The Homa Files

Ken’s Take:

(1) I was all over this issue last fall in the election run-up.  My beef isn’t with tax rates per se — I think they’re pretty reasonable.  But, I hate seeing my tax dollars wasted on wacky programs and government inefficiency, and I think that everybody has to have some skin in the gain.  Having half of all voters pay zero income taxes (or less) may be politically advantageous in the short-run, but it’s economically fatal in the long-run …

(2) Question: Does the half of the population that doesn’t pay income taxes have a right to be outraged with the way tax dollars are spent ?  Perhaps they should at least show some courtesy to taxpayers —  by sitting down and shutting up …

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Excerpted from WSJ, “Everyone Should Pay Income Taxes”, Fleischer, April 12, 2009

A very small number of taxpayers — the 10% of the country that makes  — pay 72.4% of the nation’s income taxes. They’re the tip of the triangle that’s supporting virtually everyone and everything. Their burden keeps getting heavier.

As a result of the 2001 tax cuts . . . the share of taxes paid by the top 10% — those making more than $92,400 a year —  increased to 72.8% in 2005 from 67.8% in 2001.

Contrary to the myth that Mr. Bush cut taxes only for the wealthy, the 2001 tax cut reduced taxes for every income-tax payer in the country. He reduced the bottom tax rate to 10% from 15% and increased the refundable child tax credit to $1,000 from $500 per child,. In so doing, millions of lower income taxpayers were removed from the tax rolls, shifting the remaining burden to those at the top.

Mr. Obama is adding to this trend with his “Make Work Pay” tax cut that means almost 50% of the country will no longer pay any income taxes, up from a little over 40% today.

Today, Mr. Obama and many congressional Democrats want the “wealthy” to pay even more so there is more money for them to redistribute. The president says he wants the wealthy to pay their “fair share.” Who can argue with that? But he never defines what that means. Is it fair for 10% to pay 70% of the income tax? Does he believe they should pay 75%, or 95%, or does fairness mean they should pay it all?

In addition to exempting almost 50% of the country from income taxes, today nearly every other social cause is given a loophole — or a preference — in the tax code. Want to buy a hybrid vehicle? You get a tax break. Do you own a solar water heater? You get a credit. Want to give to charity? You get a deduction. Own a house? There’s another tax deduction for you. How about college savings, certain medical costs, and retirement savings? Yes, yes, and of course yes. Did you move, pay alimony, or “provide housing to a Midwestern displaced individual”? More deductions, credits and exemptions there too, if you qualify.

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It’s time to create an Economic Growth Code whose purpose is to fix and grow the economy, not redistribute massive amounts of wealth. A new tax code that creates growth and reforms our entitlement system is the only way to dig our way out of the hole we’re in.

Everyone in American would pay income taxes — everyone. Such a system would be designed to foster broad-based growth for all, in contrast to the loophole-ridden system we have today. Not only is the current code flawed from top to bottom, it is used by politicians to divide the public along class lines and fails to promote prosperity.

Congress should start by refusing to go along with Mr. Obama’s promise to cut taxes for 95% of the country. With the government running an almost $2 trillion deficit, no one should have their taxes cut — no one. Given the size of the deficit, fiscal responsibility demands nothing less.

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I favor the abolition of all Social Security, Medicare, ending the myth that these programs are supported through government trust funds and payroll taxes.

In their place, we should create a simple income tax system that has no deductions or credits at all. The result would be a progressive, multitiered income tax in which everyone pays.

I’d also create a mechanism so tax rates go up or down for everyone — no more dividing the country by lowering taxes for some or raising them only for others. A revenue system whose purpose is to pay the government’s bills should apply fairly to one and all. If Congress wants to raise or cut taxes, it should do so for everyone.

It’s funny what happens when everyone pays the bills; Americans may want less spending so they can pay fewer bills.

Full article:
http://online.wsj.com/article/SB123958260423012269.html

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This entry was posted on April 13, 2009 at 7:58 am and is filed under Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.