American People Deserve to Hear the Truth about Tax Policy
October 3, 2012
This Wednesday President Barack Obama and Republican nominee Mitt Romney will take the stage for the first of three Presidential debates. The debate will focus primarily on economic and domestic issues, so it is a golden opportunity for both men to speak truthfully and honestly to the American people about the state the economy, the tax code and why it needs major reform
After only a quick glance, it is impossible not to be painfully aware that the tax code needs an overhaul, both on the individual and corporate side, and has for some time. A series of hearings on Capitol Hill since 2011 has brought tax reform to the national stage, but outside those with daily involvement with government, most citizens’ education on the code is limited to campaign rhetoric and sound bites. Clearly the national discourse could use a few more facts, so let’s review a few.
There are some 58 million individual tax filers with zero or negative federal income tax liability or roughly 47% share of the total population that pay no federal income tax. In a 2009 Tax Foundation/Harris Poll, 66 percent of respondents answered that “everyone should be required to pay some minimum amount of tax to help fund government”.
So here are our questions. If we have roughly 60 million people NOT paying federal income taxes, and a two-thirds majority of Americans who believe that people should pay some amount to help fund government; how do we get from point A to point B?
How do we pay for the cost of government when we are running $1 trillion deficits yet have so many people not contributing?
The U.S. already operates with the most progressive tax code among industrialized countries with the top 20% paying 94% of the federal income tax. Furthermore, a new tax on the wealthy, such as the “Buffet Rule” will not raise nearly the amount of revenue needed to cut into the deficit, never mind the impact on small businesses and economic growth.
President Obama’s applause lines about wanting the rich “to pay their fair share” may be popular, but overlook the fact that the wealthiest 3% of all taxpayers already pay half of all federal income taxes. If the President wants the wealthy to pay more in taxes, then he should take into account what the wealthy already pay, and acknowledge the impact that high tax rates on the top earners has on economic growth.
Governor Romney likes to talk about his business background and his 20% across the board tax cut, but he also has been coy about the details of his plan, including which tax expenditures and preferences he would eliminate.
The candidates need to be honest with the electorate. They need to address the complexity of the tax code and the damage it does to growth while also discussing the growth of nonpayers and its implication for the economy. Hopefully the adversarial nature of a presidential debate will force greater clarity out of both candidates.