Should people pay more taxes or should more people pay taxes?
Liberals and Democrats usually opt for the former while conservatives and Republicans generally prefer the latter. Libertarians not only don’t take sides, they reject both propositions.
While campaigning for president, on September 12, 2008, in Dover, New Hampshire, Sen. Barack Obama of Illinois said in a speech,
And I can make a firm pledge: under my plan, no family making less than $250,000 a year will see any form of tax increase — not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.
As president, Obama repeated his pledge during an address to a joint session of Congress on February 24, 2009:
In order to save our children from a future of debt, we will also end the tax breaks for the wealthiest 2 percent of Americans. But let me perfectly clear, because I know you’ll hear the same old claims that rolling back these tax breaks means a massive tax increase on the American people: if your family earns less than $250,000 a year, you will not see your taxes increased a single dime. I repeat: not one single dime.
But beginning earlier that month, Americans making less than $250,000 did see their taxes go up when Obama signed into law legislation that raised the federal tax on a pack of cigarettes by 61¢ to $1 per pack. Tobacco taxes are regressive taxes that fall more heavily on low-income smokers.
The president’s health-care law — the 2,407-page bill (H.R.3590) officially titled the Patient Protection and Affordable Care Act (PPACA) but more commonly known as Obamacare — is a collection of tax increases masquerading as a health-care law.
Although the legislation was signed into law on March 23, 2010, only one of its tax increases took effect that year — a 10 percent tax on indoor tanning services that began on July 1. The other tax increases were to be phased in gradually from 2011 to 2018.
Effective January 1, 2011, pre-tax dollars from a health-savings account (HSA), a flexible spending account (FSA), or a health-reimbursement account (HRA) can no longer be used to purchase nonprescription medicines. Also taking effect in 2011 was an increase in the tax for nonmedical early withdrawals from a HSA for those under sixty-five from 10 to 20 percent. And beginning in 2013, the maximum annual FSA contribution for employees (the amount of which is subtracted from their taxable salaries) will go from no limit (unless the plan itself has a limit) down to $2,500. When those contributions are used to cover medical expenses, the money is tax-free.
There are other taxes that take effect in 2013 as well.
There is 2.3 percent excise tax on the sales by manufacturers and importers of commonly used medical equipment and devices such as X-ray machines, stethoscopes, and prosthetic limbs.
Then there is the decrease in the ability to claim an itemized deduction for medical expenses because they will have to exceed 10 percent of adjusted gross income instead of the current 7.5 percent. That means that many will pay more in taxes because they don’t have enough medical expenses to lower their taxable income.
Also beginning in 2013, the employee share of the Medicare tax will increase .9 percent from 1.45 percent to 2.35 percent on that portion of income over $200,000 ($250,000 for married filing jointly). Then, to add insult to injury, the extra .9 percent will not qualify for the 50 percent income-tax deduction available for self-employed persons.
There is also to begin a new 3.8 percent Medicare tax on investment income, including rents, royalties, capital gains, interest, and dividends. The additional tax on unearned income will apply to the lesser of one’s net investment income or the amount of adjusted gross income in excess of $200,000 ($250,000 for married filing jointly).
Thanks to Chief Justice John Roberts, the Obamacare “individual mandate” requiring all U.S. residents to purchase a government-approved health-insurance plan takes effect in 2014. The “tax” for not doing so is the greater of 1 percent of one’s income or $95. The amounts rise to 2.5 percent of one’s income or $695.
The 2012 Democratic Party platform complains that the Republicans plan to give “trillions of dollars in tax cuts weighted towards millionaires and billionaires while sticking the middle class with the bill.” Instead of the Republican Party’s “asking everyone to do their fair share and making investments we need for an economy built to last, they would slash taxes for corporations and the wealthiest Americans.” The Democratic platform expresses support for “allowing the Bush tax cuts for the wealthiest to expire and closing loopholes and deductions for the largest corporations and the highest-earning taxpayers.” It calls on the wealthy and corporations to “pay their fair share.” The tax code should be reformed to conform to the Buffett Rule “so no millionaire pays a smaller share of his or her income in taxes than middle class families do.”
Vice President Biden recently gave a speech in Iowa which he replied to the Republican claim that “Obama and Biden want to raise taxes by a trillion dollars” by saying, “Guess what? Yes, we do in one regard: We want to let that trillion-dollar tax cut expire so the middle class doesn’t have to bear the burden of all that money going to the super-wealthy. That’s not a tax raise. That’s called fairness where I come from.”
None of that should be a surprise to anyone who remembers that it was a Democratic president — Woodrow Wilson — who signed the first income-tax legislation into law after the adoption of the Sixteenth Amendment.
Democrats are not opposed in principle to taxes — income or otherwise. They have no problem using the tax code for their various wealth-redistribution schemes, income-transfer programs, foreign aid, foreign wars, the worldwide empire of U.S. troops and bases, or fighting the drug war.
But what about Republicans?
Well, in spite of their libertarian rhetoric about lower taxes, the free market, and limited government, Republicans are not opposed in principle to taxes — income or otherwise. They have no problem using the tax code for their various wealth-redistribution schemes, income-transfer programs, foreign aid, foreign wars, the worldwide empire of U.S. troops and bases, or fighting the drug war.
The extension of the so-called Bush tax cuts that was enacted in 2010 included a temporary reduction in the employee’s share of the Social Security tax rate from 6.2 percent to 4.2 percent. It is probably the best thing that ever happened during the first four years of the Obama administration. A cut in the rate of any tax — payroll, income, sales, or excise — is always a good thing. This tax cut was extended more than once and is supposed to expire — with the Bush tax cuts — at the end of 2012.
Yet Republicans in Congress generally opposed extending the cut in the regressive Social Security taxes, as I pointed out here in “Why Do Republicans Want to Raise Taxes?”
Republican presidential candidate Mitt Romney infamously said earlier this year at a $50,000-a-plate dinner fundraiser at the Boca Raton home of private-equity manager Marc Leder,
There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what. And I mean, the president starts off with 48, 49, 48 — he starts off with a huge number. These are people who pay no income tax. Forty-seven percent of Americans pay no income tax. So our message of low taxes doesn’t connect. And he’ll be out there talking about tax cuts for the rich. I mean that’s what they sell every four years. And so my job is not to worry about those people — I’ll never convince them that they should take personal responsibility and care for their lives.
Although, as Anthony Gregory has shown, there are many problems with Romney’s remarks, he was certainly right in one respect. According to the most recently released IRS figures, in tax year 2009, the top 1 percent of taxpayers (in terms of adjusted gross income) paid 36.73 percent of all federal income taxes. The top 5 percent of taxpayers paid 58.66 percent. The top 10 percent of taxpayers paid 70.47. The top 25 percent of taxpayers paid 87.3 percent of the taxes, and the top 50 percent paid a whopping 97.75 percent.
But what is the typical conservative solution to that disparity? It is to make more people pay taxes.
In an article that first appeared in The Wall Street Journal’s “Marketwatch,” Curtis Dubya, senior policy analyst for tax policy at the Heritage Foundation, writes in “More People Should Pay Taxes,”
It is not unreasonable for the poor to be exempt from paying income tax. The exact amount of income that should go untaxed is open for debate, but most people would not settle on a level so high that almost half of all incomes were tax-free.Taxes are fostering dependence by exempting too many from the cost of government. They should be changed so more people have a stake in the size of government. Yet another reason the country badly needs tax reform.
Should people pay more taxes or should more people pay taxes? The result is the same: trillions of dollars to feed the federal leviathan’s wealth-redistribution schemes, foreign wars, global empire, and myriad of unconstitutional departments, programs, and agencies.
The libertarian solution to the tax conundrum of the liberals and conservatives is a simple one: abolish the income tax altogether and in the meantime give Americans more and greater deductions, credits, exemptions, shelters, and loopholes to ensure that more and more people pay less and less in taxes.
Democrats want the rich to pay their fair share; Republicans want the poor to pay their fair share. Libertarians want the rich and the poor to keep their entire share in their pocket and out of the hands of the government.