How Republicans Have Twisted the Argument about Income Taxes

Republican presidential candidate Mitt Romney, right, is introduced by vice presidential running mate Rep. Paul Ryan, R-Wis.,
Republican presidential candidate Mitt Romney, right, is introduced by vice presidential running mate Rep. Paul Ryan, R-Wis., arrive during a welcome home rally, Sunday, Aug. 12, 2012, in Waukesha, Wis. At left is Wisconsin Gov. Scott Walker and Romney's wife Ann Romney, rear right. (AP Photo/Jeffrey Phelps)

Tim Kaine, the former governor of Virginia and Democratic National Committee chair just walked into a carefully laid Republican Trap.

Kaine was in a moderated debate with Republican George Allen. The moderator, David Gregory from NBC News, asked Kaine whether he believes everyone in Virginia should have to pay some income taxes. Kaine said he would be open to setting a "minimum tax level for everyone."

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I am not accusing Gregory of bad motives. Gregory, the moderator, was pursuing the argument as the Republicans have redefined the issues.

But the question is a trick question.

Designed as a counter against the focus on the relatively small percentage of income paid as taxes by the very rich, the argument the Republicans and Libertarians have been making is that there should be a flat tax, everyone paying essentially the same rate. They use "taxes" interchangeably with "income taxes", pretending that other taxes effectively do not exist or do not impact the poor at a highly disproportionate rate.

The Income Tax is designed to charge against "taxable income," not "gross income." Taxable income is calculated by admitting that there should be an amount of income earned free of the "income tax" called exemptions. Each individual covered under a certain return has that exemption. For a family of 4, the exemptions are about $15,200. This translates to an hourly salary of $7.45. It isn't much. It won't cover basic expenses of housing, food, utilities, medical care, etc. But it is an acknowledgement that we shouldn't be taxing away a person's life.

Then we also remove from taxation "deductions," recognizing that the exemptions are not enough. One can itemize deductions with medical expenses, mortgage interest, charitable giving, etc., or one can take the standard deduction. Again, taxation is not meant to take away what a person needs to live.

Republicans and Democrats both have used "tax credits" to return money to individuals in a variety of circumstances. The tax credits act as if the taxpayer has paid those on his or her income tax. Whatever is overpaid is returned to the taxpayer as a "refund." They were created to promote social goals. Among those tax credits are

* The Earned Income Tax Credit for low income individuals or families.
* The Saver's Tax Credit for people who put money aside for retirement.
* The Child Tax Credit for children under age 17.
* The Adoption Tax Credit
* The Child and Dependent Tax Credit to help with expenses so that the taxpayer can leave the home to go to work.
* The Education Tax Credit to defray some costs of education.
* The Social Security Tax Credit for richer people who had too much Social Security Tax taken out of their paychecks.
* The Foreign Tax Credit for people whose income would be taxed by the US and by a Foreign Country on the same money.
* The Alternative Minimum Tax Credit for people who paid the Alternative Minimum Tax in a past year but does not have to pay it this year.
* The First-Time Homebuyer Credit.

Some of these could be simplified. They were all passed in response to certain needs (low income, the need to work but children to care for, etc), to relieve certain burdens (as the cost of adoption) or to relieve inequities (as double taxation).

Also, certain kinds of investments (municipal bonds and such) are considered important enough that the government waives taxes on people investing in public infrastructure.

Saying that everyone should have to pay a "minimum" income tax removes those deductions, exemptions and tax credits. It isn't an insult to anyone to recognize that someone may have so little income that they wind up paying no taxes on it. Most people don't have any trouble allowing adoptive parents some help with those expenses.

What is an insult is to count investment income as somehow less taxable than income earned by the sweat of one's physical labor. After all, the people with that income have a comfortable living, superior to that of those whose only income is from "work." Often this investment income is put into risky investments with potential for a high rate of return -- meaning that the investor is open to the idea of potentially losing it all. So why should money that is essentially "gambling income" be taxed at a lesser rate? Why should the salary of Mitt at Bain be considered "carried interest?"

So we ought to be careful about someone asking, "Do you believe everyone should pay a minimum amount of income tax?" We should object to the implicit insult and slur cast against the "47% who pay no income tax." They are not lazy. They work. They are taxed.

What we ought to be objecting to is someone who is rich having income so sheltered, hidden, and protected that they pay no income tax. And yes, we can insist that the tax system be simplified and made more understandable.

Mitt Romney and Republicans have effectively twisted the debate away from the way the rich avoid their responsibilities into an attack on the poor, as if being poor makes you unpatriotic. And we cannot allow ourselves to let their attacks define the issues.