Today, Washington is awash in discussions of tax reform as House Ways and Means Chair David Camp releases his tax reform plan. Is this a Catholic Progressive topic? Of course. The tax system is the foremost way to redistribute income from richer people to pooerer people. Camp does not make it better, but at least he does not make it worse. We will see how his proposal survives the Tea Party House, negotiations with the Senate and consultation with the Office of Tax Policy in the Department of the Treasury.
Michael Sean Winters of the National Catholic Reporter does not want reform now, because it comes once in a generation and the plan offered is too gradual. He wants to eliminate payroll taxes and put in a modified flat tax. I can agree to some of this in principle as I state below. After these comments, I will include my comments from the Tax Policy Center website, TaxVox. Here is MSW's article: http://ncronline.org/blogs/distinctly-catholic/tax-reform-ill-pass and my response below:
I can see repealing the Employer Contribution for Old Age and Survivors Insurance and replacing it with some kind of consumption tax (either a Value Added Tax or VAT-like Net Business Recepits Tax). I can also see crediting each employee with the same amount from that tax and possibly using some of the proceeds for purchasing employer voting stock - with group voting by occupation with Unions voting proxies for its members. As for the Employee contribution, I would put in a floor and end the Earned Income Tax Credit - increasing the Child Tax Credit and minimum wage instead and I would LOWER the cap - which would decrease the benefits paid out to richer retirees. As there would be no cap on the consumption tax funding the employer contribution, there would still be plenty of funds to increase benefits. None of this would necessarily be done under tax reform, but they might.
The reason to do tax reform is to both change Social Security but also to increase benefits for families and lessen the burden of having to file. That is best done not by having a flat tax, modified or not (the big proposal in this area is by Dick Army, who would also make people write a check instead of having withholding - which was a non-starter), but by shifting the responsibility to file taxes to employers from employees. Employers collect the income tax for the most part anyway (the process of giving 1099s to people who are essentially full time emloyees must also be eliminated) and give the same info to the IRS that they would give if paying the tax. The wasted effort of most families can be ended - while including a credit for children on the EMPLOYER tax - was a pass through to workers. Not THAT would be worth tax reform.
Howard Gleckman of the Tax Policy Center does a fairly good analysis of this and I add my comments on their website and my tax blog. In essence, Camp is to be congratulated for sticking to it. We will now see if there is follow through and if the Office of Tax Policy at Treasury takes this seriously. If they do we may see tax reform yet.
Howards Comments are at http://taxvox.taxpolicycenter.org/2014/02/26/dave-camps-tax-plan-a-brave...
Here are my comments to Howard: He will likely take flack from both the right and the left on this one. It will be interesting to see whether this survives to get out of committee and whether it goes to the floor and is voted on. He does deserve credit for sticking his neck out and making some hard choices – as well as keeping the discussion going and allowing those of us who have our own plans to get them on the record yet again. Cutting the EITC is DOA with POTUS, so we will see if Camp et al are open to compromise and whether the Administration lets the Office of Tax Policy fully engage on this plan. This could be a last shot across the bow or it could be the start of actual change this year (or part of his bid to seek an additional term as chair rather than handing it over to Ryan – who also has reform plans of his own). We live in intersting times for tax reform.