Wednesday, October 08, 2008

Tax the poor -- and the middle class

John McCain and Barack Obama both love to highlight how much they will cut taxes, especially for the middle class. I, however, think we should raises taxes. Steve Malanga makes the case:
The declining portion of households who pay taxes is a direct result of policies pursued by both Republicans and Democrats over the last 15 years or so. While deductions and credits have always served to eliminate the tax bill for some low and lower-middle income workers, from 1950 through roughly 1990, the percentage of households with no income tax burden stood constant at slightly more than one-fifth of all filers, according to the Tax Foundation. But since 1990, Washington has added all sorts of tax credits subsidizing everything from “lifetime learning” to adoption expenses--that have further reduced the tax tab, and in the process raised the proportion of households with no federal tax liability to 33 percent.

A big culprit in this evolution is the current Bush administration and its tax packages. Although the 2001 and 2003 tax cuts are often criticized as having favored the rich, in fact they were also laden with tax credits benefiting low and middle income families, and as a result, under Bush, the percent of families not paying taxes increased more than under any other president during the last 50 years.

Both presidential candidates would vastly accelerate the trend. Barack Obama’s tax cut proposals, if enacted, would boost the proportion of those paying no income tax by one-third to a whopping 44 percent of all households, according to the Tax Foundation. John McCain’s proposal is not much different in that regard. Under his plan, 43 percent of households would pay no federal income taxes.

...The larger point is that if McCain or Obama follow through with their tax plans, we’ll continue a trend that makes us look more and more like some European social welfare state, where many people have a stake in growing government entitlements, which fewer and fewer taxpayers finance. At some point along that road, change becomes impossible because too many citizens benefit from the system in place, while those who pay the freight for this system try whatever they can, including starting businesses elsewhere, or reducing their output, to avoid the disproportionate tax bite.
Read the whole thing.

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