Posted on 03/17/2013 4:54:05 AM PDT by Libloather
Democrats and Republicans are debating whether an overhauled tax code should be as progressive as the current one, after the latest House GOP budget set up an aggressive framework for tax reform.
Top Democrats are pushing to maintain the current progressivity in the code, after the party scored its long sought-after tax rate increase in the fiscal cliff deal.
But with the top individual tax rate now 39.6 percent, some Republicans aren’t nearly as concerned about progressivity as they look to lower tax rates and eliminate tax preferences.
“If this was easy, we’d have it done already,” said Rep. Pat Tiberi (R-Ohio), a senior House Ways and Means member. “There’s a lot of things that are at odds with each other.”
The battle over progressivity is just one of a slew of issue Republicans and Democrats are trying to wade through as they push toward tax reform.
The nonpartisan Urban-Brookings Tax Policy Center on Friday underscored the challenge Washington faces in that process, releasing an analysis showing that policymakers would need to find around $5.7 trillion in savings to offset the tax proposals in the latest House GOP budget.
In the newest Republican budget, Rep. Paul Ryan (R-Wis.) calls for collapsing the current seven tax brackets into just two individual tax rates – 10 percent and 25 percent.
House Republicans, in the proposals spearheaded by the tax writers at Ways and Means, are also pushing to reduce the top corporate rate to 25 percent, from 35 percent, and to eliminate the Alternative Minimum Tax.
The House GOP laid out a similar tax reform framework last year – though, after the fiscal cliff tax increases, they have now softened their language to call the 25 percent top rate a goal.
According to the Tax Policy Center, the rate cuts in the GOP plan would mostly help the highest earners. The center’s Howard Gleckman also cast doubt that Republicans could find enough revenue among tax preferences to pay for their proposals.
Even if they could, Gleckman added, Republicans would be hard-pressed to make the changes while keeping the code’s current progressivity.
Several of the bigger ticket tax incentives, like the deduction for home mortgage interest and the healthcare exclusion, broadly help the middle-class, Gleckman said. Other preferences, like the current rates for capital gains and dividends, are more geared toward the wealthy.
“That requires Republicans to make a really tough choice – do you really want to go after investment income?” Gleckman told The Hill.
Some top Republicans say that the economic benefits of tax reform would make up for any loss of progressivity in the system – especially given the fact that, as Rep. Kevin Brady (R-Texas) put it, the current code is “awfully progressive.”
“If the end result is more pro-growth for the economy, people have a better chance to get good paying jobs and to move up to middle class and beyond, then that ought to be our goal,” Brady said.
Republicans also say that other tax increases in the fiscal cliff deal and the new taxes to help pay for the Democratic healthcare law have put the top rate closer to 45 percent than 40 percent.
But on the other side of the aisle, Democrats point to the rise of income inequality as just one reason to keep the current progressivity in the code.
Senate Democrats this week also released a budget proposal that called for almost $1 trillion more in revenue from wealthy individuals and corporations – part of what Democrats call a “balanced” approach to deficit reduction.
“They seem to be blind to what’s been happening,” Rep. Sandy Levin (Mich.), the top Democrat at Ways and Means, said about the Republican proposals. “It’s kind of blind ideology.”
With control of Washington currently split, Gleckman said he was hard-pressed to see how Democrats would agree to a tax reform that made the code less progressive.
But Tiberi said it was just one of a slew of problems to stare down, as Ways and Means looks to pass a tax reform plan this year.
Ways and Means members are currently meeting in 11 separate working groups to discuss tax reform, while their counterparts at the Senate Finance Committee are also poised to start bipartisan meetings of their own.
“There’s a lot of different issues at play,” Tiberi said. “We have to thread the needle.”
Another new idea. Oh, and kill Commiecare™.
I think a better plan would be Republicans pay 10% and Democrats pay 25%. Only fair, for the children.
An even newer idea ~ provide individual personal income tax payers with all the deductables allowed corporations ~ most of us would never pay income taxes!
IMO, the entire concept of seizing the fruit of one’s labor is immoral. It is akin to slavery.
DITTO!!!!!!!!!!!
How about going back to a really OLD idea when the federal government adhered to the fact the Constitution only ever authorized the collection of taxes on items coming into the United States?
It is true, that commerce and manufactures are, or may be, intimately connected with each other. A regulation of one may injuriously or beneficially affect the other. But that is not the point in controversy. It is, whether congress has a right to regulate that, which is not committed to it, under a power, which is committed to it, simply because there is, or may be an intimate connexion between the powers. If this were admitted, the enumeration of the powers of congress would be wholly unnecessary and nugatory. Agriculture, colonies, capital, machinery, the wages of labour, the profits of stock, the rents of land, the punctual performance of contracts, and the diffusion of knowledge would all be within the scope of the power; for all of them bear an intimate relation to commerce. The result would be, that the powers of congress would embrace the widest extent of legislative functions, to the utter demolition of all constitutional boundaries between the state and national governments.
Joseph Story, Commentaries on the Constitution
The Founders restricted the taxation authority in order to KEEP the government small.
At the time the Constitution was ratified the United States had little manufacturing. The growth of commodity exports was expected but not yet realized. By taxing imports, money was raised and domestic industry protected. By not taxing exports, incomes were increased throughout the country, and farmers were encouraged to grow more stuff!
We are currently, and have been for some time, the world's leading industrial nation ~ yet we continue to maintain a policy on import/export taxes written for a nearly third-world agrarian nation over 200 years ago.
We might look there rather than in my billfold for the solution to federal greed.
BTW, the federal income tax has become just another failed government program. It does not do what it was purported to do. Time to abandon that system.
That’s the way we do it in this country; you don’t like that system go to some other country where they don’t seize a part of your production. You have the freedom to leave.
If you insist on keeping an income tax, then burn down that whole mess and just go to a plan where you earn money then you pay a tax on it. Single taxing of dividends could be done by allowing businesses to count their payment as a legitimate business expense. Capital gains would have their cost basis adjusted for inflation so you aren't taxed on our constant currency devaluation. What you then do with your money is then your business. Save it, spend it or give it away. I don't care and neither should the federales.
There must be more taxpayers.
Reduce the standard deduction, raise revenue. Screwing with the rate is window dressing if the standard deduction means the actual rate is meaningless anyway.
Imagine writing laws that actually encouraged people to produce! [The Founders were such a clever bunch]
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BTW, the federal income tax has become just another failed government program. It does not do what it was purported to do. Time to abandon that system.
I'll certainly agree there! And I really wished I'd bookmarked that paper I came across a few weeks ago that said one of the purposes of the Louisiana Purchase was to give government an additional source of income as they sold off the 'federal' land to pay down the national debt.
Which raises the question;
If we still have a national debt, WHY does the federal government still own the land?
Nah, I think I'll stay here and work to defeat politicians with whom I don't agree.
“That’s the way we do it in this country; you don’t like that system go to some other country where they don’t seize a part of your production. You have the freedom to leave.”
First, your comment was stupid. the US was not founded with an income tax. It has been manipulated countless times.
If slavery is working for zero pay, what is it when the government steals half your pay? Half slavery?
If this is connected to the Brookings Institute, then it is definitely NOT non-partisan.
Possibly bi-partisan, but not non-partisan.
"www.brookings.edu/about/centers/taxpolicy "
"http://www.urban.org/about/officers-and-trustees.cfm"
Sarah Rosen Wartell
President
Sarah Rosen Wartell, a public policy executive and housing markets expert, became the third president of the Urban Institute in February 2012.
Wartell co-founded the Center for American Progress in 2003,..."
You are correct. Slavery is nothing more than a 100% income tax rate. Any lesser percentage is simply a matter of degree.
Ain’t going to happen. Harry Reid will bottle up any meaningful changes.
Sure, cut spending but make sure there are no more free-riders who couldn't care less what the rates are on their fellow citizens as long as they themselves do not have to pay.
We have a particularly bizarre “loophole” here in Louisiana. Government retireds (teachers, postal workers, cops, etc) pay NO STATE INCOME TAX. Gov. Jindal is proposing to eliminate individual and corporate income taxes and replace the money with a higher sales tax.
As expected all the usual suspects (teachers unions, welfare leeches, etc) are screaming bloody murder. It will be an interesting legislative session.
If they were planning to raise my taxes then I'd be screaming bloody murder to. As, I suspect, you would. That's the problem with all these tax reform plans. Someone is going to pay more and they won't like it.
But if income taxes are such a good idea, why don’t the Government Retireds “pay their fair share?” Why should my IRA distributions, or my company pension benefits be taxed when all the retired government deadheads get a free ride?
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