New Castle News

July 21, 2012

John K. Manna: Coming to terms on taxes

John K. Manna
New Castle News

NEW CASTLE — This is my take on federal taxes.

Too much is made of them by the president and members of Congress. That includes past presidents and past members of Congress.

The current debate, which has been ongoing since President Obama took office, is whether the Bush-era tax cuts should be allowed to expire or continue after this year. Republicans want them to continue while Obama wants to continue them for all but the top 2 percent of income tax filers.

The Economic Policy Institute, which says it’s an independent, nonprofit think tank that researches the impact of economic trends and policies on working people, has issued an analysis of how the Bush-era tax cuts have benefited the wealthiest people and lowered their effective tax rates.

That’s because the top 1 percent realize most of their income from capital gains and dividends, which are taxed at a lower rate than wages and salaries, according to EPI.

The bottom 80 percent, on the other hand, receive most of their income from wages and salaries.

Plus, the income derived from capital gains and dividends has increased for the wealthiest between 1996 and 2006 while income from wages and salaries for the bottom 80 percent has remained essentially the same during that period.

Democrats and Republicans can argue over Obama’s justification for wanting the tax cuts to expire for the wealthiest. Politically speaking, Obama is on the winning side simply because 80 percent obviously trumps 1 or 2 percent when it comes to the November election.

Which brings me to my original point. I submit that most voters don’t base their vote for president or members of Congress on tax rates or which group of taxpayers is given favoritism. Sure, people get riled up from time to time about taxes, but taxes aren’t the determining factor in elections.

Nonetheless, Republicans and Democrats constantly go back forth over this issue. The way to resolve it is to flatten the tax so that everyone would pay the same rate or close to the same rate on all income.

Democrats don’t like the idea because they say it favors the wealthy. It’s an argument I don’t comprehend since everyone would be paying the same rate. Isn’t that fair?

Many Republicans have advocated a flat tax, but don’t push for it. Even though they control the House.

Both sides would rather have a war of words, trying to win political points, when in the end they don’t.

If they did come to terms on taxes, it would leave a big void in political campaigns. Candidates would have to find something else to talk about. That would be very difficult for some of them.