The extension of Bush-era tax cuts for the rich that caught howls from liberals last December is nothing compared with a new proposal that would, once again, reduce the progressivity of the U.S. tax code. This time it would take us back 80 years, a match for what it was in 1931, with a top marginal rate of 25 percent. The proposal would have an extra benefit for Republicans: It would add pressure to reduce federal spending, possibly to the tune of $2 trillion over a decade. It would take a lot more than defunding National Public Radio to generate that kind of dough.
The tax-flattening proposal, whose details have yet to be fully worked out, or at least to be announced, is the brainchild of Rep. David Camp (MI-04), the tea party-backed chairman of the powerful House Ways and Means Committee. He doesn't just want to cut the top tax rate for individuals to 25 percent, but also for corporations. It is currently 35 percent for both:
"America needs a tax code that promotes, not prevents, job creation," he said. "Today's code is simply too complex, too costly and too burdensome for families and employers of all sizes to comply with.…We need to set ambitious goals and work toward those, because if we don't try that will be the biggest failure of all."Chances the proposal will pass muster any time soon are not great, but expect it to make fabulous spin for GOP candidates in 2012. The perfect squeeze. Faced with Republicans trumpeting their support for a big new cut in taxes, Democrats, including a President seeking reelection, will find it difficult indeed to call for an end to the tax-cut extensions, even those for the very rich. Indeed, we can expect many Democrats to sign on to tax-flattening proposals of their own. Exactly the wrong medicine.
Mr. Camp's tax overhaul isn't designed to specifically cut the U.S. budget deficit. Overall tax revenues would remain at recent average levels, or about 18% to 19% of gross domestic product, committee aides said. ...
Aides said the rate reductions would be achieved by reducing or eliminating tax deductions and credits.
Aides didn't specify which ones would be targeted. The largest deductions include those for home-mortgage interest and state and local taxes, and the exclusion of employee health care from income. Big corporate breaks include accelerated depreciation deductions and a tax break for domestic production.
Most Americans can be expected to cheer proposals to lower their taxes. Even if the overall effect is to hurt them and the country. Which is why supporting candidates who back Camp's proposal, or one like it, can be expected to have such resonance at the ballot box. Never mind that what implementation of such a move really would mean is more cuts in public transportation, in heating assistance for the poor and Head Start and the Peace Corps, fewer teachers and more kids in classrooms, fewer inspectors at OSHA and the EPA and the FDA, fewer auditors at the SEC.
Who benefits most from such an arrangement? The right-wing sponsors and their enablers will tell you it's good for the nation to cut the top rate on individuals. The Heritage Foundation will tell it's good for jobs to cut the top rate for corporations. What they won't tell you is that from 1980 to 2006, in great part because of previous tax-flattening efforts, the richest 1 percent of Americans tripled their after-tax percentage of the country's total income. The bottom 90 percent saw their share drop by one-fifth.
As Paul Buchheit recently pointed out, "That's a TRILLION dollars a year, one-seventh of America's total income, that went to the richest 1 percent while 90 percent of us went backwards."
Backwards, of course, is where the Republicans (and some Democrats) are eager to take us. For them, apparently, 1931 doesn't seem like such a bad year.
With its income and wealth disparities, you would think Gilded Age II would already be paradise for plutocrats. But, as a recent survey of 1000 households with investable assets of at least $1 million found, "42 Percent of Millionaires Say They Won't Feel Wealthy Until They Have More Than $7 Million." Camp and his fellow-travelers are eager to ensure that these crybabies can escape their pitiful lot in life.