Even after Governor Romney’s defeat, the Republican Party still clings to his tax plan. Governor Romney’s solution to the nation’s financial problems is to cut everyone’s federal income tax rate by 20 percent. How this will help the 47 percent of Americans who don’t make enough to pay income taxes is not clear to me. He said the wealthy will still pay the same dollar amounts because he will limit theirs and everyone else’s tax deductions. If Governor Romney had been elected president and somehow got control of both houses of Congress I bet the 20 percent tax reduction could be passed, but does anyone really believe the reductions in tax deductions gets passed afterward? There are three major deductions used to reduce personal income taxes. They are contributions to qualified charities, home loan interest deduction and the deduction for health insurance.
If the contributions to charity, churches, temples, universities and colleges, medical research and aid to the poor in this country and overseas were no longer deductible there would be an outcry that would destroy any politician or party that even suggested such action. They would be rightly condemned by every one of the above listed institutions and tens of thousands of others. Loss of contributions to clarities would literally destroy these noble causes.
Reduction in the home mortgage loan interest deduction would put a tombstone on an already depressed housing industry. Can you imagine the lumber companies, general contractors, trade unions, Realtors and mortgage provider lobbyists that would descend on Washington?
The only other major deduction is the premiums paid for health insurance. I ask my readers what is one of the chief causes of the increase in their cost of living over the last 20 years. Who hasn’t experienced huge increases in the cost of private insurance? Health insurance premiums have been increasing at two to three times the rate of almost every other personal and business expense. If the dollars spent for medical insurance were to become taxable, the result would be another huge increase in the actual cost of healthcare. Once businesses and individuals understood that the cost of their already expensive insurance will increase between 10 and 30 percent, does anyone really believe that change to the tax code could ever pass congress?
I believe, as should any casual observer of Congress believe, the Republican tax plan is pure, absolute, and total male cow droppings. And I have yet to see any holder of elected office come out and even start to explain how this fantasy tax revision could actually be enacted.
In the first place, the personal tax deduction is not what is wrong with our tax code. What is wrong is that it lets corporations with billions of dollars of profits pay almost no corporate tax, i.e., General Electric paid no federal tax in 2011 on billions of dollars of profit.
Our present code permits corporations and individuals to make huge profits in this country and then take those profits overseas to avoid paying into the system that enabled them to accumulate their great wealth. I have heard Republican after Republican lament on the high corporal tax rate. But I have never heard any politician, of either party, explain that no corporation actually pays that rate or anywhere near it.
When did we become a nation that lets laws be passed that tax self-employed plumbers, mechanics, builders or insurance agents at 28 percent of income and an additional 15 percent Social Security and Medicare tax for a total of 43 percent on the first one hundred thousand dollars of net income. And he or she also pays for employee benefits, ie insurance, retirement plans and unemployment and worker comp taxes. They also must pay local property taxes on their business assets, in addition to the same home and sales taxes everyone else pays.
But if you make a living by investing yours on someone else’s money, you pay just 15 percent on your so called capital gains. Most have very few employees and little real estate, so their local and employee taxes are minimal. Additionally, the wealthy have accountants and lawyers working to even reduce their taxes further. That’s how people like Governor Romney get over a hundred million dollars into an IRA (Individual Retirement Account). This law was passed to enable self-employed people to save tax deferred money for a modest retirement. But it has been turned into another tax dodge for the wealthy.
Keep in mind when a Republican uses the words, small business owner and job creator, he’s not talking about the real small business men and women of which 90 percent make less than $200,000 per year. They are talking about millionaires and billionaires. There is absolutely nothing in the Republic tax plan for real small businesses. His plan would increase their effective tax rate, not lower it. The bottom line is that their tax plan is the same old trickle down economic theory that has squeezed the middle and lower economic classes for the last 30 years. The Republican Party is now controlled by people who believed what Leona Hemsley said when she was charged with tax evasion, “Only small people pay taxes.”
Dennis Tilly is a resident of Weatherford.