Need to Know, March 9, 2012: Cleaning up the tax mess

 

Ray Suarez.

Our tax code has been described as a morass of different rates, deductions, loopholes, and subsides that is different depending on each individual taxpayers situation. Homeowners are treated differently than renters; high earners are paying lower rates, in some cases, than middle-class Americans. And, on top of that, the nation faced a $1.3 trillion deficit last year. So, how do we make our tax code simpler and fairer? And how do we produce more revenue without stifling job creation? This week, Need to Know’s Ray Suarez hosts a panel of tax experts who debate how to fix the tax mess.

What’s on this week:

Cleaning up the tax mess

Our panel of tax experts includes: former New York Governor Eliot Spitzer; Emory University tax law expert Dorothy Brown; Bruce Bartlett, who served presidents Reagan and George H.W. Bush; and Cato Institute economist Dan Mitchell.

Read the transcript

Watch more full episodes of Need to Know.

 

Comments

  • guest

    Eliot Spitzer?  What, is this Fox 5?

  • Joelbar

    Can’t you find a liberal Democrat to defend higher taxes who was NOT very publically involved wih hiring a prostitute?

  • Gharley95

    RAy, the idea of a flat tax originated as based on consumption. To consider it otherwise loses/aborts the well thought out con cept.

  • Unfair

    I just finished my tax return for 2011. My income was solely from dividends. I paid a rate of 2% on my taxable income(line 43). If my income had come from wages, I would have paid over five times the taxes. These poor suckers who are working for a living are getting screwed big time. It is completely unfair.

  • Edie

    Excellent panel discussion tonight. Knowledgeable experts comments and good job by Ray Suerez guiding the discussion. I wish it could  have been an hour longer with viewer interaction with the panelists. Need to Know is one of the most educational and timely programs on TV.

  • Rj

    I think you made that up.

  • Rj

    A family of 4 who earns 50k a  year, pays nothing in fed tax.

  • Financialadvisorstl

    I think you made that up. A family of 4 who earns 50k a year pays nothing. In fact they receive a refund. In addition to this, your income would not be large to have a 2% effective tax. 

  • Anonymous

    If you believe it is completely unfair because you pay so little tax then put your money where your mouth is and pay more in taxes.  Something tells me you won’t.

  • http://redcounty.com/giuseppe-robalino Giuseppe Robalino

    A few things I’ve researched and written about taxation: I appreciate the thoughts and comments.

    http://redcounty.com/content/tax-plans-galore-case-jon-huntsman
    http://redcounty.com/content/teens-idea-taxation

  • Arthur Wimberly

    it is obvious that taxing the higher income people, would be a  tremendus help with government defict, its just a matter of congress, senate, presidents, to have the gutts, to do it.

  • http://redcounty.com/giuseppe-robalino Giuseppe Robalino

    Actually, experts have said that the government deficit is so large that doing that won’t even help. Forgive me for lack of specificity and numbers and statistics, but this comes from another show on PBS.

  • Anonymous

    Federal Income Tax Brackets for 2012

    Here’s a quick rundown of what the Federal income tax brackets are expected to look like in 2012:
    Tax Bracket Married Filing Jointly Single 10% Bracket $0 – $17,400 $0 – $8,700 15% Bracket $17,400 – $70,700 $8,700 – $35,350 25% Bracket $70,700 – $142,700 $35,350 – $85,650 28% Bracket $142,700 – $217,450 $85,650 – $178,650 33% Bracket $217,450 – $388,350 $178,650 – $388,350 35% Bracket Over $388,350 Over $388,350

    #############>>>>>>>>>>>>>>>>>>
    I must premise that I know little about all the deductions rich people get other than capital gains allowing them a 15% Federal tax on investment income. I think that is ridiculous! They should be paying much more! At least as much as someone making enough to pay 35% they earn with their sweat!

    For the reasons of the rich getting rich investing in other countries instead of America, benefiting from poorer people borrowing money force by high costs of living and low wages, running virtual monopolies, destroying jobs, and opportunity for others to get rich is small having to compete with them, owning 90% of wealth and means of production, twisting the arm of political leaders for lower taxes, corrupting government so there really is no democracy left, of course rich people should be taxed a lot more. Tax them until no more people are sleeping in the street, every American has a decent job, the aged and disabled are well taken care of, the national debt becomes zero, and no country think it’s OK to be a treat to America or genocide in any land! We can do all of that if we return to taxes on the rich under President Eisenhower of 91% top rate! Our country is obviously under threat from within more than without! It’s businesses too big to fail and people with so much money they effectively call the shots on how we are governed by greasing the palms of politicians with campaign contributions and offers of cushy jobs after their term is done. You can’t create enough jobs if people don’t have money to buy and their credit is destroyed from trying to keep up! Yet the rich rail saying in effect that if you destroy the wealthy you’ll never be rich. It tells me they are comfortable with the poor being disposable for the benefit for the rich. It’s OK  for them to get bailed out but hold us to debt run up because of unfair prices pushing us to credit cards and then running inflations so we couldn’t pay them off before our credit is destroyed. The rich deserve to pay through the nose for what they did to this country! It won’t happen until the people wake up and reclaim America for all the people! You don’t have to descry capitalism to do it! The problem is too much capitalism and too little socialism working for the less fortunate! The rich want to provide socialism for themselves exclusively!
    We need to return to taxes on the rich at rates under President Eisenhower of 91% top rate! It never stoped anyone from getting rich or investing in creating American jobs. Suddenly we arguing Social programs are unsustainable while the rich continue to benefit from social programs and getting bailed out! The government needs to have the funds to fill the gaps where capitalism fails to create jobs paying decent wages and stop running people into debt!

    Social programs are the devil destroying America unless it’s benefiting the rich! Kick the aged, disabled, and jobless into the street instead of taxing the rich able to pay enough without much even missing the money to provide a decent life for all Americans? That’s when you know the representative democracy has to be over ruled by the people when it doesn’t work for the people! When Representatives vote something in that does work fairly for all of the people, the people should be able to vote it out by popular vote! We’ll just get more of the same old crap until we come to that conclusion!

    America is better off with people making above a million a year getting taxed at 90% of their income after subtracting a million that’s taxed at a lower rate! I suggest $200,000 to a million pay 50% after $200,000 is deducted and taxed at a lower rate. 25-30% will probably work! It’s the glut at the top that’s hurting America! A lot of that money is earned by running overpriced goods and service at those with small incomes. Many are forced to borrow money to keep up and keep a roof over their heads! It’s one way how the rich get richer! Were better off going back to easy bankruptcy laws we had before Bush made it possible run up prices, forcing millions into credit card debt, then run inflation with easy credit so they can’t pay off the card! It’s just a scam! It’s still a scam because Obama didn’t cap the credit card rates at 15% and provide a hardship classification for a low unemployment rates that run up people’s rates and fees! Easy bankruptcy and easy credit repair stops the scams by Wall Street! It’s tyranny by the rich! Total exploitation and destruction of lives! There should be a charge for making lives worse to reap wealth! It’s the ugly side of job creation no one wants to talk about! It’s the terror of capitalism that exist and people simply conclude it’s the victim’s fault because they don’t manage their money well even when the jobs pay too little or no jobs to be found, and thus, no money to manage!
    It’s only fair the rich pay much higher taxes and decrease them only when the burden of all Americans are lifted! If not a 91% tax rate, then 70% on incomes above a million a year, and decrease it 5% for every 2% drop in the unemployment rate below 10%, coupled with a decrease of four trillion in National Debt! Otherwise, the greedy bastards are just trying to tip the boat over! I’m surprised they made it this far with the stupid arguments! Trickle down economics and free trade! It’s freedom alright! For the rich to continue the exploitation! Americans are kept ignorant on how economics work, so they trust and elect the highly educated to do the right things for us, and they stab us in the back and blame the other political party when they are both stabbing us in the back! It’s the age of treason, hypocrisy, and gross capitalist exploitation! It’s the real America! Like Rome, we’re headed for a big fall if the people don’t wake up and take control! The enemy within is our major threat! It’s a cancer eating us alive! Parasites feasting on us and we’re scared that if we remove them we’ll suddenly die! We don’t seem to understand the economist leading us down primrose path were hired by the rich to increase exploitation for them and we won’t die if we change course for the right path but be glorious greater that ever!
    Here we are with a huge need for jobs and over 14 Trillion dollars in debt and we’re still arguing about whether we should tax rich people more! Of course we should!!! They are the reasons we don’t have enough jobs but will argue we shouldn’t tax the job creators while they invest in job creation in India, China, and other cheap labor countries and keep the big profits to themselves! They argue our social programs are unsustainable while they rob the funds by causing less jobs in America and thus less taxes to afford social programs! It’s pure treason!
    We’ve evolved beyond what the original founders practiced which was a contradiction to what the Constitution says. They had slaves but freedom was why there was a revolution against English taxes! They talk freedom today but like back then, it was with the rich in mind! The founders were rich or well-off! No one was hurting much because of all the land and hunting opportunities to provide for oneself! Somehow we have people thinking that hypocrisy will work for what we now face! Circumstances have changed! The Tea Party idea of freedom means death by the millions because they have to solution for sustaining all Americans! It’s a survival of the fittest approach! You don’t survive if you don’t have the opportunity or health to work! That’s not freedom for all but for some! It’s the unimaginatively stupid way forward that ends in calamity and the destruction of America or a return to slavery as our country started out. We’ve made advance to bring us farther out of the hypocrisy we started with because our words didn’t match our actions and others are trying to take us back by reinterpreting the Constitution. The greatness of capitalism has brought us could not have happened without socialism. Capitalism gives us progress through slavery or near slavery by exploiting millions of workers for big profits! Socialism made it bearable so as not to cause wars and create a more livable environment that is more profitable for capitalism!
    It’s lunacy when our problems can be solved by increasing taxes on those who have the privilege to earn great sums of money by exploiting others! That’s what capitalism really is. The problem is over exploitation and bringing desperation for many instead of providing a decent living for all! They are allowed to jerk our lives around for their good, not ours or America for the cheapest labor and biggest profits! I have no problem in charging the rich for the privilege of exploitation to create a better life for all! That’s when you know you’re bringing capitalism and socialism together in the right way! Any other view is just a load of crap! No one should be allowed to have nearly all of the ownership of wealth, resources, and means of production to the point of leaving other American criminally destitute, having to sleep in the street, or forced to commit crimes to survive!!! PERIOD!!!
    This whole FREE MARKET ARGUMENT for being the way to insure job creation is a LOAD OF CRAP! It doesn’t build developed countries but build 3rd world and developing countries. It tears down developed countries as we are now experiencing! They removed the fees to make it easier to bring in products and services produced from cheap labor in developing countries! Therefore, America doesn’t have enough jobs from that alone! Proofs in the pudding! The rich are calling the shots in government and willing to tear us down for bigger profits! They don’t have an off switch and too many Americans are soo dumb they buy less taxes and cutting spending on social programs as the way out instead of cutting war expenses and raising taxes on the wealthy! We’re not counting the fact that technology destroys a lot of jobs along with virtual monopolies and allowing companies to move offshore. Every time there is a corporate takeover of one company by another, thousands of jobs are lost! That’s not job creation but job destruction! Yet, they cry they are job creators when they are really job destroyers!
    WE’RE NOT FACING THE REALITY, THAT BECAUSE OF TECHNOLOGY THERE ARE GOING TO BE LESS AND LESS JOBS! WE NEED TO ORGANIZE LIFE ALL TOGETHER DIFFERENTLY TO FIT THE PROBLEM! EVERYONE DON’T NEED TO WORK FULL TIME FOR AMERICA TO BE PROSPEROUS! THE WEALTHY HAVE TO BE TAXED MORE BY THE NATURE OF THE BEAST THAT TECHNOLOGY AND VIRTUAL MONOPOLIES PRODUCE IN A CAPITALISTIC SYSTEM! IT’S JOB DESTRUCTION! THERE IS NO GETTING AROUND IT!
    The only way America is going to be a greater place to live and work is to charge more for other countries to access our market with their products and services made with cheaper labor so we can keep our jobs by being able to compete on a fair basis! We have plenty of mathematicians than can fairly work that out. Free Markets is a loser now and always will be for a developed country! Americans should not be counted as disposable for the benefit of the rich! We all deserve a decent paying job! The government must be regulated to provide jobs, education, and all other social needs with that money from taxes so no one is having a hard life in America! Business is posing as having that covered and they don’t! Government has to be the one to make it all work together for the common good! It doesn’t destroy the capitalistic system but set a bottom on the standard of living that leaves no one living on the street who are able and willing to work or educate themselves! The aged and disabled should continue to be taken care of! We’re talking civilization! Not allowing the rich to totally go cannibal as they are now doing!
    In order to get there we need to take money out of campaigns to be elected! Campaigns should be paid with tax money and that’s all! No one should be able to spend their way to an elected position! If 10,000,000 Americans are unhappy with decisions government officials make, we should be able to vote to change it with a popular vote! Tax funds should pay for it! Otherwise it’s a broken democracy, false freedom, able to be bargained away by those in power! It’s being done now for campaign contributions and the mere prospect of a great job after a political term is over. All they have to do is not step on the toes of those they wish to be hired by after their term is over. THIS IS MORE A RACKET THAN A DEMOCRACY!

  • Lionhawk2

    I have an idea on how we can simplify the tax code and make
    it farer for everybody. The first thing is to combine income and capital gains
    tax and put them together. So if a person makes $50,00 in income and $150,000
    in capital gains, then that person will be tax on $200,000 instead of 25% of
    the $50,000 and 15% on the $150,000. but instead be taxed on an income of
    $200,000. Then we institute a progressive flat tax. here is how it would work,
    you take the poverty rate and double it, lets say for the sake of argument that
    is $40,000 so the first $40,000  of that $200,000
    is not tax. no one will be taxed on the first $40,000 of there income. that
    will turn that $200,000  into
    $160,000that he/she will pay on. then for the next $35,000 dollars (that would
    be up to $75,000) he/she would pay 10% ($3,500). then from $75,000 to $125,000
    he/she will pay 15% for that (person making $200,000 it would be $7,500 +
    $3,500) then from the rate would increase to 20% up to $250,000 so he/she would
    pay 20% on the remaining $75,000 ($15,000) so his and hers total taxes for
    $200,000 would be $26,000 or 13% (0% on the first $40,000, 10% on the next
    $35,000, 20% on the next $75,000 and 20% on the remaining $75,000) then from
    $250,000 to $1,000,000 ($750,000) you would be taxed 25% from $1,000,000
    to$50,0000 it will be 30% from $50,000,000 to $100,000,000 35%,  $100,000,000 to $1,000,000,000 40% and over
    $1,000,000,000 the rate would be 45%. there would be no deductions or loop
    holes. and since corporation are people (ha, ha, ha) then there profits should
    be treated as income and be taxed accordingly. what do you think of this plan?      

  • Wohl1917

    Comentator Dorothy Brown doesn’t understand what the Flat Tax is! She stated to the effect that ‘Capital Gains’ would’nt be taxed under a Flat Tax system, WRONG!!! A Flat Tax would/should tax ALL income “…from whatever source derived…” period! And yes, so-called ‘poor’ would pay taxes for a change but EVERYONE would pay equally. It’s as simple as this: YOU MAKE THIS MUCH, YOU PAY THIS MUCH. No deductions, period.

  • Wohl1917

    A progressive flat tax? That is a contradiction in terms! A ‘progressive tax’ punishes the sucessful and rewards the worthless, lazy and weak. On the other hand a Flat Tax is absolutly fair: Let’s say the tax is 10% and you make $100,000 a year then you pay $10,000 in tax. If you made $30,000 you’d pay $3,000. Doing your taxes would be as simple as moving a decimal point…

  • BrianInChicago

    One of the biggest problems is the special capital gains rate.  I think that it should be treated the same as “ordinary income,” but I do wish that people would frame this more properly to emphasize how the very wealthy are taking ordinary people for a ride.

    Currently capital gains are taxed at a special 15% rate, no matter what your income.  If there is to be any special treatment for capital gains, the rate should be indexed to the top marginal rate of the individual so that if he or she pays a 15% capital gains rate if their top marginal rate is 20% but pays a 25% capital gains rate if their top marginal rate is 30%.

    Regarding the flat tax, the idea that this simplifies the tax code is ridiculous.  Having 10 or more marginal rates is very simple if you bother to understand it.  The complexity comes from defining what taxable income is; you must subtract exemptions and deductions and identify all the rules that help increase the differential between you actual income and your taxable income.  Subjecting everyone to one rate does very nearly nothing to make the tax code simple and does very much to help the very rich keep a whole lot of money.  

    As for the highest marginal tax rate, Emanuel Saez of Berkeley has concluded that the best setting is the one that maximizes government revenue, about 70%.  Please note that a big part of the arguement has to do with marginal value.  A billionaire gains less marginal value from an additional $5,000 while someone with an annual income of $20,000 gains much more marginal value from the same amount.  The wealthy’s overall happiness is not impacted by higher marginal tax rates.  By contrast, many other citizens can be made much happier with the support and programs that these additional funds could  buy.

    In closing I will offer for consideration the average annual growth rates of some former US presidents [you can get GDP data from Federal Reserve Economic Data]; please notice who does well and who does not:

    Bush II
    1.606%

    Bush I
    1.947%

    Eisenhower
    2.300%

    Nixon
    2.699%

    Reagan
    3.333%

    Carter
    3.411%

    Clinton
    3.723%

    LBJ
    4.816%

    Truman
    4.819%

    Kennedy
    5.678%

    We actually did better with higher taxes.

  • BrianInChicago

    What we could really use is a good discussion of changing away from an income tax and toward a progressive consumption tax:
    http://www.democracyjournal.org/8/6591.php 

    Matt Yglesias makes some good points too:
    http://thinkprogress.org/yglesias/2010/08/07/198143/progressive-consumption-taxes/ 

    I think a VAT would be good so long as certain exemptions existed in combination with government services and insurance programs that would make the regressive nature of the VAT a good deal.  I would welcome a VAT in the context of adopting a more Denmark-like system.

  • Phsato

    To answer complaints that half of taxpayers do not pay any federal taxes at all, surely the fix is valuing actual work more fairly by raising wages that could then be taxed.  With the top 1% having increased their compensation at such an extraordinary rate, if the workers were compensated more for producing that top 1%, the inequity would be lowered.  I wouldn’t mind paying my fair share of taxes if I had left overs after bare bones daily living expenses were covered and I had some money to invest.

  • Anonymous

    I can’t agree more.  The problem is that Republicans want to adopt strategies that they themselves repeatedly undermine.  Case in point:  Repulicans say we should privatize social security.Ignore for the moment that purely on the merits it is a horrible idea to replace an insurance product like social security (i.e. a life annuity) with a 401(k) savings plan that is not at all an insurance product.  Just read Bloomberg[http://www.bloomberg.com/news/2012-02-22/stocks-return-more-with-dem-in-white-house-bgov-barometer.html]:The annualized return for 23 years of Democratic administrations is 11 percent, or four times the 2.7 percent annualized return during 28 years of Republican presidencies … Investing $1,000 in funds that mirror the Dow Jones Industrial Average under the same conditions, Democratic investors would have had $7,550, versus $2,716 under Republicans. 

  • http://www.facebook.com/profile.php?id=1682820338 Bob Thompson

    Excellent discussion. Thanks Ray. Balanced and focused. Panelists respected each other and let each other finish a thought. More, please!

  • AJ617

    The show was a very good preliminary discussion of of important tax issues featuring questions that are rarely
    asked in the public sphere, yet there were quite a few dubious propositions that went unchallenged, and
    quite a few pertinent ideas that went unmentioned. One of the panelist thought that taxation should be equal
    regardless of income level and seemed to be presupposing that the rich somehow earned or deserved a
    cornucopia of compensation for the benefits they bestow on society. This is simply untrue because the
    majority of the rich are neither talented nor benevolent but merely well-positioned to direct the migration of
    money upward from the poor and middle class to their pockets. The most lazy, worthless, and weak people
    in America are not the poor. At one time the money shifting upward was recycled through investment, and
    tax breaks for the rich could be justified because they benefited everyone with significant growth of the
    economic pie. It is quite likely though that we have already entered a permanent stasis where any man’s
    gain is another man’s loss – the zero sum game predicted long ago when the limits of planetary growth
    were approached and the Capitalist Gravy Train ground to a halt! Do not let the temporary tepid bounce
    here in the US be soporific, because it will soon end. The basic problem is that there is little to invest
    in profitably, because Demand, already weak, will weaken further as the pool of workers is diminished
    by Automation. Any thoughts that a tax simplification scheme will save us the long denouement of decline
    are both naive and severely underestimate the the clout of the CPA lobby and their Plutocrat clientele.

  • S_dorcin

    I think it’s good to know about taxes, and that can also help someome understand thing he or she do not know before. So, is very good to hear it.

  • Private Private

    Great show. The tax problem wasn’t solved by the end, but all in all it was a productive conversation in my opinion. I would support more conversations like this on this and all other pbs shows.

    I do think taxes favor the rich, as well as government commerce and financial policies. The evidence for me is the income disparity between the top income earners and lower income earners. The disparity has skyrocketed over the last 30 years.One might think it was capitalism alone, but the body of proof shows the legislature has facilitated the broadening disparity rather than narrowed it.

  • Private Private

    While a bit dramatic, I agree with your long view of what potential pit falls await our society. Automation and the decline of the working wage is sort of the ten ton rainbow colored bus sided hippopotamus in the room. We can fix things temporarily and get the economic engine back on the road again and balance the tires out, but there is a leak in the radiator (automation) and a hole in the tire (low stagnant average wages). Eventually this economic vehical is destined to be on the side of the road again. One day, cannot be sure when, the vehical (the economy) will reach a point of disrepair. We will either need to revolutionize the way we travel (how we obtain resources) or potential many of us might parish on the roadside.

  • Static

    Great discussion! I think it’s important to find the consensus among experts with differing political views and use that consensus as a basis for compromise. For example, everyone here is for eliminating loopholes, which will improve our tax system’s vertical and horizontal equity. There are disagreements over how much of the increased revenue should be returned in the form of lower taxes and how exactly the base should be broadened, but combining eliminating loopholes with a broader base and lower rates seems like a good idea.