[IMC-Boston-Editorial] Column on President's Tax Reform Panel

[pressroom at faireconomy.org]

Greetings,
Would you be interested in running this column responding to the President¹s
Tax Reform Panel from United for a Fair Economy?
Thanks for considering it,
Betsy Leondar-Wright


Tax Reform Tango:  More Shrink, Shift and Shaft

President Bush¹s Tax Advisory panel completed almost two years of work
earlier this month and presented their recommendations.  The results
areŠinteresting.

Though politicians talk a lot about ³tax reform,² substantial restructuring
of the tax system happens just once in a generation, like the sighting of a
rare comet.

Genuine tax reform, like the overhaul passed in 1986, requires a unique
constellation of political and economic stars to line up, including
Presidential leadership. In 1986, Congress cut a remarkable deal after six
years of public pressure to close corporate loopholes, broaden the tax base,
and reduce tax rates.

It is hard to image the current Bush Administration and its right-wing
allies in Congress following the recommendations of this report. For five
years, they have advanced a simple program: reduce taxes for the rich.  Tax
cuts for their donor patrons are reasonable in any season or economic
circumstance, according to these ³starve-the-government-beast² activists
whose political program is best characterized as ³shrink, shift and shaft.²

They rhetorically claim they want smaller government, but in reality they
only shrink the functions of government that help people and ensure equality
of opportunity. Meanwhile, they enlarge the Big Brother state and ensure a
steady flow of corporate welfare subsidies and payments to Halliburton and
other military contractors (not to be confused with defense).

They want to shift the duty of paying for government off of progressive
taxes and onto regressive taxes, off the feds and onto the states, off big
corporations and onto small business, and insidiously, off of today¹s
taxpayers and onto the next generation. This explains their obsession with
steadily reducing taxes on the wealthy in the form of tax cuts on capital
gains, dividends, inherited estates, and high incomes.

This shafts the majority of taxpayers who get tax shifts, not tax cuts ­ and
leads to budget cuts that worsen the quality of their lives.

We expected the President¹s Tax Panel to recommend more shifts and shafts ­
and this was largely true.  But it could have been much worse as well-funded
anti-tax groups have been gunning for decades to replace the progressive
income tax with a national consumption or flat tax.  But the panel carefully
studied these options, rejected them, and reaffirmed the centrality of the
progressive income tax, dealing a tremendous blow to tax shifters.

The panel made a number of recommendations for tax simplification that
should rightfully win immediate passage.  And they even courageously propose
reform of the ³mansion subsidy² provided by the Home Mortgage Interest
Deduction.  More than half of last year¹s $90 billion in homeowner subsidies
went to the 11.8 percent of taxpayers with incomes over $100,000.

How did this happen?  One charge to the panel was that their overall
proposal be ³revenue neutral,² meaning that it could neither raise nor lose
more money than the current system. This is a constraint that the President
and Congress abandoned starting 2001 when the first round of Bush tax cuts
blew a hole in budget.   Making the 2001 and 2003 tax cuts permanent would
add over $1.8 trillion to the deficit by 2015.

There are significant problems, however, as many of the Panel¹s
recommendations will worsen America¹s already festering economic divide.
First, they assume that the 2001 and 2003 Bush tax cuts become permanent
­which institutionalizes massive windfall tax cuts for the rich.  The tax
panel would also increase the ³worker penalty² by worsening the unequal
treatment of income from work versus income from wealth.   A middle-income
worker will pay a 25 or 30 percent tax rate on their earned income ­ while a
trust fund baby will only pay 15 percent or less on unearned income from
their investment dividends and capital gains.

It is unthinkable that Congress and a weakened President would expend a lot
of political capital on a tax program that doesn¹t further their ³shrink,
shift and shaft² agenda.  Even with its regressive features, there is too
much common sense underlying the Panel¹s recommendations to stir the bile of
the extreme right-wingers.

The Panel has done their job.  They¹ve started the discussion and framed the
key issues.  It is up the rest of the country to press our elected officials
to simplify and increase the fairness of our tax system. It¹s a once in a
generation opportunity.

Anisha Desai is Program Director and Chuck Collins is Senior Fellow at
United for a Fair Economy (www.faireconomy.org <http://www.faireconomy.org>
).  Collins is co author of the new book Economic Apartheid in America.
 

 

 

 

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