Tax Loopholes & More

CNN Money reported that quite contrary to President Ronald Reagan’s reputation, he actually signed into law what amounted to the “largest tax increase in (peacetime) American history”–upon realizing that our country couldn’t really afford the largest tax cuts that he had put in place earlier in his Administration. But the Reagan Administration’s tax increases were large in terms of revenue gains, not in terms of marginal tax rates, because they did it the smart way: by reforming the tax system to make the tax base broader and more efficient. Two bills passed in 1982 and 1984 together “constituted the biggest tax increase ever enacted during peacetime,” tax historian Joseph Thorndike said.

Reagan didn’t raise more revenue by hiking individual income tax rates though. Instead he and a bi-partisan Congress did it largely through making it tougher to evade taxes, and through “base broadening” — that is, reducing various federal tax breaks and closing tax loopholes.

Imagine if the slash-and-burn budget cuts that have become a new way of life for recession-stricken state governments could be ended by keeping the tax burden off low- and middle-income families while raising taxes on the wealthy.

When asked about a proposed new income tax in Washington state, Willaim Gates, Sr., a prominent retired lawyer, philanthropist and father to Microsoft founder Bill Gates, commented  "state cutbacks have put our kids at risk, and we can't just sit here and do nothing about it."

Gates said skewing taxes toward the rich is nothing new. "I have a very clear recollection of the days when we took for granted an income tax rate on the highest earners of 90%, 70%, at times when our country was just motoring along in very good style," he said. "The notion of adding a couple of points to a 35% [federal] rate — it isn't going to change the world."

Did you know that the top twenty-five hedge fund managers made a combined $25 billion but because of tax policy their lobbyists helped write, they pay a lower effective tax rate than many teachers, nurses and police officers? As a result of tax havens in the Cayman Islands, Bermuda and elsewhere, the wealthy and large corporations are evading some $100 billion a year in U.S. taxes. Warren Buffett, one of the richest people on earth, has often commented that he pays a lower effective tax rate than his secretary.

We need to overhaul Ohio's tax structure. Do not be fooled by those politicians who claim that raising taxes on the wealthy will somehow harm the economy or will negatively impact the low- and middle-class. The present tax system favors the rich and big business. They have the means to lobby politicians, the means to pay for access through unlimited campaign contributions, and the belief that wealth and power equals entitlement. Funny...these are the same people who want to end entitlements for everyone else.

We know for a fact that the gap between the rich and the poor continues to widen and the middle-class is shrinking.  I remember awhile ago watching Chris Matthews, MSNBC, interviewing a Republican operative about the state of the economy. Chris asked the man what will happen to the economy when 75% of the people can no longer afford to spend? The Republican shrugged and blithely responded that the other 25% will have to make up the difference. Matthews, shocked that this man would suggest that it was OK for three quarters of the populace to do without, retorted, "You don't really mean that do you? That's un-American."

 If elected, I will work to eliminate tax loopholes and tax breaks for the wealthy and to put in place an equitable tax system for all Ohioans.