There's an old joke about three finalists for a a highly coveted accounting job, and they are all brought in to meet the head of the company. He tells them that the person who answers the final question correctly will get the job. "What is 2+2?" "Four!" says the first applicant, who is shown the door. The second does about 15 minutes of calculation before meekly answering, "Four?" He is also shown the door. The third waits until the other two have left, leans over and says "What do you want it to be?" When you start looking at the math, you'll see that Dave Camp and his buddies behind the Republican Tax Plan follow this philosophy. Lots of numbers below the fold.
First of all, lets establish the difference between the official tax rates (aka what people and businesses are supposed to pay) and the actual rates based on money the IRS really receives. Officially, corporations are supposed to pay 35%. In reality, thanks to archaic and mystical tax code laws and loopholes, some businesses pay 0%. But this diary is focusing on individuals (sorry Mitt, corporations are not people in this diary).
The biggest change (and red cape to flash at the media bull) is the end of the preferential tax rate on capital gains. No more would capital gains be treated as something other than income, no more would Mitt pay less taxes on his capital gains than the average worker pays on his or her entire pay check! The rates will be the same!
Except no. Under ol' Campy's plan 40% of capital gains would be exempt from taxation. Period. Same for dividends on investments. And the top marginal rate will drop to 35% from 39.6%. As Michael Hiltzik in the LATIMES notes, capital gains maxes out at 20% currently. If you raise the tax rate on them to 35%, but only after exempting 40% of them, you've increased the effect capital gain tax from 20% up to a staggering 21%.
Magic, folks, magic.
It would be bad enough if all the plan did was give us a less progressive tax system. We've been doing that since the 70s Read Emmanuel Saez of UC Berkeley if you want to know more. But no, we can't stop there, can we Camp? We gotta go messin' with the 501(c)4, AKA Social Welfare Organizations. You know, the ones that make us safer, like FreedomWorks helping poor ALEC's anti-union agenda. Right now 501(c)4 need to report to the IRS about their donors and under new rules would have their political activity sharply curbed by the IRS. Camp wants to do away with the first and delay the second for at least a year.
"What do you want it to be?" indeed.