Washington needs courage to address tax inequities

By Jon Hinck, Special to the BDN
Posted April 18, 2012, at 4:49 p.m.

Monday, the Senate rejected the “Buffett Rule” aimed at achieving greater tax fairness. On Tuesday, millions of American taxpayers — from working people to multinational corporations — closed their books and filed their taxes before deadline.

Wednesday, America’s super-rich laughed all the way back their high-rise office suites and vacation homes as yet another tax year has passed with nothing done to correct inequity in our tax system.

Thanks to Senate Republicans (minus Maine’s own Sen. Susan Collins), Warren Buffett’s secretary will continue to pay a higher tax rate than her billionaire boss. As Maine’s senator, I would support the Buffett Rule and tax fairness generally. Here’s why.

Consider a hardworking couple. Say an electrician and a dental hygienist, both skilled and successful, parents of three kids. The family enjoys a comfortable life but money can still be tight given the costs of education, heating oil and gasoline, and chipping in to help aging parents on fixed incomes. Under our tax system, this family easily could pay a federal tax rate of 28 percent.

Here’s the unfairness: that rate is about twice as much as Warren Buffett and Mitt Romney pay on incomes many times larger.

Many of America’s super-rich earn most of their money through investment — money made moving money. Such “capital gains” are taxed at just 15 percent. This is a major reason Buffett can pay lower tax rates than many ordinary working families.

The old saying goes: The rich get richer. However, when taxation was fairer, the rich paid their fair share and middle-class people and even the poor did better too. For more than a decade now, most average folks have been economically standing still or falling behind. Now the middle class shoulders the tax burden and America goes further into debt.

Certainly, any system that rewards risk and effort will produce varied financial outcomes. In other words, some inequality is to be expected. But when those with money and power rig the rules to create a winner-take-all system, ordinary working people find it increasingly hard to get ahead. The country as a whole loses out.

The Buffett Rule is a step toward fairness. It does not go as far as taxing capital gains as ordinary income as was done under President Ronald Reagan, nor does it set a higher marginal tax rate as was the law under Eisenhower and Nixon. Instead, it simply ensures that people earning more than $1 million per year will pay a minimum effective tax rate of 30 percent, still lower than the current maximum of 35 percent.

Opponents call the Buffett Rule a “gimmick,” saying that it won’t solve the debt crisis. True, but not a fair test. No single measure eliminates the national debt. It will take years to undo years of fiscal irresponsibility. The Bush tax cuts, two wars, subsidies for Big Ag and Big Oil, the Medicare Part D giveaway to Big Pharma — all helped dig the fiscal hole.

Having the super-rich pay a fair share is a good start. Besides, last year’s debt-ceiling debate made plain that congressional Republicans would not vote for an Obama tax overhaul if it was chocolate-coated and gutted half of all federal regulations. We cannot wait for a “super fix” from another “super committee.”

Today, the gap between the super-rich and everyone else is wider than it has been in four generations. America thrives when we share the view that we are in it together. Our national identity, “the American Dream,” is built on the promise of equal opportunity.

Complaints that the Buffett Rule is either too much or too little boil down to something else: Washington lacks courage. Not since presidents named Roosevelt have we told the rich and powerful that they cannot get it all.

The Buffett Rule provides a little tax equity, shows movement toward a balanced budget, and signals that the middle class still matters in America. Let’s hope tax fairness is an idea whose time has come again.

Jon Hinck, D-Portland, represents District 118 in the Maine House of Representatives, where he serves on the Energy, Utilities and Technology Committee. He is a Democratic candidate for the U.S. Senate.

http://bangordailynews.com/2012/04/18/opinion/washington-needs-courage-to-address-tax-inequities/ printed on December 25, 2014