Tax Reform...for the Rich
Story Link Here
Parts of the story below.
More relief for struggling millionaires you thought the current Bush tax rate rewarded the wealthy, wait until you get a load of his administration's latest plan
By Michelle Goldberg Nov. 20, 2004
Liberal policy wonks -- and even some who aren't so liberal -- did a double take when they read the new tax plan floated by the Bush administration in the Washington Post on Thursday. Was the White House really suggesting eliminating incentives for employers to offer their employees health insurance plans? Was it really proposing to shift the country's tax burden even further onto states that didn't vote for Bush, like New York and Massachusetts?
It was.
The Post reported that according to White House advisors, the Bush administration "plans to push major amendments that would shield interest, dividends and capital gains from taxation, expand tax breaks for business investment and take other steps intended to simplify the system and encourage economic growth."The plan would further shift the tax burden off of people whose money comes largely from interest and investments -- the very rich -- a prospect that liberals find disheartening but not surprising. But what really caught financial experts' attention was the next paragraph, which explained how Bush intended to pay for these tax cuts."
The changes are meant to be revenue-neutral," the Post explained. "To pay for them, the administration is considering eliminating the deduction of state and local taxes on federal income tax returns and scrapping the business tax deduction for employer-provided health insurance, the advisers said.""Revenue-neutral?" asks Martin Press, a high-profile tax attorney and registered Republican. "There's no such thing. When lawmakers refer to 'revenue neutral,' they mean it helps someone and hurts someone else." If such policies move forward, says John Irons, associate director for tax and budget policy at the Center for American Progress, a liberal think tank, "You'll see an economy that benefits only the very few at the very top. People in the middle will be squeezed, people in the low end won't be helped at all."
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The first part of the plan -- which would get rid of federal tax deductions for state and local income tax -- would fall disproportionately hard on Democratic-voting states, which already pay more in taxes than they receive from the federal government. On his blog MaxSpeak, the economist Max Sawicky calls the proposal "The Bush Blue State Tax." Experts say the second part, which would do away with the tax deduction granted to employers for providing health insurance, would likely throw millions of people out of group plans, forcing them to buy far more expensive individual insurance.
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If removing the health-insurance deduction would reward some of the administration's supporters, removing state and local tax deductions would punish its enemies.
Why?
Because these state and local income taxes are highest in such blue states as New York, Massachusetts and California, says Press. New York City also has an income tax. State taxes are lowest in the red states, which provide fewer services. Texas and Florida have no income tax at all.
Right now, people who itemize their tax returns -- about 30 percent of taxpayers, according to Sawicky -- can write off the money they pay in local taxes, thus reducing their federal taxes. "If you're in New York and you're a high-income person, you pay more state income tax, but the blow is less severe because you can deduct it," says Sawicky. "So in effect the price of your state income tax has been reduced. If you pay a dollar in state income tax and you're in the 35 percent bracket, you can deduct $.35, so in effect your state income tax is only costing you $.65 on the dollar."
"If you take away those deductions, you're in reality increasing the taxes on high-taxing, generally blue states," says Press.
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So is the Bush administration truly pushing a system in which someone who lives off interest and dividends -- say, Paris Hilton -- would pay less tax than the person who cleans her bathroom? "Yes," Press says.
He continues: "The attitude is that everyone who is working 40 hours a week doing an average job at a construction site, or is a store clerk, or me sitting in an office doing economic analysis, is feeding off the people who are the real successes. The attitude is that the economy should be geared to benefit the people who are business owners, who are rich, who are giving us the benefit of jobs. That's what you really see in the tax code."
-----
Even if these ideas are thrown out in negotiations, what kind of hubris exists in this administration that it thinks its okay even to float such ideas?
Story Link Here
Parts of the story below.
More relief for struggling millionaires you thought the current Bush tax rate rewarded the wealthy, wait until you get a load of his administration's latest plan
By Michelle Goldberg Nov. 20, 2004
Liberal policy wonks -- and even some who aren't so liberal -- did a double take when they read the new tax plan floated by the Bush administration in the Washington Post on Thursday. Was the White House really suggesting eliminating incentives for employers to offer their employees health insurance plans? Was it really proposing to shift the country's tax burden even further onto states that didn't vote for Bush, like New York and Massachusetts?
It was.
The Post reported that according to White House advisors, the Bush administration "plans to push major amendments that would shield interest, dividends and capital gains from taxation, expand tax breaks for business investment and take other steps intended to simplify the system and encourage economic growth."The plan would further shift the tax burden off of people whose money comes largely from interest and investments -- the very rich -- a prospect that liberals find disheartening but not surprising. But what really caught financial experts' attention was the next paragraph, which explained how Bush intended to pay for these tax cuts."
The changes are meant to be revenue-neutral," the Post explained. "To pay for them, the administration is considering eliminating the deduction of state and local taxes on federal income tax returns and scrapping the business tax deduction for employer-provided health insurance, the advisers said.""Revenue-neutral?" asks Martin Press, a high-profile tax attorney and registered Republican. "There's no such thing. When lawmakers refer to 'revenue neutral,' they mean it helps someone and hurts someone else." If such policies move forward, says John Irons, associate director for tax and budget policy at the Center for American Progress, a liberal think tank, "You'll see an economy that benefits only the very few at the very top. People in the middle will be squeezed, people in the low end won't be helped at all."
------
The first part of the plan -- which would get rid of federal tax deductions for state and local income tax -- would fall disproportionately hard on Democratic-voting states, which already pay more in taxes than they receive from the federal government. On his blog MaxSpeak, the economist Max Sawicky calls the proposal "The Bush Blue State Tax." Experts say the second part, which would do away with the tax deduction granted to employers for providing health insurance, would likely throw millions of people out of group plans, forcing them to buy far more expensive individual insurance.
------
If removing the health-insurance deduction would reward some of the administration's supporters, removing state and local tax deductions would punish its enemies.
Why?
Because these state and local income taxes are highest in such blue states as New York, Massachusetts and California, says Press. New York City also has an income tax. State taxes are lowest in the red states, which provide fewer services. Texas and Florida have no income tax at all.
Right now, people who itemize their tax returns -- about 30 percent of taxpayers, according to Sawicky -- can write off the money they pay in local taxes, thus reducing their federal taxes. "If you're in New York and you're a high-income person, you pay more state income tax, but the blow is less severe because you can deduct it," says Sawicky. "So in effect the price of your state income tax has been reduced. If you pay a dollar in state income tax and you're in the 35 percent bracket, you can deduct $.35, so in effect your state income tax is only costing you $.65 on the dollar."
"If you take away those deductions, you're in reality increasing the taxes on high-taxing, generally blue states," says Press.
-----
So is the Bush administration truly pushing a system in which someone who lives off interest and dividends -- say, Paris Hilton -- would pay less tax than the person who cleans her bathroom? "Yes," Press says.
He continues: "The attitude is that everyone who is working 40 hours a week doing an average job at a construction site, or is a store clerk, or me sitting in an office doing economic analysis, is feeding off the people who are the real successes. The attitude is that the economy should be geared to benefit the people who are business owners, who are rich, who are giving us the benefit of jobs. That's what you really see in the tax code."
-----
Even if these ideas are thrown out in negotiations, what kind of hubris exists in this administration that it thinks its okay even to float such ideas?
posted by Mike at 9:13 AM
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