Republicans want to change the progressive income tax to a flat consumer tax to lower taxes on the wealthy. President Bush cut the number of tax brackets down to seven, and now Republicans propose only three tax brackets.
All of our taxes except the federal income tax are flat taxes. Our most regressive tax (where the poor pay a higher percentage of their income) is the flat sales tax. The system is broken, wages are overtaxed and
investment gains are under-taxed.
We have a progressive income tax for a good reason. Most of the income that wealthy people have is not taxed, is taxed at a lower rate, or is delayed until their death. If someone owns assets that appreciate in value but a taxable event does not occur, there is no income tax to pay. The hereditary elite can borrow against other assets if they need tax free money.
Workers have to pay taxes on their wages when they get paid. A flat tax always favors the wealthy. Republicans hate the progressive income tax so much that they are proposing a federal flat sales tax of 30 percent to replace the federal income tax. Tangible items that most people buy, like houses and cars, would be taxed; but intangible items that wealthy people buy, like stocks and bonds, would not be taxed. Corporations would not pay the sales tax and therefore would not pay any taxes.
Lower-income people have to spend a higher percentage of their income to support themselves and their families than the wealthy have to spend. Also, no one who lives in poverty should have to pay income tax.
A wealth tax can solve the taxing problem. Household wealth in the USA is $86 trillion and the book value of corporations is over $30 trillion. Assuming the taxable wealth in the USA is $100 trillion and the federal budget is $4 trillion, a wealth tax of 4 percent would replace all federal taxes. A progressive wealth tax (what you own minus what you owe) that increments by .2 percent for every $1 million up to 5 percent would bring in sufficient revenue to cover the budget. For example, tax on $3 million of net worth would be $2,000 and $4,000 on the next million dollars. Only 10 percent of people have a net worth of at least $1 million. The remaining 90 percent of the population and most small businesses would pay no wealth tax. The wealth tax will create jobs and grow the economy and simplify the IRS tax forms for all.
We cannot have markets that function and a democracy that functions unless we have a government that functions. Without a functioning government, we just don’t have a country.
Bruce Barnes, Former County Chair, Precinct 75 Chair
Montgomery County Democratic Party
Published in The Conroe Courier Sept. 6, 2016