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    Tax The Poor!

    By Michael Maiello on Wed, 08/17/2011 - 8:58am | Politics

    The media is so allergic to common sense these days that nobody has reported on the obvious implications of the Republican complaint that nearly half of Americans had no income tax liability in 2010.  Republicans want to raise taxes on the poor.  This is the subject of my column in The Daily this week.

    The problem with taxing the poor, of course, is that they have no money.  The richest 1% of Americans take in more in annual wages than the bottom 60%.  That's why half the people don't have to pay taxes -- they have no money!  Most folks would gladly pay income taxes in exchange for better wages.

    Warren Buffett told us as much in The New York Times, by pointing out the obvious fact that higher tax rates (for both individuals and corporations) for the bulk of his career didn't exactly discourage him from becoming one of the richest men on the planet.  It's hard to think that anything as mundane as a fair tax burden would make a manlike Buffett pull a John Galt.  And anyone who would pull a Galt over something like that is no Warren Buffett.

    The obvious way have more Americans paying income taxes would be to raise incme for more Americans.  That means more and better jobs with wages that outpace the rise in the cost of living.  Absent that, you could monkey with the tax code, but the effects on the federal government would be disastrous.  Here's what you'd have to do.

    1) Abolish the child tax credit.  This would force some families to seek federal and state assistance for their children, probably costing more than it would save, but hey... these kids should get jobs, right?

    2) Abolish the mortgage interest deduction.  I know some lefties who even support this.  But is now really the time to make it more expensive for Americans to keep and maintain their homes?  If you abolish this across the board, you further hurt the housing industry and you make homeownership another thing available only to the wealthy.  If you abolish it over a high income level, that does nothing to tax the poors and Republicans remain unhappy.

    3) Abolish the standard deduction.  Everyone must itemize everything!  Of course, the IRS will not be able to keep up with this and we will become Greece.

    4) Abolish the earned income tax credit.  This is an anti-poverty program that encourages work.  Ronald Reagan expanded it.  Why?  Because it keeps people off of welfare, which is worse for people and more expensive for the country.  But, hey... it'd make Republicans feel better.

    Or, we could go with my idea of more jobs at better wages.  Even if the government has to provide them for awhile.

    Topics: 
    Politics

    Comments

    The EITC is one of their key targets.  Unlike a lot of other credits, an individual is able to claim all of the credit regardless of how much one owes or is owed.  Thus, family households (it mainly helps those with children) not only don't owe taxes, they receive $1,000 to $3,000 dollars back from the government.  So in the eyes of some of them, this is a form of welfare.

    One of the interesting facets of EITC is that on the lower end of the scale, one gets more credit as one makes more income.  The philosophy was that the credit would act as an incentive to make more money and thus move one's household further away from the poverty line. 


    by Elusive Trope on Wed, 08/17/2011 - 9:47am

    Now I remember where I saw this last night.  Ed Kilgore over at the Democratic Strategist:

    Now some conservatives confine themselves to attacking not the EITC itself, but its refundable nature: the ability of families whose EITC exceeds its income tax liability to get a check from the IRS (capped, however, by the amount paid in federal payroll taxes). In the common parlance of the Right (ironically echoed by John McCain during the desperate moments of his 2008 presidential campaign when he ran ads attacking Obama's proposal to increase EITC payments) this refundable feature is "welfare" (albeit "welfare" inherently linked to a work requirement since earned income is necessary to generate it). Indeed, if and when Congress gets around to "tax reform" discussions, you can be certain that conservatives will go after the refundable EITC as a "loophole" that needs to be eliminated along with corporate subsidies.

     


    by Elusive Trope on Wed, 08/17/2011 - 9:58am

    Sigh. This is, of course, precisely what makes the EITC so effective.

    by Michael Maiello on Wed, 08/17/2011 - 10:09am

    My biggest problem with the EITC (and this could just be my ignorance) is that it seems to me like a substitute for insisting that companies pay a living wage.


    by Verified Atheist on Wed, 08/17/2011 - 10:18am

    There may be some of that negative feedback loop, where "society" experiences a lessening of desire to push for higher wages, but I think it is minimal.

    EITC is really focused on say the single mom with two kids making 32K a year.  Part of the function of EITC is that it will reward her for striving to get to 35K because she will get an increase in credits on top of the 3K salary raise.  

    I have been involved for the past three years in providing free tax preparation to low and moderate income households, with an emphasis on pushing the EITC.  In the process I have met a number of people who are now in the 50K+ range (including a banker) who were able to achieve the financial flexibility to go back to school, etc. and improve their income flow because of EITC.

    In the past three years, we have been able to see $100,000s of dollars annually flow not only to households that could really use the money, but also to a local economy that could really use the money.  Many are not aware of EITC and so a lot of dollars are left on the table that could be flowing back to those who need it.

    This coming tax season, if people are looking for a way to help out, check with AARP or the IRS's VITA program to see how you can help people with free tax preparation.  If anything you can help them avoid the tax prep predators like HR Block.


    by Elusive Trope on Wed, 08/17/2011 - 12:21pm

    An interesting subtext of the EITC story is how it became (and maybe still is, for all I know) an audit magnet, arising out of the fear that responding to the graduated payment/higher earnings feature, people would falsely claim higher taxable income (there's a counterintuitive problem for you) to goose their credit.

    This, of course, had the happy effect of *diverting audit resources from tracking down the undeclared cash income of the petit bourgeouisie. 

    Win/win for the Repugnants who hate the  working poor more than they hate the IRS.

    *2004: Of the total number of returns audited, 487,461 (48.3%) claimed an earned income tax credit (EITC).

    Wow, that's way worse than I thought.  That means that fully one half the audit resources were directed at low earners, by definition.  Is this a great country, or what?


    by jollyroger on Wed, 08/17/2011 - 8:59pm

    Since those who make as much as $40,000 and who have children can claim EITC.  Since over 60% of the population makes this amount or less, it would seem about right that 48% are audited.  Moreover, working with free tax preparation for the past three years, and seeing how so many of those using these services are unprepared to deal with tax filing, that their filing are generating more red flags than those who can afford real accountants to do their taxes further makes it seem that 48% is about right. 

    Just because you're paranoid doesn't mean that they aren't out to get you.  Then again, you might just be paranoid.


    by Elusive Trope on Thu, 08/18/2011 - 1:33am

    Regarding your first suggestion, which includes kids getting jobs, some Republicans are already ahead of you on that:

    http://www.senate.mo.gov/11info/BTS_Web/Bill.aspx?SessionType=R&BillID=4124271


    by Verified Atheist on Wed, 08/17/2011 - 10:21am

    I thought I already did this!

    But I hereby render unto Destor the Dayly-Weekly Headline Award for this here Dagblog Site, given to all of his nakedness from all of me!

    The headline is so goddamn ridiculous and yet I really think it underlies the true goal of the fucking teaparty.

    It would be easy to do.

    Just make the payroll taxes general taxes; gut SS, gut SSD, gut Medicare and gut Medicaid.

    It is so simple and it is something the repubs would just love!

    TAX THE POOR.

    Hatch lost any credibility (as far as I am concerned)  whatsoever when he made that statement.

    Thank you!


    by Richard Day on Wed, 08/17/2011 - 7:15pm

    Hatch lost any credibility

    How can you lose what you do not have?


    by jollyroger on Wed, 08/17/2011 - 8:55pm

    Well Jolly, at least Oren (and can you just imagine growing up with a name like 'Oren' and being a Morman and ending up in some elite school being hazed by Christian billionaires...?) pretended to be human at times.

    I mean he liked to dance the minuet with Teddy and stuff like that and he would come across as reasonable on one or two pieces of legislation at times.

    But the fact is and was: Oren is a prick. hahahahahaah


    by Richard Day on Thu, 08/18/2011 - 1:38am

    Destor, for the record, Stewart did a gig on the subject last night. The bottom 50% of the population have 2.5% of the assets. If you took half of all their assets of the bottom 50% it would equal $750B, roughly equivalent to restoring an extra several percent revenue stream from the upper  2%. Since $750B is not nearly enough money to reduce the debt, Stewart recommends taking all the assets of the bottom 50%--which would be $1.4 Trillion.


    by Oxy Mora on Fri, 08/19/2011 - 9:25am

    Yes, and then we could roast their babies


    by Flavius on Fri, 08/19/2011 - 12:47pm

    I just watched Jon Stewart expound on the sick 'class warfare' message going on in our culture right now.  We really need our leaders to push back against this but the republican message machine is pounding it hard.  Senator Coburn's remarks yesterday were awful.  He doesn't see or doesn't care that continuing to support the growing income disparity creates more dependency.  The general population is being tenderized for a full scale shift to a third world country with low wage workers and reduced living standards.  Nothing funny about it and in the end I really don't think these idiots are going to like the America they create.


    by synchronicity on Fri, 08/19/2011 - 11:16am

    I think what makes me most disheartend about Obama and Democratic messaging is that this clap trap about the lower 50% paying no taxes had been driven by Fox for at least two weeks with no response.We have to leave it to the comedy channel to present the essential counter argument--which is a double whammy because it also reveals the difference in asssets between the bottom 50% and the top 2%.


    by Oxy Mora on Fri, 08/19/2011 - 11:46am

    Well I keep watching and wishing I would see something to change my mind about President Obama's chances for reelection but my perception of his chances is only getting worse.  I feel like I am watching the ship every one is betting on as it sinks.  I am sorry to say that the way I see it the president has become a victim of the republicans and their machine and he acts like it.


    by synchronicity on Fri, 08/19/2011 - 12:52pm

    So much of the outcome will depend on the economy, in particular this quarter. We don't know if the recent mini-contraction is longer term or an anomaly. Buffet said all the 70 companies in his portfolio were doing better quarter by quarter, except for one's tied to housing. Capital expenditures by companies could take a huge leap by year end. As for the current market, I think we are seeing the kind of gambling by hedge funds which took place before 2009 more so than market fundamentals.


    by Oxy Mora on Fri, 08/19/2011 - 1:37pm