Reshaping the tax code

by The City Wire staff ([email protected]) 161 views 

Last Saturday, news broke of President Obama’s intentions to reshape the tax code in favor of the middle class and working families, which would require raising taxes and fees on the largest financial firms and wealthiest taxpayers in our country.

While I do not expect such a proposal to succeed in a Republican-controlled Congress, I do believe that the conversation built around it will reveal the true value that is placed on our hardest working citizens by the more conservative-leaning members of Congress and (hopefully) start a dialogue about how taxation can become more equitable in our country.

Under the new plan, $320 billion would be raised over the next decade and provisions to cut $175 billion over the same period would also be installed. The crux of the plan addresses inherited assets, where it’s estimated that hundreds of billions of dollars go untaxed each year. Capital-gains would also be affected, as the top tax rate would move from 23.8 percent to 28 percent for couples making over $500,000 per year.

Through these changes and fees placed on banks that possess assets over $50 billion, the middle class will see an adjustment to their taxes and be eligible for credits regarding education, increased childcare and a $500 credit for families with two working spouses.

Rather than continuing to allow our government to capitulate to the bogus argument that raising taxes on the ultra wealthy is damaging to economic growth, the President is making a move.

In an issue brief entitled “Middle Class Series: The Federal Tax Code and Income Inequality,” the Center for American Progress notes that our nation’s income has grown increasingly unequal over the last several decades. They go on to state: “In 1979 the average income for a household in the richest 1 percent was about 10 times higher than the average income for a household in the middle 20 percent. By 2007 that ratio had almost tripled. The average household in the richest 1 percent was now earning nearly 30 times as much as those in the middle. Yet even as income inequality increased dramatically, the effect of the federal tax code on income distribution declined substantially.”

Given this data, is it any wonder why one of the most progressive leaders of our time has incentive to amend the federal tax code in light of such inequality? What possible argument could the GOP put forth to defend our current system?

The purpose of the federal tax code is to raise revenues that pay for government programs, benefits, services and investments.

With a progressive system, income inequality can be significantly reduced.

So, this is all truly a matter of ideology – of whether or not our governing body can see the purpose in strengthening our nation through a more fair approach to taxation, or whether or not it will remain mired in the belief that there is a way for our hardest working citizens to achieve their dreams and a comfortable lifestyle while working to do on an uneven playing field while shouldering the financial burdens of each of the individuals who share the same boat or worse.

Another thought to keep in mind is that additional revenues also serve to reduce the federal budget deficit, which is a number that each of us owns equally whether we agree with how our current debt came to pass or not. By not utilizing the means we have to address the various inequalities and ills that plague our society, we are accepting the anchor that hangs around our figurative necks that continues to keep us below the mark of where we could and should be as a society.

Yet there is no reason to believe that the President will not receive a significant backlash for his attempt to level the playing field because he can really only do so with the assistance of a majority of individuals who ran on platforms of torpedoing his every move.