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Americans First: A tax reform plan to help American citizens, not corporations

American citizens who believe in a fair and equitable tax system should be incensed by the Republican tax plans.

The Republican establishment still fails to understand that our citizens are tired of a government run for powerful corporations and the super-rich instead of our hard-working citizens.

The Republican Senate proposal and the bill that just passed the House have some differences but one commonality – they are fraudulently being marketed as “middle class tax cuts”, when in reality they disproportionately benefit the wealthy and corporations.

Under both the House bill and Senate proposal, the maximum corporate rate is cut from 35% to 20% (a reduction of 42%) while income tax rates on our citizens would be reduced by a much smaller percentage at all income levels. And not only are the corporate rate reductions much larger, the individual rate cuts are phased out after 2025 under the Senate proposal, while the corporate rate reductions are permanent.

For example, under the Senate proposal, self-employed individuals with incomes as low as $39,000 would pay a marginal income tax rate of 22% (not even counting a self-employment tax of 15%). Yet corporations earning millions would pay a top rate of 20%.

Why should hard working citizens earning a middle-class income pay a higher tax rate than Apple, Google or JPMorgan Chase? Don’t believe the argument that corporations deserve a rate lower than working people because they will create jobs. A recent Bank of America survey of 300 large corporations found that 65% said they would use tax savings to pay down debt or buy back shares and only 14% would use the savings to expand their business. And even to the extent tax savings would be used to create jobs, small businesses and entrepreneurs can use lower taxes to create them just as well as large corporations. In fact, small businesses create more jobs in America in the aggregate than large corporations.

Other aspects of the Republican proposals disproportionately benefit the super wealthy. They include abolition of the estate tax that would only benefit the richest wealthiest 0.2 percent of estates, yet keep the “stepped-up basis” rule that allows some capital gains to completely avoid tax. For example, the estate of a taxpayer who at death owns stock with a cost of $1 million but with a market value of $10 million would completely avoid tax on the $9 million gain. At death his heirs could sell the stock, pocket the $10 million and pay no estate, income or capital gains tax.

A case can be made for repeal of the estate tax if the wealth accumulation has been taxed once, but if the estate tax is repealed without also repealing the stepped-up basis rule billions in capital gains will forever escape any taxation. This is criminal.

Here are the elements of a tax reform plan that would truly help working class American citizens and make our system much more fair and equitable:

•   Progressive tax rates that apply equally to all forms of income – wages, interest, dividends and capital gains, instead of the current system that taxes income from work at higher rates than passive and investment income. For example, a rate system of 10, 15, 20, 25 and 30 percent on incomes of $50,000, $75,000, $100,000, $200,000 and $500,000 respectively up to $1 million and 40% thereafter. And no, progressive rates aren’t to punish success; they are necessary are to fund the government services our citizens demand and need; 

•  Abolition of the payroll tax on wages with funding of Social Security and Medicare from general tax revenues; 

•  No preferential rates for corporate taxes – all taxpayers, both corporations and individuals paying the same progressive rates;

•  A fully refundable per child tax credit of $5,000 to help American families grow;

•  Elimination of the deductibility of the state and local tax deduction and the mortgage interest deduction on debt over $500,000 – the federal government has no business subsidizing state and 
local governments nor McMansions; 

•  Preservation of the estate tax on estates over $20 million and abolition for all estates of the 
stepped-up basis rule which allows wealthier taxpayers to avoid any tax on capital gains; and

•  And finally, a new idea – a tax credit of $1,000 against wage income for American citizens only. 
Our tax system needs reform, but reform focused on helping hard working American citizens, not corporations or the wealthiest among us.

Americans First, Inc., is a non-profit organization based in Lexington, whose mission is to promote and protect the interests of American citizens. This commentary was written by Dan M. Rose and Ron Vissing of Americans First. For more information contact Dan M. Rose, President of Americans First, Inc. phone 859-229-7782 or by email at dan@americansfirst.org.

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One Comment

  1. Michelle Foy says:

    What is the plan for maintaining transparency and accountability for this new tax system?

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