Wednesday, October 12, 2011
Political tax talk is becoming Orwellian: Secrecy is Democracy. Auditors Reduce Collections. Tax Cheats Will Be Caught With Fewer Auditors. ...
In Washington the mantra that spending, not revenue, is the problem was repeated endlessly last week. The idea that cutting tax rates, especially at the top, will pave a path to renewed prosperity is promoted by just about everyone in national politics except President Barack Obama and the few Capitol Hill Democrats who do not fear liberal as a political epithet.
Fact is, falling revenue is a problem. In fiscal 2011, which ended on Sept. 30, federal income tax revenues were smaller than in 2001, a recession year when the George W. Bush tax cuts began.
In fiscal 2001 the individual income tax brought in $994.3 billion and in just-ended fiscal 2011 it brought in an estimated $956 billion. That’s 4% less money before taking into account 10 years of inflation. Per capita the federal income tax brought in 31.5% less in real terms in 2011 than in 2001. ...Cain’s 9-9-9 tax plan would scrap the current tax code and replace it with 9% levies on corporate profits, on income and on spending. The already rich would only be taxed on their spending since capital income would be tax-free, part of the little known flat tax premise that labor should be taxed, but taxing returns to capital discourages saving....
Cain’s plan also imposes a one-time 9% tax on existing wealth, which may surprise his wealthy friends. He also would double-tax interest income, though, as Kleinbard noted, that must be a mistake.
Under Cain’s plan workers would have far less to spend after taxes. Cain insists that critics don’t understand. But as the chart illustrates, rich investors would pay less, helping their wealth snowball.