Opponents of the tax reform bills working their way through Congress claim that they are a sell out to the rich, will increases taxes on the poor, and increase the deficit. These criticisms come from the same folks who like a big government that grows bigger and who think they can spend other peoples’ money more wisely than people can spend it themselves.
Part of the claims about the rich are the proposal to eliminate the estate tax and the alternative minimum tax. The estate tax actually applies to a very small number of tax payers. They have the wealth to hire tax specialists who know how to use the tax code for tax payers to avoid the estate tax. Setting up foundations and trusts have become two favorites avoidance techniques. More basically, it is difficult to come up with a sound public policy reason for taxing assets of the dead when their assets or the money that acquired them has already been taxed.
The alternative minimum tax—AMT–was added to the tax code in the 1970s when some companies found ways to avoid paying any taxes. The provision was not limited to companies so in time it has captured a growing number of individual tax payers because the threshold for being subject to the AMT was not indexed. Since it was intended to apply to companies, eliminating it frees individuals from a potential tax that never was intended to apply to them.
The Tax Foundation published a report, putting a Face on America’s Tax Returns, that provides statistics clearly showing that tax reform is not going to harm middle and lower class tax payers. Here’s why. The top 10% of taxpayers pay 70% of taxes while the bottom 50% pay 2.4%. The percentage of Americans who pay no federal income tax is a startling 45%. Those statistics explain why tax payers in the top income groups benefit the most from tax reform. It also explains why polls show only luke warm support for tax reform. If you don’t pay taxes, you really don’t care whether or not there is reform.
Reductions in tax rates are only going to benefit those who actually pay taxes. Those who claim otherwise are engaged in a major case of misleading the public. It is unfortunate that so many in the main stream media have not taken the time to expose this scam. They also have not taken the time to point out the major cause of deficit spending and increases in the national debt are entitlement programs, primarily Medicare, Medicaid, and Social Security, which together account for 62% of government spending. Until politicians have the courage to reform those programs, the debt and deficit are just going to grow larger.
Tax reform will allow companies and individuals to keep more of their own money. Since they will spend it more efficiently than the government will, the economy will benefit. This has little or nothing to do with “trickle down” which is another ruse that opponents of tax reform raise in a pejorative manner.