Don't Get Fooled Again! A Message on Tax Reform

Sabrina the Unicorn from the <a rel="nofollow" href="" target="_blank">People’s Tax Page</a> along
Sabrina the Unicorn from the People’s Tax Page along with her friend Not-Rich Kid look on as Rich Kid enjoys a whole box of tax cut donuts

Republicans are at it again. They are rallying around a massive tax cut for the rich, and they are using the usual tricks to try and sell it to the American people. Now they are flirting with adding the repeal of the Obamacare “individual mandate,” another trick, to the mix, so that they can both gut health-care for tens of millions and still get their tax cuts for the rich -- a win-win deal for the barons of capitalism!

We at the People’s Tax Page are trying to explain all this to a busy and often confused general public -- a confusion aided and abetted by politicians and the complex language of tax. It helps to situate the present moment in the context of history. We have discussed the work of Larry Bartels, a political scientist, in his classic article from 2005, Homer Gets a Tax Cut. Bartels analyzes how the people came to support an irresponsible, deficit-busting tax cut for the rich -- because they were blinded by their own modest tax savings.

Another article from the Bush era lays bare the plan: Grover Norquist’s Step by Step Tax Reform, published in the Washington Post in 2003. Norquist, president of the influential Americans for Tax Reform, applauded the Bush tax cuts, following a legacy of Reagan Tax Cuts: “The new Republican policy is an annual tax cut.”

Norquist went further. His dream is to get Americans to adopt a flat-rate wage tax. Learning from Bill and Hillary Clinton’s failure to adopt health-care reform in the 1990s, Norquist concluded that: “It is easy to stop oversized reforms.”

Instead, Norquist laid out an incremental plan, his step-by-step guide:

There are five steps to a single-rate tax, which taxes income one time: Abolish the death tax, abolish the capital gains tax, expand IRAs so that all savings are tax-free, move to full expensing of business investment rather than long depreciation schedules and abolish the alternative minimum tax. Put a single rate on the new tax base and you have Steve Forbes and Dick Armey's flat tax.

Sound familiar? Republican tax reform proposals continue to include movement towards abolishing the estate and alternative minimum taxes, to expense business investments, and to lower the effective capital gains rate: four out of Norquist’s five steps. Only the IRA item -- individual retirement accounts being a savings vehicle for the middle class -- is not moving forward at this time. But the results of all of these changes is clear: we are moving ever closer to a flat wage tax. The payroll tax is a regressive wage tax; flattening the income tax and eliminating its taxation of capital will just complete the picture: America taxes work not wealth.

Grover Norquist is winning.

Working people are losing.

Repealing the Obamacare individual mandate will free up billions of dollars in government funds that can be used to sweeten Homer’s donut, the middle class tax cut that emerges from all the smoke and mirrors. But it will also cripple Obamacare itself, leading to a collapse of individual health insurance market affecting tens of millions tomorrow. And it will widen an already gaping hole in the national debt, which future generations will have to pay -- without any meaningful tax on the rich even being in place. Homer will get his tax cut, today, but he will pay for it, tomorrow, and he’ll be less likely to have health insurance to help with the symptoms of having eaten all those donuts.

That is, unless the people wake up and stop the madness. Come visit us at the People’s Tax Page as we try to keep shedding light on the darkness of tax.

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