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Tax Reform: What’s In a Name?

The latest effort by the House Republican leadership is called “Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012” (H.R. 6169). That’s a misnomer.

This bill would provide for expedited consideration of tax reform legislation – but only on the condition that it include additional massive tax cuts for high-income households and corporations and leave behind millions of women and their families.

Under H.R. 6169, the current six-bracket personal income tax system would be replaced with just two rates, 10 percent and 25 percent (or less). But reducing the number of brackets won’t make it any simpler to file your taxes. The IRS – with or without your favorite tax prep software – already tells you how much tax you owe after you fill in the Form 1040 – you don’t have to muddle through the brackets yourself. There’s probably an app for that, anyway. But fewer brackets mean that our tax system is less progressive, because then taxpayers with extremely high earnings pay taxes at the same rate as those with lower earnings. “Simple” doesn’t necessarily mean “fair”. 

Like the 2013 Ryan budget, H.R. 6169 calls for large tax cuts for the very wealthy. In 2015, those making $1 million or more would enjoy an average tax cut of $265,000 (on top of what they would get from extending the Bush-era tax cuts). In contrast, those making between $20,000 and $30,000 would get an average tax cut of $129 from the tax cuts proposed in the Ryan budget and H.R. 6169, and half of the people in that lower income bracket would get no tax cut at all.

Tax cuts for the wealthy under H.R. 6169 are in addition to tax cuts that passed the House yesterday (H.R. 8) to extend the Bush-era tax cuts for the richest two percent. Under H.R. 8, millionaires would keep all of their tax cuts – worth an average of $160,000 in 2013 – but more than one-third (37 percent) of all families with children and nearly three-quarters (74 percent) of low-income families with children would lose tax benefits next year. A single mother with two children who works full-time at a minimum wage job would lose$1,545.

The bill is fiscally irresponsible as well as unfair. H.R. 6169 does not identify any offsets to pay for the $3.2 trillion cost of the tax rate cuts for individuals or the $1.1 trillion cost of the tax cuts for corporations. As a result, either middle- and low-income families would have to pay a larger share of taxes (because tax benefits that help families buy a home, pay for health insurance, provide for their children, and save for retirement would be slashed or eliminated), programs vital to women and families would have to be severely cut, or budget deficits would soar.

Let’s stop worrying about “simple” and go right to “fair”. And let’s think about a better name – we welcome your suggestions!

Tagged:Taxes

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