Shafting the middle class

[DWill]

There is more than one way to address our fiscal problem, whether the part of it you focus on is inequality, the debt, or the tax code. It sounded absolutist to me to say that only by reforming campaign finance can we hope for anything else to happen. It's true that John McCain, back when he really was a reformer, saw campaign financing as a linchpin. Interest groups contribute money to politicians' campaigns in order to get them to put through favorable tax laws, exemptions, and subsidies. The result is a corrupt and hugely complex tax code (corruption feeding off the complexity). The question is whether McCain's legislation did anything to alter this much. I don't know the answer, but if it has been largely ineffective, I don't know how successful we'll be by making more activities illegal. How much will be enough, and can we ever really regulate this sphere? If we could bypass more, complicated campaign finance reform and directly take on the tax code, something--perhaps several things--would change. It's a big 'if,' granted.

[Dexter]

Campaign finance reform is a joke, it's just for show. As long as a legislative committee has billions of dollars of favors to dish out and regulations to write, the special interests will be at the table.

People still seem to have faith that if only they get the smart, caring people in charge (Obama?) it'll all be different.

[R. LeBeaux]

If we could bypass more, complicated campaign finance reform and directly take on the tax code, something--perhaps several things--would change. It's a big 'if,' granted.

The problem with taking on the tax code goes back to the same thing: the politicians who would be doing this are financed by big business (and to a much, much smaller degree, the unions and the public) through campaign contributions (not to mention under-the-table sweetheart deals that enrich them personally). So, if there is to be tax reform, it will always favor the rich and hammer the poor and middle class (note the idiotic flat-rate proposals being proposed by Republicans -- not that I'm against a flat tax, but it will have to have a ton of exemptions for the poor in order to be equitable). Again, no matter what solutions you come up with, they still have to be passed by the Congress, and the Congress is managed and directed by special interests because of the enormous amount of money being provided for their reelection campaigns. There have been a few fairly honest politicians who have candidly admitted that they begin raising money for their reelection the day they take office, and that any kind of actual legislative work they do always takes a back seat to raising that money, not to mention that it influences ("dictates" would be a more accurate word) every decision they make while in office. It's nice to talk about solutions like tax reform, but the reality is that real, common-sense, fair and equitable remedies for the problems this country faces will never happen, simply because of the way campaigns are financed and the fact that corporate America can spend whatever it wants on ads to sway public opinion. It's vicious circle that always come back to one thing: money!

[Interbane]

If we could bypass more, complicated campaign finance reform and directly take on the tax code, something--perhaps several things--would change. It's a big 'if,' granted.

I agree with Lebeaux. How do you suppose the tax code could ever be changed? Who is going to do the changing? The people who will be "fixing" the tax code are the people who are influenced by private interests. What sort of fix could ever result?

Even if the tax code were completely scrapped and rewritten, it would change and morph to once again present an unfair playing field. I don't see how you could stop policy drift.

The position isn't absolutist; it's recognition of just how much power money has over people. The nexus of that power and it's negative consequences is campaign finance. There are a host of other issues that wouldn't be solved by campaign finance reform, but it is a necessary first step to solving most of the major issues in any sustainable way. Most other issues are symptomatic of campaign finance, and if we solved them, the solution would only be temporary, since the siren call of money would ensure policy drift.

[DWill]

Well gentlemen, you're not, unfortunately, saying wild things about the impossibility of change. I'm not with you on that, but we have indeed reached a bad place as far as wresting power away from powerful financial interests is concerned. I'd only point out that what you're saying about the pervasiveness of corruption would militate against campaign finance reform ever succeeding, either.

A flat tax wouldn't have to really have a 'boatload' of exemptions to make it equitable, would it? It would seem simple to exempt earners below a certain level. The plans that have been floated don't use the right formula, but there is a benefit if we begin to seriously consider the idea. Flat taxes don't have to be simple-minded like 9-9-9 or fit on a post card to be an enormous improvement over what we've got.

Politics is best seen as an amalgam of forces that can combine and cross over to create unexpected solutions. Being open to paradox enable us to not think categorically, in terms of conservative and liberal. Republican Nixon opened up communist China to the West; democrat Clinton engineered welfare reform.

[realiz]

Having a flat tax rate would simplify tax to some extent, but much of the complicated tax laws are about defining taxable income. This is not quite so easy to simplify.

[Interbane]

I'd only point out that what you're saying about the pervasiveness of corruption would militate against campaign finance reform ever succeeding, either.

The key difference is that if even a small victory is made in campaign finance, the ley lines of influence would be weakened, making things easier to change across the board. It could be that a few smaller, consecutive changes would be possible. But if you target another issue, you will not have weakened the influences that resist change. They will still be there, and will fight continuously to retake the ground that was won.

If we push for tax reform right now, the result will be a half-measure. It will inevitably reflect the fact that it's authors are people who are influenced by private interests. There will be small print, and loopholes will gradually collect over the following years as policy drift eases in the direction of power. This would happen because after the initial victory, the American public would lose it's steam and go back to life as normal.

I may even go so far as to say that if you want any real change to happen, you must start with campaign finance. The influence is too powerful to be able to make meaningful change or reform, as Obama has had to learn the hard way. The influence must be reduced first, money has entrenched private interests much too deeply.

[DWill]

Having a flat tax rate would simplify tax to some extent, but much of the complicated tax laws are about defining taxable income. This is not quite so easy to simplify.

Most informed people know more about taxes and finance than I do. Thanks for that comment. I wonder also about how the marginal rates are set up. It's possible to have a top marginal rate of say, 60%, which would look like an improvement to many people, but whether it's so good depends on when that rate kicks in. Currently, taxpayers reach the 35% mark on income over $379,000, so that if they make $400,00 total, they pay the 35% on $21,000. If I have that right.

[realiz]

10% Bracket $0 – $8,500
15% Bracket $8,500 – $34,500
25% Bracket $34,500 – $83,600
28% Bracket $83,600 – $174,400
33% Bracket $174,400 – $379,150
35% Bracket $379,150+


DWill,
Yes, you're right, you'd only pay the highest bracket on the last $21,000, but the next rate down is 33%, so not a lot less.
The above rates are for a single person, and there are different thresholds for married and head-of-household filers from what I see when looking this up on the internet.

In Canada our rates are:
•15% on the first $41,544 of taxable income, +
•22% on the next $41,544 of taxable income (on the portion of taxable income between $41,544 and $83,088), +
•26% on the next $45,712 of taxable income (on the portion of taxable income between $83,088 and $128,800), +
•29% of taxable income over $128,800.


These rates are the same for any filer, though we have personal exemptions, married exemptions, special deductions and all sorts of credits that lower taxable income or tax payable.

Also, just as in the USA, these rates are only federal ones, the provinces and territories each have additional tax and those rates vary from 10% to 21% with various thresholds. Alberta is the only place that has a flat tax rate, which is the 10% (and there are many Albertans not happy with this).

So if you combine the top federal rate with the top provincial rate, the highest income tax bracket in Canada for personal income would be 50%. I did read that many states follow the same rates and thresholds as the federal government, so the top rate in the US would be 70%. That, to me, seems like a high enough rate for top wage earners, though it would be tempting to move to Alaska (or another income-tax free state) if you paid that much tax.

[realiz]

A note to the 50% vs 70% above: All tax rates can be misleading as the important factor is taxable income and how it is arrived at. One difference in Canada and the US is the US state income tax itself is a deduction to federal taxable income, which is not true in Canada.