The Times has a piece on how Republicans, high on their "mandate," are now salivating over a host of regressive taxation policies that leave middle- and lower-income Americans holding the bag so that instead of making millions of dollars, wealthy Republicans can make millions and millions of dollars.
Here's the breakdown:
In the House, dozens of Republican lawmakers favor junking the income tax altogether and replacing it with a national sales tax or a flat tax.
A national sales tax is a regressive tax, meaning that people at lower income levels are taxed at a higher rate than those with larger incomes. This is naturally true since lower income people tend to spend a larger percentage of their income than higher income individuals.
A flat tax is also a regressive tax - it is also particularly deceptive in that it is presented as a fair and proportional tax. While it's true that everyone's earned income (the wage they get from working) would be taxed at the same rate, what proponents don't tell you is that unearned income (that is income from dividends, interest, and other assets) is not taxed at all. Guess who has a lot of unearned income? Yep, you guessed it - rich people.
Many of Mr. Bush's advisers, by contrast, prefer a piecemeal approach that would reduce if not eliminate most taxes on savings and investment, leaving a system that only taxes consumption.
Again, consumption taxes are regressive since the people who spend most of their income are lower- and middle-income households. Rich people save and invest.
In a speech last week, Deputy Treasury Secretary Samuel W. Bodman focused almost entirely on issues like dividend taxes and savings accounts, suggesting that the administration wanted to expand on its earlier tax cuts.
The measures include an elimination of taxes on stock dividends, expanded tax-free health savings accounts and big new "lifetime savings accounts" to shield almost all savings from taxes.
Eliminating taxes on stock dividends and savings is something that benefits rich people since most lower -income people don't make a lot on their stock dividends (if at all). While rich people would benefit, a larger proportion of government would now be funded by lower-income households.
Another idea in circulation, which has been promoted for years by advocates of a consumption tax, is to let companies immediately write off the cost of new buildings and equipment - another way of eliminating taxes on investment.
Accelerating depreciation is like giving money to corporations. They already got a major advance when the tax code was reformed in '86 (or was it '82) when they allowed buildings to be depreciated in 15 years instead of 30. (Meanwhile, the building is still usable for 30). This allows companies to take out huge chunks of their corporate income tax since the depreciation expenses are deducted from corporate profits.
To offset those tax cuts, many proponents of tax overhaul outside the administration have suggested eliminating major deductions, like those for state and local taxes and corporate interest payments.
But the political hazards are enormous. Eliminating the deductibility of state and local income taxes would infuriate people in high-tax states along the East and West Coasts.
This could be described as expansion of the current "Subsidize Jesusland" tax policy that we already have in place.
Mr. Norquist supports the idea of a stealth tax overhaul, achieving the similar goal as a national sales tax but accomplishing it through backdoor changes like a big expansion of tax-free savings accounts.
Indeed, Mr. Bush has twice proposed the lifetime savings accounts, allowing people to set aside up to $15,000 a year and pay no taxes on the income the accounts earn. Besides being bigger than today's individual retirement accounts, the new accounts could be tapped anytime before retirement for any purpose.
Do you have $15,000 that you can just lock away into a savings account each year? Yeah, neither do I. I like paying rent and having food. Of course, this isn't a concern for rich people.
If you're keeping count, the tally is as follows:
1. National Sales Tax (make poor people pay)
2. Flat Tax (make poor people pay)
3. Eliminate tax cuts on dividends (tax cut for rich people)
4. Expand tax-free health savings accounts (tax shelter for rich people)
5. Create tax-free lifetime savings accounts (tax shelter for rich people)
6. Immediate write-off of building and equipment expense (tax cut for rich corporations)
7. Eliminate major deductions for state and local income taxes (increase taxes on blue staters)
8. Eliminate deduction of corporate interest payments (tax increase for rich corporations)
There you have it - 8 tax proposals to radically restructure our tax code. Half of them are tax cuts or shelters for rich people or corporations that would reduce the amount of federal revenue. Two of them are regressive tax proposals that shift the burden of funding government to lower-income individuals and households. The only areas of tax increase are for blue staters who pay higher state and local income taxes and a small raise on corporations that is more than neutralized by the immediate depreciation of their building and equipment. (Think about it - they get to deduct the full costs of the equipment immediately but pay on the amount of interest of getting the equipment)
And to think that Republicans suggest that it is unfair to characterize this as a class war. This is the definition of class warfare. They are going to leave average Americans holding the bag for rich people at a time when income inequality is already pretty horrific.
If you think that class warfare arguments aren't effective for Dems, you'd be mistaken:
The political hazards of more radical tax overhaul were underlined in the battle in South Carolina to succeed Senator Ernest F. Hollings. The odds-on favorite had been Representative Jim DeMint, a Republican who is also the sponsor of a bill to replace the income tax with a national sales tax. Democrats set up a big advertising campaign, accusing Mr. DeMint of proposing a 23 percent sales tax that would steeply raise the price of everything from groceries to gasoline. Mr. DeMint won, but only after his challenger pulled close enough in the polls to make the race competitive.
This IS class warfare and it's time for Democrats to attack Republicans as the lazy, elitist, greedy fatcats that they are.
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