The CTJ puts its own spin on the proposals by grouping them, not by candidate, but by, in their opinion, “Bad Ideas” and “Good Ideas”. I thought I would weigh in with my 2 cents worth on the subject.
Here, with by my comments, is what they consider Bad Ideas:
· Make Permanent the Bush Tax Cuts. If George W’s tax cuts are allowed to “sunset” everyone will be hit with a huge tax increase in 2011. Doing away with the 10% tax bracket, the increased Child Tax Credit, and the partial marriage penalty relief would hurt lower and middle income families. Some of the tax cuts have already been made permanent, such as those that relate to pensions and retirement savings (by the Pension Protection Act of 2006).
· Repeal the Estate Tax. I am not a fan of the estate tax (I do not prepare federal or state estate or inheritance tax returns). My only concern with its total repeal is losing the “step-up in basis” on inherited property. It would be a nightmare for tax preparers if the original cost basis of the deceased is carried over on inheritance.
· National Sales Tax. While I have not embraced the Fair Tax proposal (I am not ready to retire yet) I will admit that replacing income and payroll taxes with a national sales tax has some things going for it. As I said in an item from the September 4, 2001 installment of TWTP - (1) “A national sales tax would eliminate the problem of the ‘underground economy’ which escapes taxation under the current system. Everyone, regardless of the source of their income, would pay sales tax at the point of purchase.”, (2) “A national sales tax would encourage saving and investing. As the tax is assessed on retail purchases only, income from investing activities would not be subject to tax.”, and (3) “If under the national sales tax system corporate and business income taxes are abolished, along with the need for expensive compliance costs, the savings would be passed along to consumers in the form of reduced prices and to stockholders in the form of increased dividends.”
· Flat Tax. I would support a flat tax, with minimal, if any, deductions. The goal is to “simplify, simplify, simplify”. It would not be bad for my business - as a tax preparer I would make more money, and experience much less “agita”, if all I did was prepare simple short forms all day than I currently do preparing complicated returns. Besides, I do not like the “progressive” tax system. Why should a high-income individual pay a higher percentage of his income? If everyone paid a flat 10%, or whatever, a person making $1 Million would obviously pay more than than a person earning $30,000.
· Increase Revenue by Cutting Taxes. I do believe that reduced taxes may result in economic growth, given the right circumstances. I seem to recall reading that tax revenues have historically increased after cuts in capital gains rates have been enacted.
· Tax Breaks for Health Care. The cost of health insurance is prohibitive for many individuals, especially those of us who live in New Jersey. Something has to be done. I do agree with CTJ that a credit is “more better” than a deduction, and “if it's not refundable it still won't help those who pay federal payroll taxes but not federal income taxes.” But then I am opposed to refundable credits. The bottom line is that the answer to the problem will not be found by using the 1040.
· Eliminate the IRS. There will always have to be an IRS in some form, although a simpler tax system would be easier to administer. My September 2001 posing also said, “A national sales tax would also be relatively easy to administer. Almost of the 50 states already have a state sales tax, with all the appropriate collection and auditing functions in place. The national sales tax could be incorporated into the collection and compliance process of the various state sales taxes, with the states receiving a ‘commission’ from the federal government.”
The Citizens for Tax Justice think the following are Good Ideas:
· Repeal Bush Tax Cuts to Fund Other Priorities. See my comments above on making the Bush Tax Cuts Permanent.
· Stop Taxing Work More than Wealth. I do not want to see an end to preferential capital gains tax rates. I want to encourage investment. And, as I have said above, I seem to recall reading that tax revenues have historically increased after cuts in capital gains rates have been enacted.
· Close the Loophole for Carried Interest. I will agree that there may be some merit to this idea. I rarely, if ever, come across this tax break with my clients, so I have not followed this issue.
· Taxing Carbon Emissions. Again, I have not followed this issue and do not have enough information to form an opinion at this point. I do agree with CTJ’s comments of concern that the resulting “added cost would likely be passed on to consumers in the form of higher prices that disproportionately burden low-income families.”
So it looks like the Citizens for Tax Justice and I disagree on many of the candidates’ proposals. What do you think?
As a final comment - I am surprised the review did not address the dreaded Alternative Minimum Tax (AMT). Have the candidates been silent on the AMT?
FYI, Kelly Phillips Erb posted interviews with several Republican candidates on tax policy at her TAX GIRL blog a few months ago.