Create a Fair and Simple Tax Code
Reform the Tax Code to Reward Hard Work—Not Just Wealth
President Bush and his congressional allies have enacted an explosion of tax giveaways and earmarks that have created a massive $400 billion deficit and lined the pockets of the wealthiest individuals and corporate special interests. As a result of the tax changes from 2001 and later, someone making more than $1 million can expect to receive a tax break over $100,000, while average middle-class Americans have been overwhelmed by falling incomes, higher gas prices, and mounting debt. As the Congress has shifted the tax burden away from accumulated wealth, an idle millionaire can easily pay just half the tax rate of an average American who is working for a living.
We are faced with a fundamental choice about our tax structure: continue the policies that have failed the vast majority of taxpayers and our country for the benefit of a few, or reform the tax system to be consistent with American ideals of hard work and opportunity. It is time for a fairer and simpler tax system that reduces the massive deficits created over the last several years, strengthens the middle class while honoring their work, and creates opportunity for Americans of all income levels to succeed. Comprehensive progressive tax reform is badly needed.
The Plan:
1. Ensure fairness and honor work by taxing each source of income according to the same progressive rate structure—whether from dividends, capital gains, wages, or salaries.
2. Restore the progressivity of the code by reducing the number of income tax brackets from six to three at the rates of 15 percent, 25 percent, and 39.6 percent; and by removing the employee component of the Social Security payroll tax, immediately reducing by 6.2 percent the tax rate all Americans pay on the first $90,000 of earnings. The reform provides a substantial tax cut to about 70 percent of taxpayers earning under $200,000. Higher income individuals, who have disproportionately received the benefits of the Bush tax changes, would see an increase.
3. Simplify the tax code by closing corporate and individual loopholes and eliminating the Alternative Minimum Tax in a responsible manner.
4. Promote fiscal responsibility and economic growth while protecting Social Security by raising $500 billion more than under the president’s policy over the next decade—thus reducing our nation’s debt burden below that of current policy.
5. Promote opportunity by expanding eligibility for the child tax credit to low-income workers, and by ensuring earned income tax credit recipients do not lose benefits when they marry.
For more information: John Irons & John Podesta, “A Tax Plan for Progressives,” The American Prospect; “A Fair and Simple Tax System for our Future,”
The Expert: John Irons
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