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To just what percentage of a tax overcharge is the government entitled? We all know the answer. None. Zero. In our Democratic Republic, the elected representatives decide the level of expenditures and the level of taxation needed to support those expenses. Those assessed taxes are compulsory. The government has no right to keep anything more. So, our principled representatives will now debate whether to keep 100 percent of the tax overpayment for government use or just 75 percent. No one will mention adjusting the rates downward at a level that would eliminate the surplus. All politicians of all parties understand how difficult it is to raise taxes except in a time of war. They are willing to defend their windfall against all challenges. For them, the status quo is victory. The focus of the tax debate will be the legislation proposed by President Bush which has just been submitted and is expected to become signed legislation about July of this year, retroactive to January. The one thing the citizen is unlikely to hear is a summary of what the Bush Tax Plan actually proposes. The elite media only wants to tell you what they think you should think and the opponents specialize in outright lies and half-truths. So here, without comment, is the Bush proposal. The Bush Plan Who owns the tax overcharge? The people, not the government. At approximately 21.0 percent of Gross Domestic Product (GDP), the federal tax has leapt far above its historical range of 18-19 percent. Citizens work more than four months of the year just to fulfill their tax obligations. High taxes unfairly limit the participation of low-income earners, middle-class families and senior’s in today’s economic growth and prosperity. A steeply progressive tax structure acts as a success tax on innovators and entrepreneurs who supply growth through invention, job creation and new investment in fresh ideas. The real debate on taxes is about the proper role of the public sector. Which is more helpful to the growth and security of the middle class – economic prosperity and freedom or comprehensive central government? The current level of taxes is so high that families pay more in total taxes than they spend on housing, food and clothing combined. It is neither wise nor just to force families to work harder each year to fuel the growth of government. The best way to help all families is to let each family keep more of its income and spend their money, as they deem appropriate. To create prosperity with a purpose, the Bush tax plan focuses on five priorities. Create a larger middle class. To provide a greater reward for those worker’s entering the middle class, one-half of the Bush tax cuts would finance changes designed to encourage low-income families to make the sacrifices needed to get ahead. This can be accomplished by lowering the marginal tax rate. The current 15 percent tax bracket would be reduced to 10 percent for the first $6,000 of taxable income for singles, the first $10,000 for single parents and the first $12,000 for married couples. The existing child tax credit would be doubled to $1,000 and also count against the Alternative Minimum Tax (AMT). Ease the penalties for marriage and children. Middle class families are robbed of precious time together as well as needed resources by the unfairness of taxation regulations on two-earner families. The middle class currently pays either a 28 or 31 percent marginal rate. A new lower rate of 25 percent would replace these two rates and apply to singles with taxable incomes over $25,750 or married couples with incomes over $43,050. In addition, the marriage penalty would be cut by restoring the deduction for two-earner families. Encourage entrepreneurship. To maintain an innovative economy, taxes that penalize entrepreneurial success should be reduced. The maximum marginal rates of 26.0 and 39.6 percent should be cut to 33.0 percent. (The marginal rate is the tax on each additional dollar of income.) The punitive estate tax falls most heavily on individual small businesses and family farms. Eliminating the death tax would allow family farms and businesses to pass from one generation to another without having to sell the assets or incur heavy debt in order to pay punitive taxes. Encouraging charitable and educational investments. Some 70 percent of all tax filers (80 million people) do not itemize their deductions and therefore cannot deduct their charitable donations. The Bush tax plan would raise the limit for corporate charitable donations from 10 percent of taxable income to 15 percent. Tax-free charitable contributions from an Individual Retirement Account (IRA) would be permitted after age 59. Every taxpayer would be able to deduct charitable donations, regardless of filing method. From kindergarten through college, $5,000 per child per year could be contributed to Education Savings Accounts. There would be no earnings tax on withdrawals used for education-related purposes. No penalty for working seniors. The Social Security Earnings Test would be repealed. Currently, working seniors age 62-64 lose one dollar of benefits for every two dollars they earn over $9,000. Those age 65-69 lose one dollar of benefits for every three dollars they earn over $15,500. The tax debate will fill the airwaves in the weeks ahead. As submitted, the Bush plan focuses on individual and not business tax regulations. The plan is based on an average annual growth rate of 2.8 percent and cuts are phased in over five years. The Congressional Budget Office (CBO) now estimates a $125 billion non-Social Security surplus in FY2001 and another $142 billion in FY2002. With recession fears rising, Congress may well question the trickle-in feature of what is a rather modest tax cut. Size and speed will be major debates. ### |
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