Robert Reich on Tax Reform
Former Secretary of Labor; Democratic Challenger MA Governor
A: It is a good idea to cut taxes on the people who are going to spend the additional tax revenues and those are people in the middle class. You have to have some revenues to keep the government going and the Bush tax cuts for the very wealthy, people over $750,000 a year, are not great for the economy because the wealthy already have as much money as they need, you know. That’s the definition of being very wealthy. You’re not going to spend your additional tax cuts. Look, what you want to do is get the tax cuts where they will have a big impact. That’s what Senator Obama wants to do. That is on the middle class and, again, every independent analysis shows that his tax cuts for the middle class and his overall tax cuts are bigger than John McCain. What John McCain wants to do is continue supply-side economics. Continue to give big tax cuts for the rich. That’s the last thing we need now.
Reich has said that he would consider raising the gas tax to pay for the Big Dig, and reinstating the state’s capital-gains tax as a way to make up for lost tax revenues.
Reich insisted yesterday his position has not changed. He said his statement on Fox TV was a quick response to a rapid-fire debate. Indeed, although pushed by Hannity, Reich refused to take a no-new taxes pledge. “In context, I would do everything in my power not to raise taxes,” Reich explained. “But it is irresponsible to take a pledge. I don’t want to send out a mixed message.” Reich said that taking a pledge not to raise taxes is “playing games with the public.”
So here’s our plan: First, expand the Earned Income Tax Credit by $20 billion a year (retroactive to January 1, 2001). That means an additional $1,800 of income for a working family at the bottom and $500 for one in the lower middle. Second, eliminate all Social Security payroll taxes on the first $7,000 of personal income. One of the best-kept secrets in America is that most lower-income taxpayers pay more in payroll taxes than they do in federal income taxes. Shielding the first $7,000 of income would reduce their tax burden $500 to $1,000 a year. Remove the ceiling on Social Security payroll taxes and the net payroll tax cut is about $15 billion a year.
First of all, look at all married taxpayers and you find that the marriage penalty is a myth. About the same number of couples pay less tax because they’re married as pay more.
Second, the total cost of eliminating the extra tax on those couples who now pay more is estimated to be $182 billion over the next ten years. It would be one thing if this money went to relatively poor married couples, but most of it will go to wealthy couples. That’s because well-educated people who are most likely to have higher incomes tend to marry other well-educated people who are also likely to have higher incomes [and that category are the largest beneficiaries of the House bill].
Passing a bill in an election year that cuts taxes on wealthy married couples takes no great courage. The real courage comes in exercising common sense and voting against it.
A: The first role of government in terms of corporate responsibility is to act as a kind of cheerleader. Using the bully pulpit. Using jawboning. Bringing the spotlight of public opinion to bear on the companies that are doing it right, and occasionally the companies that are doing it wrong. Now, beyond that, should there be tax breaks? Well, you know, we have tax breaks for companies to come into disadvantaged areas, enterprise zones, empowerment zones, we have tax breaks for research and development and for investments in equipment and machinery, should there be tax breaks for more and better investments in employees? I think it’s an important question. We have not fully evaluated it. But the first step, clearly, is to use the bully pulpit, which the President has been doing.
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