I’ve written about our need for tax reform, but I realize I haven’t catered to everyone who might be interested in the subject. I’ve argued from a pro-individual, pro-business, pro-responsibility foundation. If you don’t like that, and prefer your tax reform to include tax increases, anti-investment incentives, and heightened class warfare, advocating poverty for all, I’ve found the plan for you, courtesy of Oregon Sen. Ron Wyden. Behold:
Wyden’s plan, the Fair Flat Tax Act of 2005, would replace the six current personal income tax rates with three – 15 percent, 25 percent and 35 percent. Corporate income would be taxed at a single flat rate of 35 percent. The proposal would eliminate many of the personal and corporate tax breaks that encrust the existing tax code, and would allow all taxpayers, not just those who itemize, to deduct state and local taxes from their federal income tax forms.
Most significantly, Wyden calls for taxing all income equally, regardless of its source. Interest and dividends would be taxed at the same rate as wages and salaries, eliminating the preferential treatment for investors over workers.
That’s brilliant. Instead of ending extra punishment for wage income, Sen. Wyden wants to punish investing. Not a moment too soon, of course, because we know only the wealthiest, greediest individuals invest their money in financial instruments generating interest and dividends. The bastards deserve to be punished for their
capitalism hatred of poor people.
Simplicity is a virtue of any tax system; fairness is another. Wyden’s idea of equalizing the tax treatment of all income – whether it comes in the form of a paycheck or a stock dividend – has powerful appeal. The preferential tax treatment of investment income clearly favors the richest taxpayers. In Oregon, according to the state Department of Revenue, the richest 5 percent of taxpayers received 40 percent of all income from interest and dividends, and 79 percent of all income from capital gains.
Here’s an angle these editorial writers might like to pursue: what percentage of Oregon’s tax payments come from the richest 5 percent? Might that reveal a useful understanding, as well? But it’s about helping the poor, not punishing the rich. The use of “clearly favors the richest taxpayers” is all the analysis I need, so never mind.
Tax rates on interest, dividends and capital gains were cut during the Clinton administration, and again under President Bush, as a means of encouraging investment and savings. The resulting disparity in tax rates is manifestly unfair to those who rely on income from salaries and wages. A middle-class taxpayer who gets a $1,000 raise will forfeit 25 percent of it in federal income taxes, plus Social Security taxes. The same amount paid in dividends, interest or capital gains is taxed at a rate of no more than 15 percent, with no Social Security bite.
Once again, this plan just looks out for the poor(er) taxpayers. We wouldn’t want to bring that 25% tax hit on the $1,000 raise down as much as we want to hit the rich with an extra $100 tax for having the nerve to derive sources of income apart from direct labor. We shouldn’t care if they spent years building the wealth to invest. Hell, they should’ve donated the extra to the poor. Since they didn’t, we should take it from them.
If this is the best Democrats can do, they should just shut up and let Congressional Republicans continue to botch our nation’s economic well-being.
UPDATE: With a little research, I found this statistic from 1999. (I’ll look for a newer statistic, but I don’t think the result will change.)
For example, 38.1 percent of 1999 full-year taxpayers had an income of $20,000 or less but paid only 4.2 percent of all taxes. Conversely, those 1999 full-year taxpayers with income of at least $100,000 comprised only 6.8 percent of all taxpayers, yet they paid 42.8 percent of all taxes.