By: Jason Lewis
The Post Bulletin
Gov. Mark Dayton’s recent comments about the tax reform plan in Congress weren’t nearly as convincing as they were predictable. Indeed, the knee-jerk response from the very liberal politicians who gave us this convoluted tax code would be comical if they weren’t so sadly ironic.
At some point, however, it’s hard to ignore the empirical evidence. Combining tax simplification with rate reductions worked in the 1960s and 1980s, and it’ll work now for Minnesota families.
Since history isn’t on their side, critics of tax reform are left complaining about the elimination of tax loopholes most often employed by wealthy interests and their accountants. It’s an odd argument from these class warriors, as it now appears they would rather keep high marginal rates with deductions at the top end than lower rates for the middle class.
None other than President John F. Kennedy pointed out that exercise in futility in 1962, saying:
‘”The present patchwork of special provisions lightens the tax loads of some only at the cost of placing a heavier burden on others. it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now…”‘
Contrary to supporters of the status quo, the current exemption for state and local taxes (SALT) disproportionately benefits high-income taxpayers, as the graph here illustrates. More than 88 percent of the benefit from SALT deductions flows to those earning more than $100,000; and it’s the single largest deduction claimed by households making more than $200,000.
Opponents of reform can defend carve-outs for the rich, but they should not hold tax cuts for the middle class hostage to it. Especially since the average 2nd District family benefits far more from doubling the standard deduction to $24,000 — allowing them to skip itemization and fill out their taxes on a postcard.
The answer to SALT is for Minnesota to reduce taxes — not for federal taxpayers (thousands of them here in Minnesota) to pay more. The virtue of keeping a $10,000 property tax deduction is that it levels the playing field, benefiting everybody in every state.
Our economy has been stuck in low gear for a decade. Median family incomes haven’t bounced back from the recession. Tax reform will increase the return on capital, giving businesses a much greater incentive to invest in employees. And when productivity goes up, so do wages.
In addition to doubling the standard deduction and introducing a new “family credit,” our plan eliminates the bottom bracket — taking low-wage earners to a zero tax rate — and reduces small business taxes 40 percent. Just as important, we get our corporate rate in line with the rest of the developed world, so companies invest here at home.
The great simplification comes when seven brackets are lowered to four, reducing the countless unproductive hours that families spend doing their taxes. By eliminating loopholes, we’ll get a tax code where everyone has skin in the game — but at much lower rates.
Similarly, repealing the Alternative Minimum Tax (AMT) simplifies the tax code and gives major relief for almost 4.5 million American families forced to calculate taxes twice, and pay the higher figure.
Finally, it’s really too much to be lectured on deficit spending by tax-and-spend Democrats who doubled the debt during the last decade and now seek to defend tax loopholes for the rich.
There always have been two kinds of deficits — ones from increased government spending crowding out capital and ones derived from reducing taxes to spur economic growth. JFK said, “‘the first type of deficit is a sign of weakness; the second reflects an investment in the future.”‘
Democrats such as Dayton should try listening to him.