Wednesday, August 31, 2011
In a decade of frenzied tax-cutting for the rich, the Republican Party just happened to lower tax rates for the poor, as well. Now several of the party’s most prominent presidential candidates and lawmakers want to correct that oversight and raise taxes on the poor and the working class, while protecting the rich, of course. ...
Until fairly recently, Republicans, at least, have been fairly consistent in their position that tax cuts should benefit everyone. ...[Republicans argue] that “everyone needs to have some skin in the game.” This is factually wrong, economically wrong and morally wrong.
First, the facts: a vast majority of Americans have skin in the tax game. Even if they earn too little to qualify for the income tax, they pay payroll taxes (which Republicans want to raise), gasoline excise taxes and state and local taxes. Only 14 percent of households pay neither income nor payroll taxes, according to the Tax Policy Center at the Brookings Institution. The poorest fifth paid an average of 16.3 percent of income in taxes in 2010.
Economically, reducing the earned income tax credit and the child tax credit — which would be required if everyone paid income taxes — makes no sense at a time of high unemployment. The credits, which only go to working people, have always been a strong incentive to work, as even some conservative economists say, and have increased the labor force while reducing the welfare rolls.
The moral argument would have been obvious before this polarized year. Nearly 90% of the families that paid no income tax make less than $40,000, most much less. The real problem is that so many Americans are struggling on such a small income, not whether they pay taxes. ...
At a time when high-income households are paying their lowest share of federal taxes in decades, when corporations frequently avoid paying any tax, it is clear who should bear a larger burden and who should not.
(Hat Tip: Ann Murphy.)