A Far Right Vision For Our Tax Code

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THE republican candidates' flirting with the flat tax, and in the cases of Cain and Perry, embracing it, hasn't been met with the same cynicism and derision that the media reserves for anything our Democratic president proposes as an economic remedy or to promote tax fairness. Leaving aside the prospect for any of these radical republican tax schemes of ever becoming law, there's still an overriding question of the fairness of their revenue-enhancing proposals offered to appease their corporate benefactors.

Perry's plan, which he http://www.washingtonpost.com/politics/rick-perrys-flat-tax-plan-everything-you-need-to-know/2011/10/25/gIQA1X4SGM_story.html">released today, calls for a 20% rate for everyone which would reduce the taxes of the minority of the wealthiest -- even as it allows the 98% or so of the rest of us to either pay the 20% or keep most of the deductions we have now.

Assuming that those middle-class deductions remain in place, and assuming that the wealthy taxpayers actually lose their myriad of deductions and adhere to that 20% level, there will still be the question of fairness as the vast majority of us will still struggle to pay our share, while the wealthier among us will never be forced to miser their basic needs just to ante-up to the federal government.

The result of the cut in the wealthier income taxes will be a certain drop in revenue which Perry wants to make up with another across the board gimmicky cut in spending. The reality, though, is that the taxes will always be easier to manipulate than the spending. It's hard to envision any scenario where the burden of the taxes and revenue needs wouldn't be permanently placed on the backs of the middle and working class.

Predictably, the mavens of finance are already heralding Perry's proposal as a major boon for their corporate allies. The appeal is seductive to folks who believe that simplifying their filing will mean a reduction in their contribution. The WaPo fed into this notion with their mostly-uncritical review and their initial headline parroting the republican candidate, "Perry: Flat tax will shrink filing to postcard."

No doubt that the flat tax would be a huge revenue enhancing measure for their businesses -- that is, if they bothered to invest the money back into job-producing endeavors. The recent history, however, shows that the beneficiaries of these tax giveaways to the wealthiest Americans just pocket the dough.

A new memorandum issued Tuesday morning by Mr. Obama’s policy director, James Kvaal argues that both plans would shift the tax burden to the middle-class, and that they would likely lose benefits like child-care and home deductions. (https://www.nytimes.com/packages/pdf/national/102411-tax-memo.pdf)

“Many flat tax proposals also eliminate all taxation on capital gains and other investment income so that the wealthiest, who generate much of their income from investments, rather than work, see huge gains,” Kvall argues.

"Both the Romney and Perry economic plans embrace a far-right vision for our tax code," the memo reads. "They share elements with plans offered by congressional Republicans, which independent economists believe would fail to accelerate job creation now. Both plans would cut taxes on wealth and investment income, shifting the tax burden onto work and wages. Both plans are likely to be costly, driving up the deficit at a time of historic fiscal challenges. And under both plans, the most fortunate Americans would pay less while the middle class would pay a higher share."

Working-poor and middle income Americans spend most of what they earn. The only ones with the money left to pay for necessities are the wealthiest of the taxpaying population. The flat tax proposals aim to set that inequity in concrete, likely draining our federal budget of money for priorities other than defense.

Couple that with Perry's Social Security privatization scheme that he included in today's presentation . . . Is there any republican economic proposal which doesn't intend to separate the rich from any obligation outside of their own taxpayer-enabled aggrandizement?

[TheKentuckian]

1. Fees to private corporations and consumption taxes to fund the war machine and police state.

[ProgressiveProfessor]

2. This is something that the administration is missing the boat on

The current tax code clearly needs to go. If they were offering a simplified and fair replacement they could take this issue from the repukes and beat them with it.

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3. possibly

. . . the best Congress could do right now would be to undo the Bush cuts that went to that top tier. I really can't believe any tax scheme which promises 'simplified' rates in this complex economy. There will always be exemptions. Who do you think will come first when their pretty, compact packages unravel?

[ProgressiveProfessor]

4. Unless something dramtic is at least proposed, the repukes will push this issue.

The current code is massive and most of the in depth knowledge of it is outside of government. Tax avoidance is a major industry that has a lot of smart people in it. It needs to go away.

Most deductions/credits are attempts at social engineering. Think it is pretty clear now that is a bad idea. They need to go to a no/minimal deductions approach needs to the rule.

Simplify does not mean flat

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8. well, republicans are still on the wrong side of the public opinion

. . . in refusing to require the wealthiest 1% or 2% to pay their fair share. After all, no one cares how much of a calculation they have to make at tax time as much as they care about the bottom-line.

I'll bet most middle-class recipients of 'social' oriented tax breaks would call them an entitlement before they'd call them 'social engineering' -- and they'd call the upper income breaks corporate welfare. Congress will never eliminate the benefits their wealthy supporters enjoy. Until, there's some actual equity between the rich and poor contributions (never because the wealthy will always be able to pay the taxes without a comparable burden on their necessary expenditures) the working-class shouldn't be expected to forfeit theirs.

[babylonsister]

5. Thanks, and recommend. nt

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6. It's time for a

[oldbanjo]

7. I agree with that.

[IndyPragmatist]

9. The big issue here is the 47% not paying federal income tax

In a sense, I agree with them. Compare that to European socialist democracies and you realize they require a significantly large percentage of their population to pay income taxes. Obviously, you can't expect everyone to pay. But there is no way that you can argue that 47% of our nation is not financially able to pay income taxes. The bottom 20-25% should be able to keep their income, but beyond that, everyone needs to participate. This means closing the loopholes at the top and dropping the floor as well.

I'm going to do some looking around my old textbooks for a certain study I read about in college. It regarded the free-rider program. They set up a party and had everyone pay an equal amount of the costs. Except for entertainment. The entertainment budget was only paid for by 20% of the people (not the richest 20%, just a random 20%). When discussing adding to the general budget, everyone generally came together and made sure everyone was in favor of the additional expenses. However, when it came to entertainment, decisions to increase the budget came with little to no discussion. Because they weren't forced to pay for it, they were more likely to support it. When asked about their actions afterwards, most of the people claimed they treated general and entertainment spending decisions exactly the same way, when it was obvious they did not.

This is a bit of our problem right now. We need to have more people invested in our government. If programs are needed, we will fund them. However, some people just want more without understanding what "more" is or if "more" is really needed. We need to look at Europe and use their tax codes as an example for ours. There are reasons they designed theirs in certain ways...good reasons. I just hope we don't get a wave of republicans who think that their election means the people want the country to move to the far right.

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10. I see the flat tax adopted in many European nations (mainly the former Soviet provinces)

. . .but I'm not sure if it's because their political system is more responsive, or less. They certainly pay more taxes, overall, than we do. Most of these European nations are moving from a central government to a free market with room for growth.

Businesses would certainly embrace the flat tax if it meant more revenue for them, but aside from the big question of what they'd actually do with the money saved, there's still the question of fairness, as most middle-class payers would see their taxes rise under the plans offered by Cain and Perry.

[JHB]

11. If you don't note that the 47% DO pay taxes on their income through other tax streams...

...you are perpetuating a mis-characterization of the issue.

We might also take a look at our own tax policies that worked in the past. Since you bring up incentives, once upon a time, high marginal tax rates provided a dis-incentive for the very wealthy to squeeze for every last dime to maximize profit. It just wasn't worth pocketing the extra gravy when a huge chunk of the extra would go to Uncle Sam. It incentivized making use of those resources by directing them to other uses: using more carrots and fewer sticks with employees, R&D, etc., all of which circulated that wealth downward and gave those farther down the chain more income, which would result in more paying Federal Income Taxes in addition to FICA taxes on income.

[IndyPragmatist]

12. I'm well aware they still pay taxes, but income taxes are the largest chunk for most Americans

I just think that we would be better off closing all the loopholes at the top (and everywhere else) while bringing up the floor a bit.