Sunday, February 13, 2005

In The New York Times, David Cay Johnston notes that we've already taken the first step down the slippery slope that leads to the end of progressive taxation: The richest Americans no longer pay the highest federal tax rates.

When both income and payroll levies like those for Social Security are counted, Americans making as little as $100,000 paid a larger share of their income in taxes in 2002 than those making more than $10 million. Those with incomes of $100,000 to $200,000 paid 20.6 percent of their income in these taxes, compared with 20.1 percent for those in the $10-million-and-up group, the Tax Policy Center computer model calculated.

You'll hear something different from conservatives -- but they're counting only federal income taxes. Payroll taxes (for Social Security and Medicare) are federal taxes, too, and if you're a middle-class wage earner, you pay them on every dime you earn, while every dime over $90,000 is exempt from the SS tax, which means high earners get a big break.

And meanwhile, as Edward Andrews notes in the Times, there's a push to combine "tax reform" -- which, for conservatives, means a regressive consumption tax, or an approximation of one -- with Social Security "reform."

..."We can deal with Social Security and taxes simultaneously," said Representative Bill Thomas, Republican of California and chairman of the House Ways and Means Committee, in a speech last month. "Sometimes, the more you include in a piece of legislation, the easier it is to pass."...

In recent weeks, numerous Republican lawmakers and Mr. Breaux [John Breaux, co-chair of Bush's tax advisory panel] have echoed Mr. Thomas's call to broaden the Social Security debate and link it with tax reform.

"Why don't we look at the whole picture of how we fund entitlement programs?" Mr. Breaux said of Mr. Thomas's idea. "I think he's raised very worthwhile questions."

As Andrews notes,

Both a flat tax and a consumption tax would probably shift more of the tax burden from high-income households to middle- and lower-income taxpayers.

If Thomas and Breaux get their way, kiss progressivity goodbye.

Of course, I'm not sure what's really going on -- maybe this call for even more radical change all at once is a trick to make Bush's SS reform seem like the sensible middle ground. (Something like that happened in 2001, when a few members of Congress demanded bigger tax cuts than Bush was asking for.)

Or maybe these guys are serious. Maybe when Thomas says, "Sometimes, the more you include in a piece of legislation, the easier it is to pass," what he means is "If we make this really, really confusing we might be able to pull the wool over the eyes of the public and get it all passed."

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