Senator Cruz says,
“"Let's simplify the tax code. Let's let everyone fill out
their taxes on a postcard.”
Speaker Ryan says,
“We will consolidate the existing seven brackets into three, double
the standard deduction, and simplify things to the point that you can
do your taxes on a form the size of a postcard.”
Treasury Secretary Steven Mnuchin says,
Americans should be able to "do their taxes on a large
postcard."
The reality: the Republican Tax Cut
will not allow American's to complete their taxes on even a “large”
postcard. That's because the Republican party is misleading the
public about the crucial issue.
This year, the electorate has already
seen Republicans disingenuously pretend shorter
is better. They're trying the same tactic with Tax Cuts, but
the truth is more complicated. The issue they're making into an
issue: the number of brackets in the tax code. Today, the United
States tax code contains seven brackets; 10%, 15%, 25%, 28%, 33%,
35%, and 39.6%. A quick history: in 1919 there were fifty-six
brackets, with anyone earning more than 13.8 million taxed at a rate
of 70%. Even through 1980 the tax code included thirty-three
brackets with the top rate of 70% applied to anyone earning 1.18
million (after 1980 it dropped to 17, and then only 2 in 1988, before
returning to 7 in 2013). The Republican party plans to (among other
aspects), squash the current seven brackets into four; 12%, 25%, 35%,
and 39.6%. Their reasons? Simplicity and fairness (but
really just a tax reduction on businesses) This won't make
it possible to complete one's taxes on a postcard, because the true
problem of the tax system remains unresolved: loopholes and
deductions.
For instance, most corporations are not
paying the 35% required by law. A 2017 study by the Institute
on Taxation and Economic Policy conducted from 2008 to 2015,
found that of 258 Fortune 500 companies (including General Electric
and Apple) they paid roughly 21% over that time. In addition,
eighteen companies paid nothing, forty-eight paid a rate of 10% or
less, and one hundred companies paid no taxes at least one of the
years during the study. Corporations are paying much less than they
should, and yet the central purpose of the Republican tax bill seems
to be to reduce corporate taxes. The solution certainly shouldn't be
to reward misbehavior by reducing the the tax rate to 20% as the
President's plan proposes. Instead, a moderate reduction, to 30%,
could be paired with closing of deductions and loopholes to ensure
companies actually pay what they are legally and morally obligated to
pay.
Of course, this will have no effect on
whether any citizen's tax return is the size of a postcard, but it
highlights the deception of the Republican plan. The plan does not
seek to ease the public tax burden, to make the process easier for
the public, or to reduce the deficit. It is solely to reward the
already
wealthy, by reducing
their tax brackets, eliminating the Estate Tax (which only effects
estates worth five million or more), eliminating the Alternative
Minimum Tax, and allowing pass-through
corporations to be taxed
at a 25% rate. The result: 1.5 trillion dollars added to the debt
over 10 years.
In short, it reduces taxes on
businesses and the super wealthy, while increasing the deficit, and
it doesn't simplify the process for the average United States
citizen, because it doesn't confront the issue of deductions.
But what if someone could construct a
“large postcard” to complete taxes on? (Better yet, what if the
government
did it?)
Before we continue, I'm not a tax
expert and I don't expect to write a perfect tax code. I don't even
think a postcard could contain the necessary aspects for a fair tax
code, but has Ted Cruz produced his copy yet? (or has the president?)
What we want is a progressive bill
which addresses income inequality and deals fairly with the public,
by expecting the wealthy to pay a larger percentage of their income.
It needs to close loopholes, like those which allow the superwealthy
to hide their money in offshore accounts. Let's assume, that
this postcard tax code reform closes loopholes and significantly
reduces the number of deductions available. I'm not against
deductions on principle, they're a useful tool of the governments to
induce the public to act in a certain manner, but as they accumulate
over decades they clog the system (because they are rarely repealed).
So let's assume for this project that almost all deductions are
eliminated.
What we're going to do, is take the
1971 tax brackets and adjust it slightly. In doing so, we're
increasing the number of brackets compared to 2016, because we
appreciate that the bottom quintile of families earn significantly,
astronomically, less than the top quintile, but also because the top
.1% far exceeds the top 1% which exceeds the next few percentage
points, and so on. We also understand that (for example) though the
bottom 12% of families current pay taxes at a 10% rate, their
effective rate (the amount they actually pay after deductions and
exemptions) is significantly lower. The same is true of each
bracket, and since we're going to eliminate deductions, we'll lower
some of the brackets to adjust.
You'll see on the far left, the upper
end of the tax bracket, and on the right, the lower end. Then in
order to provide a comparison; the 1971 tax brackets, the 2016 tax
brackets, the Republican tax brackets, and my proposal which,
compared to the 1971 law, reduces tax rates for the poorest Americans
and introduces a new bracket for the richest. In this proposal, it's
true, some citizens will pay more. Overall, the bottom
three-quarters of American's will receive a tax break, while the top
quarter will see an increase. Yet, these tax numbers aren't some
sort of historical aberration. Before the delusion of supply side
economics during the Reagan revolution, this sort of tax bracket
would have been considered ordinary for anyone living between 1920 to
1980. It's our current time which is disturbed deviation from the
normal.
In conclusion, we ask the question: Is
this tax plan perfect? No, but it's more likely to put wealth back
into the pockets of the middle class, instead of lining those of the
rich, and it does fit on a postcard, so until Ted Cruz produces his
copy, I have him beat.
So, anyone with actual experience, what are your thoughts on taxes?
So, anyone with actual experience, what are your thoughts on taxes?
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