Edwards has released his tax reform proposals in “Building One Economy with Tax Reform to Reward Work” on his campaign website. His plan includes:
· A new "Get Ahead" tax credit to match up to $500 a year in savings for families earning up to $75,000 – that could be used for retirement, college education, buying a home, investing in a small business or during a financial or medical emergency, and new "Work Bonds" to offer additional targeted savings incentives for low-income families.
· Expanding the Child Care Credit to pay up to 50 percent of child and dependent care expenses up to $5,000 and make it partially refundable, and allow stay-at-home parents to help pay for child care for newborn infants.
· Tripling the Earned Income Tax Credit for single adults and cuting the marriage penalty.
To pay for these tax cuts Edwards plans to:
· Raise the tax rate on capital gains to 28 percent for the most fortunate taxpayers – taxing the investment income of the wealthiest Americans similarly to the wages of the middle class.
· Repeal the Bush tax cuts for the highest-income households and keep the tax on very large estates (above $4 million for couples).
· Declare war on offshore tax havens by cracking down on tax shelter promoters, cooperating with allies to fight tax havens, and closing the "tax gap" by improving IRS customer service, simplifying tax filing, auditing more large corporations and high-income individuals and requiring more third-party reporting.
· Close unfair loopholes like the tax breaks for hedge funds and private equity fund managers and unlimited executive pensions.
While I am all for providing incentives to save, increasing the Child Tax Credit, cutting the marriage penalty, and cracking down on tax havens and shelters, I am against refundable tax credits (they create too much potential for fraud), expanding the Earned Income Credit (let’s call a spade a spade – the EIC is really a federal welfare program - see my commentary from TAXPRO JOURNAL) and any increase in the capital gains tax.
The WSJ article points out that Edwards is the first Democratic candidate to provide detailed tax proposals. So far Clinton and Obama have only said that they favor rolling back at least a portion of the Bush tax cuts that favor upper-income families, though Obama's aides have said he is considering raising the capital gains rate to 20%.
The Tax Foundation has posted a commentary on the Edwards tax plan in the “Reality Check for John Edwards on Who Pays Taxes” posting on its TAX POLICY BLOG. They specifically take exception to Edwards’ comment that "It should not be in America that the middle class carries the tax burden, and that's exactly what's happening”.
FYI, the TAX GIRL posted a series of interviews on tax policy with Presidential candidates earlier this year.