From Flash Points
- Who takes the hit? Candidate Obama pledged to shift more of the tax burden to the richest Americans, in part by reversing President Bush's tax cuts. His plan targeted those earning more than $250,000; everyone else would get a tax cut. But the recession intervened, putting the tax hike for the wealthy temporarily on hold and changing the discussion to which tax structure will help us get out of a giant economic rut. Research by one of President Obama's own advisers estimated that every dollar in tax cuts equals $3 in economic growth. For now, most people with an income below $500,000 are likely to get at least a small tax cut.
- More middle-class families walloped by the alternative minimum tax (AMT) In 1969, Congress closed a loophole that had allowed 155 very rich households to hide most of their income in tax shelters. But the resulting AMT didn't adjust for salary inflation; today, it can affect families making less than $100,000. Getting rid of what amounts to a legislative goof should be easy. It's not, says James Horney of the Center on Budget and Policy Priorities, because the government has counted future AMT revenue on its books: "Absent tax reform, getting rid of the AMT is very expensive." Every year, Congress ends up passing a "patch." For 2008, you're probably safe if you make less than $200,000.
- More sales taxes With an eye on the $3 billion that could be siphoned from currently tax-free online sales, New York State recently drew ire by taxing items shipped there by amazon.com. As strapped states look to sales taxes to help plug shortfalls, expect concerns about the uneven impact of such "regressive" taxes: "People with lower incomes have to spend most of it to stay alive. People who bring in $10 million a year don't spend $10 million," Lee Farris, of United for a Fair Economy, has said.
How the cash flows into Uncle Sam's coffers.
For 2007
Individual income taxes: 50.4%
Payroll taxes (FICA): 31.4%
Business income taxes: 14.6%
Excise and other taxes (tobacco, gas, etc.): 3.6%
Total tax revenue for 2007 = $2,709,798,000,000
One Family's Burden
How much a typical family in Philadelphia earning $50,000 paid the tax man in 2007.
Federal taxes: $6,007 (41%)
Sales tax: $803 (5%)
Property tax: $4,235 (29%)
State/local income tax: $3,361 (23%)
Auto tax: $231 (2%)
Total = $14,637 or 29.3% of income
The Back-and-Forth …
... On Taxing the Rich
"You can't tax the rich and give it to the poor and produce a fair economic system."
--Brent Littlefield, spokesman for the American Conservative Union
"President Obama should take half of our huge earnings in taxes instead of the current one third. Higher taxes on huge paydays can finance opportunity for the next generation of Americans."
--Reed Hastings, chairman of Netflix
... On Inheritance Taxes
"They tax you when you earn a dollar, they tax you when you save it, they tax you when you invest it. If you earn a dividend, they tax it again, and if you're stupid enough to die, they steal up to half."
--Grover Norquist, president of Americans for Tax Reform
"You could take that $30 billion and give $1,000 to 30 million poor families."
--Warren Buffett, on the Republican proposal to eliminate elements of the inheritance tax, which raises some $30 billion a year from the assets of about 12,000 rich families
- Cash back - A centerpiece of President Obama's $789 billion stimulus plan provides $400 tax credits for middle- and lower-income workers. The goal is to direct the break to those cash-strapped enough to turn right around and spend it. But since these credits are being given to people who earn so little that they don't currently pay income taxes, expect partisan wrangling over whether tax policy is being used as a back door to "welfare." The president also plans business tax cuts for creating jobs, though conservatives want more help in this area, such as lowering the corporate tax rate from 35 percent to 25 percent. "President Obama is a more international guy, so we should be close to the European average [of 25 percent]," quips Grover Norquist of Americans for Tax Reform.
- Simplify - Americans currently spend over $20 billion annually on software, accountants, and other ways to navigate the 4,333-page tax code. One idea popularized by presidential candidate Mike Huckabee would toss out the book (literally), getting rid of the IRS and replacing income taxes with a 23 percent national sales tax. Under this "Fair Tax," the Philadelphia family earning $50,000 would get a $5,612 rebate; their total tax bill would range from $8,600 to $12,500, depending on their spending.
- Debt management - Since 2000, government revenues have fallen and spending has risen. Future deficits will run over $1 trillion annually. Where's the tipping point? Worst-case scenario, says Len Burman, director of the Tax Policy Center: "In ten years, we can't pay our debt back at all without printing a whole lot of money." Better scenario: "In three or four years, when the economy is doing well again, we take measures to get the budget under control."
1765
The Stamp Act. British Parliament's tax against the American Colonies draws cries of tyranny.
1794
Gulp! President George Washington sends federal troops to Pennsylvania to suppress farmers rebelling against a whiskey tax.
1817-1861
Tax-free days!
1913
16th Amendment establishes income tax.
1917-1918
World War I spawns an enormous tax increase.
1935
During the Great Depression, the Social Security Act levies a 1% tax on the first $3,000 of earnings.
1941-1945
Tax hikes swell federal receipts from $8.7 billion to $45.2 billion.
1981-1988
Reagan's tax reforms (codename: Trickle Down) reduce the top tax bracket from 69% to 28%.
1989
"Only the little people pay taxes": hotel heiress Leona Helmsley's tax evasion trial.
1990
Read his lips now: President George H. W. Bush raises taxes.
2000
Presidential candidate Steve Forbes bases entire campaign on championing a 17% flat tax, just as he did in 1996.
2001-2003
President George W. Bush's cuts trim the top tax rate by 4.6%, the middle rate by 3%.
2009
While 138 million returns are filed, Congress rewrites the tax code via the stimulus bill and the president launches recovery.gov to show "how and where tax dollars are spent."
The only just and fair tax is a flat tax on all income which includes social security and health insurance overage. There will be no other taxes levied no real estate, no sales tax, & etc. At the end of the year each taxpayer receives a statement from the government for tax received & if less than a prescribed amount for the number of dependents they get half of what was paid back. Our tax system is a snake pit of evil with many squirming out of paying their fair share. Everyone pays.
When did RD move so far left? Sources like Warren Buffet, a well known Democrat supporter. To the comments from the print version about people with $10MM don't pay tax. No kidding, they INVEST it. Where's the representation of the total tax burden? The cell phone tax? The gas tax? Etc. IN your print article you say OBAMA lowered taxes on 95%. That is a lie. Taxes went up everywhere else. I have to say in the past year I am wholly disappointed with RD's hard left biased turn.
America will never have Fair Tax. Congress levies taxes based on payola through “Campaign Donations.” Regular people like us don’t make 6-digit donations that buy favoritism. Fat Cats do.
Somebody should take up the cause and get the present tax system replaced with the Fair Tax. There are people in Congress who support this type of tax but someone, like the Readers Digest, should step up and lead the fight to help replace the present system. I don't have the resources or the clout to get this new tax to the public.
How can you screw up something so simple? Re the FairTax, Income has zero bearing on how much a family receive in the prebate. A family of four who spends $56,000/yr would pay a net tax of 11.5% or $6440 in a sales tax if everything they bought was new. Used (cars, houses, anything) is not taxed. If you are going to be an expert and write about a topic, at least learn it well.
I vote that we enact the Fair Tax. The most important thing to me is that it will boost our economy to a new level of prosperity. Another important thing is that Social Security and Medicare will continue to be fully funded by the Fair Tax. All federal revenues, in fact, are generated from a single National Sales Tax, and that is as simple as it gets. The I.R.S. is abolished, and we save on compliance costs there, too. This will get us back to our roots.
We would finally live in an era where it was the people vs the government elite. No more class and income warfare perpetuated by politicians. If they want to spend more money they would have to convince ALL of "we the people" that it is justified. Fair Tax!! Tuesday night at 6PM EST on C-SPAN, Congressman Steve King of Iowa will be explaining the Fair Tax. Tune in if you are interested!!!
The Fair Tax is the way to go. It untaxes the poor who will not have to pay their SS and MCare taxes. They will get a monthly prebate instead of having to fill out tax forms each year to get any money back. It will bring international companies to America because we will have 0% business taxes-what company does not want that? Better jobs to choose from. Finally, if the only way the Feds can raise taxes is to increase the sales tax, it would hit ALL Americans-harder for them to hide the tax.