Candidate Debate on Tax Policy Ignores Reality

As several non-partisan analyses have demonstrated, both Herman Cain's 9-9-9 plan and Rick Perry's two-track 20 percent plan would be major revenue drainers for an indebted government, with most of the benefits going to the richest Americans through lower marginal rates, as well as the elimination of capital gains and estate taxes. Mitt Romney, who has tried to somehow position himself as the GOP's champion of "average middle-class Americans," who he says will benefit most from his proposed tax policy, once again has a reality problem.

Romney said in an interview with FOX 13 Tampa Bay this week that he proposes "no tax cuts for the rich" and that his tax cuts focus instead on the middle class. Unfortunately, his middle-class tax cut rhetoric is derived from the idea that middle-class Americans will be able to "keep more of their savings" by avoiding a capital gains tax – a capital gains tax on investments the vast majority don't have. Romney's given no word on where these mythical investment savings would come from, considering inflation-adjusted wages for this group have been flat since the early 70's.

While Romney's plan doesn't drain the government coffers as badly as the other two, it still includes trillions in tax cuts for the richest 1 percent of Americans and large corporations. Romney also seeks to eliminate the estate tax, a very expensive proposition. The estate tax, which is paid only on estates worth over $5 million, after a wide assortment of shelters to avoid it have been maxed out, is paid not only by the richest 1 percent, but the richest one-tenth of one percent. That being said, Romney as ”defender of the middle class“ seems rather implausible.

Folks, this isn't a partisan issue. It's not a liberal or conservative matter. It's math! For more than three decades, effective tax rates for both corporations and individuals have been at historic lows. The returns are in and it's been a massive failure. IT HASN'T WORKED! Doubling down on a failed philosophy will not somehow reverse its course. Counting isn't a circular exercise. Continuing with such policies will exacerbate the problem and force draconian cuts in services that could leave us unable to perform even the simplest matters of the state. That might not be a problem for someone that continues to hoard more and more wealth through such policies, and if you are in the top half of the one percent and support such an end-game, so be it.

But if you are an average, hard-working American who is sick of Washington spending money irresponsibly and thinks that we are going to get the country back on track by redistributing more wealth upward, your anger is misplaced. That was the logic behind the Bush tax cuts – the ones that have cost us about a trillion dollars without providing the economic growth they promised. Corporate profits are higher than they've ever been in our nation's history and a new report from Citizens for Tax Justice shows that over the last three years, 78 Fortune 500 companies paid ZERO in corporate taxes for at least one of those three years, while 30 of them paid zero ALL THREE OF THEM, despite making over $160 billion in profits!

Personal incomes tell a similar tale. Warren Buffet really does pay less in actual percentage of taxes than his secretary, and the richest hedge fund managers, the top dozen of which "earn" hundreds of millions of dollars annually, pay a rate lower than many school teachers. This isn't science fiction. As a result, income disparity in the U.S. is at its highest since the 1929 crash that spawned the Great Depression. Those realities didn't save us, but instead have resulted in record unemployment, record personal debt, and a sharp curbing of the middle-class consumption that drives this country's economy.

Another news flash: average Americans are deeply affected by that, but multi-millionaires and billionaires aren't. Half of the world still lives on $2 a day or less, can be jailed for unionizing and don't have laws regarding pollution. The super rich can find plenty of undeveloped nations to invest in at a handsome profit with their tax savings. Why on earth do we keep assuming they'll start creating domestic jobs if they get just a little richer, when them doing so is at the expense of the consumers who create the demand from which job creation is originated? Tax cuts should be targeted to those making $250,000 or less, in order to give them more disposable income to drive domestic consumption.

We should focus on closing loopholes that incentivize incorporating subsidiaries and moving revenues to offshore tax havens, getting the largest corporations to pay their fair share and again focus relief on small businesses that are the real domestic job creators. The idea that this one-size fits all approach, where the majority of benefits from cuts go to those who need it least, while a little trickles down to the masses will right our economic ship, is laughable. As I noted, the Bush tax cuts were expensive, though more than half of the benefit went to 5 percent of taxpayers.

There is a well-funded movement among the super rich to systematically decrease their tax liability through a series of cuts in taxes and cuts in services, which in turn allow... you guessed it – more tax cuts. It is based on populist rhetoric about big government, you knowing how to spend your money better than Uncle Sam, and distortions about where most welfare money is spent. It works. It gets a deeply divided citizenry arguing with each other about crumbs falling off the table, while ignoring the bread that is being lifted from their plate.

Finally, we should fix Washington by getting the money out of politics by demanding real campaign finance reform. It's not that government can't inherently do anything right. Amazingly, government can be quite capable when it's not bought and paid for. Publicly-financed elections, in which real Americans that are not beholden to special interests actually have a chance at getting into national office, would be a good start. Banning lobbyists would be another. As for getting spending under control, I like Warren Buffet's idea: ”I could end the deficit in five minutes, he told NBC. "You just pass a law that says that anytime there is a deficit of more than three percent of GDP, all sitting members of congress are ineligible for reelection."

The United States is still a very wealthy country, but while the economy has more than doubled since 1980, almost all of the gains have gone to a small class of super rich. If this sort of strategy worked, I wouldn't be writing this column. Let's put our differences aside and start focusing on the real problems in our economy – a lack of consumer demand because too few Americans have shared in the growth they've helped to create. Their earnings are flat, while gas, food and medical inflation have grown exponentially, and as a result, they are too leveraged to consume enough to keep the domestic engine pumping. Too many tax breaks for the super rich helped to cause this, more of them will not make it go away no matter what the gentlemen on the stage tell you.

Dennis Maley is a featured columnist and editor for The Bradenton Times. An archive of his columns is available here. He can be reached at dennis.maley@thebradentontimes.com. You can now also follow Dennis on Facebook and Twitter by clicking the badges below.