Posted by Michael Dorning at 4:28 pm CST
With signs that congressional Republicans plan to campaign this year-once again- on calls for tax cuts, two Democratic members of Congress think it’s time for their party to take up the cause of tax reform.
But this would be tax reform progressive-style.
Their reform is not the “flat tax” famously championed by billionaire publishing heir Steve Forbes, in which rich and poor alike would pay the same tax rate and income from investments would largely be tax-free. Rather, theirs is a “fairer, flatter tax” which simplifies the tax code in a way that its promoters say would shift the burden of taxes away from middle-class families that earn their living from a paycheck, own their own homes and aspire to send their kids to college.
Rep. Rahm Emanuel (D-Ill.) and Sen. Ron Wyden (D-Ore.), who introduced the tax reform proposal as a bill before Congress last year, think this is the moment to press the Democratic Party to adopt the idea.
On Friday, they recruited Chicago Mayor Richard Daley to come to Capitol Hill to throw his political weight behind the proposal.
“I think we’re going to have a groundswell of support in the cities,” Daley told a forum organized by the Progressive Policy Institute, the think tank of the centrist Democratic Leadership Council.
Karl Rove, the Bush Administration’s chief political strategist, just gave a speech a week ago laying out a White House plan to maintain Republican control of Congress that calls for focusing the debate on national security and taxes.
Emanuel, whose job it is as Democratic Congressional Campaign Committee Chairman to spearhead his party’s effort to win control of Congress, thinks the Democrats should not cede the issue of tax reform to the GOP.
“You can’t beat something with nothing,” Emanuel said. “The argument we have here-fairer, flatter-works to where public sentiment is….Something that is pro-family, pro-work and grows the economy is very important.”
The centerpiece of the plan is a new, simpler version of the 1040 tax form that would be a single page and only 30 lines. The current six tax brackets would be compressed to three brackets, at 15, 25 and 35 percent. Corporations would pay a flat rate of 35 percent.
The standard deduction would be tripled, rising from $5,000 to $15,000 for individual taxpayers and $10,000 to $30,000 for married couples.
Many tax breaks would be eliminated, but some of the tax breaks used most often by middle-class taxpayers would be made more generous and easier to use. For example, people could deduct mortgage interest payments without itemizing their taxes and thus still take the standard deduction.
One break that Emanuel’s plan would eliminate is preferential treatment of investment income under current tax laws. They would end lower tax rates for capital gains and dividend income, and instead tax the income at the same rate as income from salaries and wages.
They cast the issue as one of fairness for middle-class people who must work for a living.
“It ends the discrimination against working people in the tax code,” Wyden said.
Emanuel said he has been urging Democratic congressional candidates to campaign on the proposal or adopt elements of it.
And he said that he lobbied for congressional Democratic leaders to take up the proposal during a dinner Thursday night with House Minority Leader Nancy Pelosi (D-Calif.). Emanuel said Pelosi indicated she was “very interested” but made no commitment.
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Comments
It's about time the Democratic party came up with a solution to use as a counter point for the Republican (lets give everything to the rich) form of tax code. You know the Republican's will try to make this look like a tax increase, but will infact only be an increase for the richest people, and a tax break for working population. The trickle down economic experiment first introduced by Ronald Regan in the 80's did not work then and is not working now. The trillions of dollars in corpoate profits have not hit the stock market, so that even a modest investor has not realized any benifit of the huge tax breaks that corporations have been using to move their operations overseas and take away American jobs.
Posted by: Rory M | January 28, 2006 9:02 AM
If you're looking for someone to blame for those evil corporations moving their operations overseas and taking away American jobs, check the mirror. The problem is that we won't pay more for "Made in the USA." Remember the ILG ladies? Their jobs are in Bangladesh now. There used to be a thriving shoemaking industry in the US; now it's in Slovakia. Corporations can no longer afford to employ American workers when foreign workers in lesser-developed countries will work for so much less than Americans, and it's so inexpensive to fill a container with goods and ship it here.
Meanwhile, other companies are moving here and doing quite well, thank you. Toyota, Honda, Nissan, BMW, Mercedes-Benz all have plants in the US, but they locate in the South where wages are lower. They even export a few cars back to their home countries.
American workers have priced themselves out of many markets. It's Economics 101; high prices drive people to seek alternatives, and invite lower-priced competition to enter the market. It's as true for corporations as it is for people.
Posted by: Dave Brann | January 28, 2006 7:50 PM
I've always found it appalling that I pay three times more tax on income I earn from *working* than on the income I collect from doing nothing (i.e., interest, capital gains, & dividends). The GOP trumpets its devotion to hard work and family while it pushes tax policies that punish work and reward those already blessed with wealth. The tax differential does nothing for most workers, who can put their small savings into IRAs and other tax-free ways to save. It also hasn't "encouraged investment" by the other two major sectors: corporations have increased dividends instead of investing in growth, and the federal government has used the revenue hit as an excuse to run up huge deficits, soaking up investment capital to pay for its expensive war while slashing social investments (like, oh, food for babies) at home.
Congratulations to Democrats for understanding this stupidity.
Posted by: payton chung | January 29, 2006 12:37 AM
I'm a proud Republican and I believe this is a grand idea. The only problem is that I have serious doubts that the majority of the Democrats will get behind it. But hey, at least the Democrats are starting to come up with ideas instead of attacking Republican ones.
Posted by: Stewart Thrower | January 29, 2006 7:09 PM
As a conservative I am happy to hear about any tax reform ideas. The fact that some Democrats are willing to admit the current system should be changed is a positive sign and I am eager to hear more about this proposal. However, I am intrigued by the blatant ignorance of many Democrats regarding previous GOP reform ideas, especially the original Steve Forbesd Flat-Tax plan.
Dems always claim these plans only benefit the rich, when in fact these plans are designed so the poor and lower middle classes with family's pay nothing in taxes. Yes...nothing! Under the Forbes plan that is now ten years old, a family of four making under 46K paid nothing. However, Dems say the plan hurts the lower economic classes and favors the rich. The fact is that the Democratic tax code is so complicated and full of loopholes that the wealthy are able to find ways to lower their tax burden. The Forbes plan of a flat 17% eliminated those loopholes.
Dems always think they are helping the poor and the working man, but as a working stiff (911 dispatcher) I know their good intentions are failures. As Reagan said "Democrats think everyday is April 15th, while Republicans think everyday is July 4th."
Posted by: Paulie | January 30, 2006 9:02 AM
Someone says they pay less taxes on interest income and such than on income from work. I have always paid the same rate on all income. But I suppose that is because I was always one of the
lower paid blue-collar working stiffs.
As far as the Forbes plan, that seems to have been totally made for the unearned income class.
Posted by: lee Elder | February 24, 2006 2:44 PM
The Democratic plan is great!
The fact is that working families and singles rae getting killed in taxes, while at the same time the Republican's borrow and spend crippling federal deficits ensure that our kids and grandkids will have lives of high taxes with virtually no government services, because their tax dollars will all go to servicing debt. That my friends is NOT moral.
Republican blowhards insist, ridiculously, that somehow it's taxes that make corporations go overseas. Nonsense. Large corporations pay virtually nothing in taxes for the past two decades and have all rushed overseas anyway the second they could find quasi-slave labor. I don't feel the answer is for Americans to work for migrant Chinse wages either as too many Republicans insist. Oddly we never see the Republicans proposing this living that way after all.
It's definitely time for new and fair tax policy that evens the score out for the highly endangered middle class , and only Democrats are going to bring this.
Posted by: G. C. M. | March 21, 2006 9:06 PM
I've seen many of countrie's states where now a massive structural gap has opened up between the country's financial inflows and outflows.
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