Don’t Tax You, Don’t Tax Me

Tax that fellow behind the tree. That was Russell Long’s famous 1918 definition of tax reform. He got it about right. I was reminded of it last week as Barack Obama was promising to cut taxes for 95% of Americans. The 5% behind the tree are in for it. For 2006 that would have meant anybody earning more than $153,542. They already pay more than 60% of all personal federal income taxes. Presumably that will go up. The fifty percent who earned less than $31,987 paid less than 3% of the taxes. A lot of people paid none at all. I guess they will be getting larger rebates.

Now that the conventions are over and candidates are recharged the media are making their quadrennial complaint that they aren’t focused on the issues. Actually it’s the media who are ignoring the issues. Both candidates post their positions on everything from health care to trade right there on their web sites for any who bother to read. For tax policy they both have a fairly specific set of proposals for cuts, although both are light on how they intend to pay for them. Senator Obama wants lower taxes for working families, the middle class, the elderly, and small businesses, as he says, just about everybody except large corporations and the wealthy. He also wants to simplify tax forms for most people by having the IRS fill them out based on W-2s and 1099s they already get from employers and banks. The taxpayer would just have to review and sign. The only revenue raising measure I see in his economic plan is a windfall profits tax on big oil to pay for a second general rebate to compensate for high energy costs.

John McCain outlined his economic initiatives in a speech back in April. His are a bit simpler than Obama’s and his tax cuts would appear to be restricted to people who actually pay taxes. He wants to double the personal exemption for dependents from $3500 to $7000. The Republican’s approach to a simplified code is based on a switch to two flat rates with a generous standard deduction. Anybody wanting to remain under the current system can. McCain also wanted a suspension of the federal gasoline tax for the summer driving season. We’re past that and he never did say how he would replace the revenue for the highway trust fund. Given today’s news that it is out of money and payments may be cut for state construction projects, that is of more than passing concern.

I can’t find a reference on either web site but the single clearest difference in tax policy may be in respective positions on the Bush tax cuts, set to expire in 2010. Most Democrats and presumably Senator Obama want them to expire. McCain wants them extended. Expiration would mean a lot of people who don’t consider themselves wealthy would owe substantially more than they do now. The Obama claim to be cutting taxes for most Americans probably depends on expiration, and on not calling it an increase.

So tax issues are there for anybody who is interested. The candidates like to talk about their proposed cuts, but not how they would pay for them. I would hope some people in the media would ask. That’s easy to do in a televised debate, which I presume is why Senator Obama has mostly avoided them. It’s hard to do in the blogosphere. It’s one thing we are still pretty much dependent on the mainstream media for. The other issues are all there too, all with just as many unanswered questions. Each of the four candidates has a huge traveling press entourage. I hope some of these people start asking real questions and soon. The phenomenal audiences for the acceptance speeches suggest a lot of people will also watch the debates. But three short sessions on TV isn’t enough. These folks need to get serious. Just who is that fellow behind the tree?