GOP scam Tax plan cuts for rich and hurts everyone else

The long-awaited Republican tax reform plan was released today by House Ways and Means Committee Chairman Dave Camp (R-Mich). It's being hailed as a breakthrough in putting real reform on the table, but also being instantly eulogized as dead-on-arrival in a Congress that wants no part of any tax reform, now or ever.

Still, it's instructive to examine the Camp plan for a primer on the latest mathematical trickery aimed at making something that preserves, even enhances, tax benefits for the wealthy appear instead to be a tax increase for the wealthy. Nice try, Congressman Dave.

Here's the easiest calculation. Camp says he's eliminating the preferential tax rate on capital gains, and taxing them the same as ordinary income. That would be a big philosophical change and a big tax hike on the rich, if it were true.

It's not true.

Camp's plan exempts 40% of capital gains (and investment dividends) from any taxation at all. How does this work out in real numbers? The top marginal tax rate on married taxpayers today is 39.6% (couples with more than $457,600 income). The top capital gains rate is 20%.

Camp wants to cut the top marginal rate to 35%. If you tax capital gains at 35%, but exempt 40% of them from any tax, your effective rate on all capital gains works out to (... wait for i t...) 21%. In other words, Camp is raising the standard cap gains rate by a single percentage point. But since he's also cutting the top rate on all income by nearly five percentage points, rich taxpayers still come out ahead.

Camp acknowledges that his plan results in a "three percentage-point decrease from the maximum rate" individuals pay on investment income today, but his math on that is a little murky. He is leaving in place the new 3.8% surcharge on unearned income, including cap gains, levied on households earning more than $250,000 to pay for Medicare.

What's especially stealthy about this tax break is that capital gains and other investment income account for a far higher share of total income for the wealthy than for average taxpayers.

According to IRS statistics for 2011 (the latest published), taxpayers earning between $75,000 and $100,000 received less than 1% of their income from the sales of capital assets on average, and 77% from wages and salary. For the average taxpayer in the $1 million to $1.5 million range, capital gains were more than 11% of income, and wages and salary less than half. For the taxpayer reporting $10 million or more, cap gains accounted for nearly half of all income, and wages and salary only 17%.

Camp also proposes tinkering with tax deductions and increasing the standard deduction; we'll leave it to Washington's cadre of expert number-crunchers to determine how each of these provisions affects taxpayers at various income levels. But Camp is candid about wishing to "flatten" tax rates -- that is, make them less progressive.

That's a dead giveaway that this plan benefits the rich more than anyone else, because it continues a long-term trend toward relieving them of their share of the overall tax burden. This has been documented by Emmanuel Saez of UC Berkeley; a graphic representation of the decline in the U.S. tax system's progressivity from 1970 to 2004 can be found here.

Camp also tries to slip a few other bennies for the wealthy into his tax plan, possibly hoping that no one will read that deeply into the text. But keep an eye out for the changes he makes in the rules for 501(c)4 "social welfare" nonprofits.

These organizations have been turned into conduits for huge donations to political campaigns because they're allowed to keep their donors secret from the public, though not from the IRS. They landed at the center of the fabricated "scandal" over IRS screening of political groups, mostly because the IRS wasn't given the legislative guidance or the resources effectively to distinguish groups that were really political, which aren't eligible for 501(c)4 tax or secrecy benefits, from genuine social agencies, which are.

Camp would make the job of the IRS harder. He would ease the registration process for C-4s, and allow them to keep almost all their donors secret not only from the public, but from the IRS too. This is really sleazy of him. It gives rich political campaign donors more of a shield from the law than they deserve, and much more than is healthy for the public interest. If there were a single reason to laugh this tax "reform" off the table, this would be it.
http://touch.latimes.com/#section/-1/article/p2p-79447462/


Well a new plan that only helps the rich and hurts the rest of us. So does anyone think this is a good idea?

FTR: NPR is Reporting that this plan would end IRAs and force everyone to Roth IRAs. Also the mortgage deduction could be on the chopping block. I will see if I can find a link.

 

how about we cap the exempt amount at 50k, 40% up to 50k worth of tax credits, no more then that


.

 

That makes sense, but of course that is "class warfare" or "class envy" or "hating the rich."

 

not hardly, we often cap the max you can get back for something in taxes

what is class warfare is having non-labored income be taxed less then labored income in the first place

 

I completely agree.

 

At some point, can't you see some rightwing "intellectual" proposing...in all seriousness...

ZERO taxation on the wealthy? After all, if "less taxes on the jobs creators creates more jobs".....NO taxes on the "jobs creators" would create EVEN MORE jobs. Right?

Just go ahead and honestly declare him or herself a plutocrat. Quit trying to HIDE it like they have since Reagan.

 

Actually a smart "job creator" pays no taxes already. But yes it would be nice if they just said as much and their distaste for anyone who actually has to deposit the paycheck.

 

So it would be better to take more money out of the investment pool and let the federal government spend it on pretending to help poor people??

Now we are approaching a time when people born on government dependence, lived on government dependence, raised their kids to live on government dependence and now they are too old to work and will die of old age still on government dependence.

When the government controls "investment' funds as BH Obama wants to do all we will see is one failed projected after the other with no consequences for the people squandering tax payer money on political crony projects.

How is Holder doing?

 

Freshing honesty....after all, it's THEIR theory, why don't they take it to its logical end?

33% tax rate is too high for the wealthy and cutting it to 29% would "create millions of jobs"....then it's 29% and a recession hits and they say "Cut it to 25% and it'll create millions of jobs".....then another recession hits and they say "Cut it to 20% and it'll create millions of jobs"....

just save time....ZERO percent taxes for the wealthy....and prosperity will be endless. Right?

 

The plan is revenue neutral:
Camp wants to cut the top marginal rate to 35%. If you tax capital gains at 35%, but exempt 40% of them from any tax, your effective rate on all capital gains works out to (... wait for i t...) 21%. In other words, Camp is raising the standard cap gains rate by a single percentage point. But since he's also cutting the top rate on all income by nearly five percentage points, rich taxpayers still come out ahead.

So no it doesn't take investment capital out.

 

As opposed can't you see some leftwing "intellectual" proposing... in all seriousness...

100% taxation on the wealthy? After all, we don't need investors to start up new businesses or expand existing ones. Oh no, all you need is more spending by the bottom half of the income brackets and hey presto, those businesses will popup by themselves.

Just go ahead and honestly declare him or herself a progressive liberal socialist bureaucrat. Won't help the low income people, but by God we really screwed those rich guys. Income inequality will be achieved, we'll all be poor and unemployed.

 

The one tax plan I would put forward is a 1% VAT on all sales except food, fossil fuels and housing bellow 500K. The revenue brought in would lower the debt pretty quickly over a few years.

 

Taxcutter says:
"Less progressive" is a feature, not a bug. "Progressive" tax rates let a large part of the people entertain the fantasy that government runs on other people's money. If Camp's "less progressive" has any valid criticism, it's that his proposals have left any "progressive" component in the tax structure. As long as there is any "progressive" element, the fre stuff crowd can think they are getting fat on other people's money.

Also, is it really reform if the tax system remains based on income rather than consumption?


"...only helps the rich and hurts the rest of us."

Taxcutter says:
Democrats should love that. They are Goldman Sachs' water boys.

 

Liberal ideology doesn't call for 100% tax rate on the wealthy. The MOST we've ever had in this country was 85% ...under REPUBLICAN Dwight Eisenhower.

But it is the RIGHT's belief that "lower taxes on the wealthy creates jobs and economic prosperity".....okay.....I'll accept that theory....but I ask-

Why not ZERO percent taxation on the wealthy for MAXIMUM jobs creation and growth?

Explain why or why not?

 

Let's just cut to the chase should a family of 4 making 60K pay a higher rate then a family who brings in 160K and that family should pay more then the family making 1.6mil?

 

Naturally ANY tax increase, even a 1% VAT, the Right opposes. It violates their philosophy on economics. Thing is....THEY don't believe in their economic theory or again, they'd call for a ZERO percent tax rate...which according to tha theory...would create endless prosperity.

 

Taxcutter supports a VAT or at least a consumption tax...

 

But I think he means INSTEAD of the progressive income tax, right?

ANY Sales or Flat Tax has to be heavily weighted to the poor, even middle class to work. Otherwise, those people go broke on gas and food.....or the wealthy escape the taxes...or both.

 

Smoke and mirrors, I expect nothing less from our lawmakers.

 

It is going to be interesting how the CBO is going to score this once they have analyzed the tax plan structure. Still there are some benefits, but this propsoal is by no means true tax reform. at all.

 

Taxcutter says:
The tax rates should be exactly the same. that's why a consumption based tax plan is best.

 

A family of 4 making 60K doesn't pay a higher rate than a family who brings in 160K, not even close. However a family bringing in 160K quite often pays a higher rate (depending on nature of income) than a family making 1.6M and that is completely (*)(*)(*)(*)ed up. One tax schedule for all income regardless of source and I'm happy. We can then discuss the merits or not of appropriate standard deductions and whether the tax schedule ought to be "progressive" or not, but this (*)(*)(*)(*) about certain types of income ought to receive favorable tax treatment has to end.

 

liberals just want the umber rich to pay the same % tax for every dollar they earn that the working class does

 

I wonder how many "loopholes" that mean that corporations that do billions in business in the USA yet don't have to pay the tax for it, will get plugged up by this plan? The same "loopholes" that have been on the books, unchanged, for year after year after year after year.

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These rich barely consume at all.. They take money OUT of the economy to hoard in their off-shore tax-haven bank accounts.

 

A 40% exemption on LT Cap gains would benefit people who sell property that was gifted to them by elderly relatives; the mortgage interest deduction disproportionately benefits the wealthy, so its elimination would increase taxes on the rich more so than on the middle class.

For a lot of people, ROTH IRA's make more sense because most of your contributions will be during periods when you are in a lower tax bracket with lots of deductions and credits available to you, when you would otherwise be paying taxes at the end of your career when you have fewer deductions/credits and presumably higher incomes and effective tax rates.