Observing from beyond the solar system, a cultural outsider looks in.

Friday, July 27, 2007

John Edwards Wants to Lower Your Taxes

The word "your" in the title of this article refers to everyone who makes less than $200,000 a year. If you make more than that, chances are you're not paying your fair share now, and Edwards will raise your taxes. But let's be very clear about this. For almost everyone who will read this article, Edwards wants to lower your taxes.

Here are a few statistics about income inequality in America today:

An Economy Only Growing at the Top: Income inequality is at its greatest level since 1928. American families are growing apart: 40 percent of the economic growth over the past 20 years has gone to the top 1 percent of families. In 2005, income grew by leaps and bounds for the top 1 percent – 14 percent in one year – but it was stagnant for the bottom 90 percent. The top 300,000 taxpayers now make more than the bottom 150 million. If all Americans were sharing in economic progress as they were nearly 30 years ago, families in the bottom 80 percent would be earning $7,000 more a year.

John Edwards sees the unfairness in this situation.

"It's time for us to put our economy back in line with our values," said Edwards. "It's time to end the president's war on work. And it's time to restore fairness to a tax code that has been driven badly out of whack by the wrongheaded rules of the Washington establishment – more wealth for the wealthy and more power for the powerful. In America, when the middle-class makes money from hard work they shouldn't pay higher taxes than when the rich make money from money."

Let's get into the nitty-gritty of what this means for most of us. (Quotes in italics come directly from the fact sheet provided by the Edwards campaign.)

  • A "Get Ahead" credit would help millions of families. The Get Ahead Credit will expand the Savers Credit to match savings up to $500 a year, providing as much as an additional dollar for every dollar of savings. The credit will refundable to low-income families and be phased out with income and families earning up to $75,000 would receive a credit.

  • Work Bonds would help low income families save. More targeted than the Get Ahead credit, Work Bonds will supplement the Earned Income Tax Credit to match the savings of low-income workers up to $500 per year. Together, the two tax breaks would let the lowest-income families set aside as much as $1,000 a year. The Work Bonds will be directly deposited into a savings account.

  • The first $250 in investment income would be exempted. Edwards will exempt from taxes each family's first $250 in interest, capital gains, and dividends.

  • You could save your child tax credit for the future. Edwards will allow families to deposit part or all of their child tax credit into a tax-free saving account. The funds could be withdrawn for any use when the child turns 18. A family that deposited the entire $1,000 every year would have $31,000 for college and their future after 18 years.

  • Better child care credits for middle-class families. To help millions of families with their child care expenses, Edwards will expand the Child and Dependent Care Tax Credit to pay up to 50 percent of childcare expenses up to $5,000 and make it partially refundable to benefit low-income working families. He will also allow stay-at-home parents to get the credit to help pay for child care for newborn infants.

  • Expand the Earned Income Tax Credit. Edwards will offer more than $1,200 to poor single workers, tripling the current EITC, and it will give 4 million low-income workers an average tax cut of $750. He will also cut the marriage penalty in the EITC. Edwards believes that we must cut the EITC marriage penalty. His proposal will cut taxes for 3 million couples by about $400 a year.

  • Eliminate estate taxes for the middle class, small businesses, and family farmers. He will also eliminate estate taxes for the middle class, small business owners and family farmers, while keeping these taxes on the few families with large estates above $4 million in value.

Most people reading this article can find one or more of the tax changes above that would benefit them. But let's be realistic. This creates a shortfall that has to come from somewhere else. So whose taxes would be raised? The answer is that if you make over $200,000 a year, or if a significant portion of your income comes from investments, rather than work, you're going to be paying more under an Edwards administration.

  • Tax wealth as much as work. Edwards will raise the top tax rate on long-term capital gains to 28 percent for the most fortunate taxpayers, the same rate signed into law by President Reagan. The 28 percent rate will ensure that high-income investors will pay taxes on their investment income at a similar rate to what regular families pay on their earned income.

  • Repeal Bush tax cuts for people making over $200,000 a year. More than half of the Bush tax cuts – $132 billion – will go to the top 1 percent of taxpayers in 2010. Edwards will repeal the Bush tax cuts for the highest-income households.

  • Declare War on Tax Havens: About $300 billion a year in taxes go unpaid, and about $1.5 trillion in personal assets of U.S. taxpayers are held offshore. These unpaid taxes increase the share of the tax burden shouldered by honest taxpayers. Edwards will end the abuse of foreign tax havens: low-tax countries that facilitate American corporations and wealthy individuals seeking to avoid U.S. taxes.

  • Close the Hedge Fund and Private Equity Loopholes: Some of the most highly paid people in America are the managers of hedge funds and private equity funds, some of whom make hundreds of millions of dollars or even billions a year. Although most of their income, like other earned income, is nothing more than payment for the work they do, they pay only the 15 percent capital gains rate rather than the ordinary income tax rate. Edwards will close this loophole and also ensure that publicly traded private equity and hedge funds pay corporate taxes.

  • Cap Executive Pensions: Top executives at large corporations commonly receive deferred compensation packages that allow them to put off indefinitely the payment of taxes on much of their compensation. They have in effect unlimited IRAs or 401(k)s, without the limits that apply to other workers. Edwards will limit the amount of money that can be put into these funds to $1 million a year.

Now quite frankly, what Edwards is proposing is a lot more equitable than the tax code we have now, and it will help the majority of Americans while preventing the wealthiest from getting a free ride. Getting it done won't be easy. The wealthy people that Edwards wants to raise taxes on are exactly the people that control the media. You're going to hear a lot of spin about this proposal, most of it untruthful. You're going to also hear a lot of personal attacks on John Edwards as a result of this. Watch this video, and you'll get an idea of how strongly Edwards will fight for tax equity.

I don't know about you, but my money's on John Edwards.

Labels: , , , , , , , , , , ,


Post a Comment

Subscribe to Post Comments [Atom]

<< Home