Regressive Direction

The four Republicans seeking to defeat Congresswoman Gabrielle Giffords want big tax cuts for the highest earners—and that means higher deficits or higher taxes for you

All four Republicans seeking to oust Democratic Congresswoman Gabrielle Giffords said at a debate last week that they'd raise taxes on most Americans or balloon the deficit in order to provide the nation's highest earners with big tax breaks.

They didn't come out and say that directly.

But all four of the GOP candidates—Jonathan Paton, Jesse Kelly, Brian Miller and Andy Goss—embraced policies that would scrap the progressive tax structure that now requires the country's highest earners to pay the majority of the taxes.

While many Americans believe that they pay too much in federal income taxes, nearly half of them pay nothing at all, according to a recent analysis by The Associated Press.

The AP study showed that because of various tax credits (including new ones that were passed by Democrats as part of the stimulus plan that the four Republicans running in CD8 opposed), roughly 47 percent of Americans will pay no federal income taxes for 2009. In fact, a family of four with an income as high as $50,000 can escape a federal income-tax bill.

As a result of the progressive system, the top 10 percent of earners—with an average household income of $366,400—paid nearly three-fourths of all the federal income taxes collected in 2006, according to the AP analysis.

In other words, most Americans get a pretty good deal out of the income tax. Granted, they pay plenty of other taxes. They pay Social Security taxes. They pay Medicare taxes. And most pay far more in sales taxes than they pay in income taxes.

But Paton said it was wrong that so many people don't pay more in federal income taxes.

"I think that's one of the reasons we need a flat tax, because you want to have an even chance for everybody as much as possible," Paton said.

He added that the present system takes too much away from the highest earners.

"There's a very small number of people paying the majority of the taxes," he said. "We need to find ways in the country where we can actually create and generate wealth, and we can do that by lowering taxes for everybody. It should be low and flat for everybody."

But it's not mathematically possible to lower taxes on the highest earners without increasing them on the lower earners, unless you want to balloon the deficit—and Paton has been sharply critical of the growth of the deficit under both GOP and Democratic administrations.

After the debate, Paton admitted he hadn't yet worked out details on how a flat tax would work.

There is a flat-tax proposal introduced in every session of Congress by Sen. Arlen Specter of Pennsylvania. That bill would establish a standard 20 percent tax on all income, with one large standard deduction; most tax credits and deductions would be eliminated. It would also eliminate taxes on investment income.

An analysis of his proposal by Citizens for Tax Justice shows that the top 5 percent of earners would see lower taxes, including an average cut of nearly $210,000 in 2011 for the top 1 percent of earners.

But the bottom 95 percent of taxpayers would see their taxes go up under the proposal, with an average increase of $2,887 in 2011.

Those numbers do not dissuade the CD8 candidates from embracing a flat tax.

"I don't like the soak-the-rich sentiment," Goss said. "I don't think because you are rich, you should be taxed any more or any less than anyone else. Everybody pays the same."

Goss, who railed against taxes and government throughout the debate, said he wanted a flat tax that would lower taxes for everyone.

"I think I'm taxed too much, and I want a tax cut," Goss said. "I think I deserve that."

Goss said after the debate that he believed a massive tax cut for the wealthiest Americans would cause such an economic boom that overall tax revenues would skyrocket.

Miller said he would support a flat tax, but that he would prefer to abolish the Internal Revenue Service and replace income taxes with a national sales tax.

That plan—dubbed the "fair tax" by supporters—would impose a 30 percent sales on all purchases, including homes. Citizens would be issued "prebates," designed to decrease the regressive nature of the tax, that would vary based on household size.

But even that 30 percent figure would come on top of local taxes, which would drive the sales tax up to nearly 40 percent in many areas of the country. And since states would likely have to abolish their own income taxes—because they are often based on federal tax returns—it would mean that local sales taxes would have to be increased, leading to a sales tax of nearly 50 percent on goods.

Until a national sales tax can be implemented, Miller proposes freezing government spending at the current levels while eliminating corporate income taxes and capital-gains taxes, and cutting personal income taxes by 15 percent "so that we can grow our economy ... like only people in a free economy can do. And once we hit 2016, we make sure there's a balanced budget."

Miller has not done an analysis of what his proposal would cost in tax revenue, but he says government spending should be sharply curtailed. Among his targets: Scrapping the entire welfare system and working toward eliminating Medicare and Social Security.

Like Paton, Kelly complained that the highest earners pay too much in taxes.

"We continue to squeeze the productive in favor of the unproductive," Kelly said. "Government has gone from taxing people in order to fund itself to taxing people in order to redistribute wealth. ... We cannot continue to punish success, because everybody knows that when you tax something, you get less of it."

After the debate, Kelly delivered what essentially amounted to a faith-based economic policy.

"If 10 percent was good enough for Jesus Christ," Kelly said, "it's good enough for the United States of America."

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