Middle class doesnít need a tax cut
The press is having a field day with something called the Paradise Papers. Maybe youíve heard of it. Itís a pile of documents released by the International Consortium of Investigative Journalists (ICIJ). They detail the business dealings of celebrities like Bono and the Queen of England, and companies like Apple and Nike. Even U.S. Commerce Secretary Wilbur Ross. They show nothing illegal, really, just how the rich and famous move their money around to avoid paying too much in taxes.
The media are treating this like a scandal when itís actually a wake-up call. This is why tax reform is so badly needed here in the United States. Iíve regaled you with the stats from the IRS, like the top five percent of wage-earners paying nearly 60 percent of the income tax. The House Republican tax legislation takes some steps in the right direction but it still leaves the basic problem unresolved. They wonít tell you what that is so I will. The rich pay way too much in taxes. Theyíre the ones who need a tax break, not the middle class.
The middle class now pays somewhere around eight percent of their income in taxes. Thatís set to go to around five percent if the House Republicans and President Trump get their way. They always target the middle class for tax cuts because thereís more of them. They just donít need another tax cut.
If the objective is really to stimulate the economy then youíre going to have to allow the filthy rich to keep more of their money and spend it in the economy. That means the dreaded one-percenters. I know, people donít like to hear that, but itís true. The rich are overtaxed and the middle class are under-taxed. The poor and working poor arenít taxed at all. In fact, most of them get money from the government through the Earned Income Tax Credit that they never paid in.
Why arenít the folks in Washington telling you this? Because theyíre cowards. Cowards and panderers. They donít really see this as a vehicle to stimulate the economy. They see it as a way to buy votes, not dissimilar from the way the Democrats operate. So, why arenít the Democrats going for it? Simply because they didnít think of it first. If this were their idea theyíd be all over it.
The only thing that remotely comes close to doing what we need done is lowering the corporate rate from 35 percent to 20 percent. Mark my words, thatís the one thing that will probably not survive intact when the dust settles. Itís too tempting, even for the Republicans, to punish the very corporations that create the jobs.
And then thereís the SALT issue. That stands for state and local taxes. The current GOP plan would severely limit how much high-tax states can deduct those taxes. Thatís raised the ire of Republicans and Democrats in high-tax states. Rep. Diane Black, chairman of the House Budget Committee and member of the tax-writing Ways and Means Committee pointed out to me that itís wrong for the rest of us to subsidize high-tax states. She has a great point. Why is it fair for anyone to claw back some of the taxes they pay their own states through deductions to their federal income tax? The fact that some states tax their people to death is not the fault of the rest of us.
Getting rid of many of the deductions is the right move. Continuing to soak the rich is the wrong move.
©Philip Carr ďPhilĒ Valentine