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A Campaign Issue: Reform
The Tax System

By Ron Forthofer

18 September, 2008

We are facing a gigantic financial crisis today, and the likelihood is that it will become a lot worse. Average citizens along with municipal, state and the federal governments are facing increasingly difficult times today due to:

* the sub-prime debacle that lead to bailouts of Wall Street, Freddie Mac and Fannie Mae and to a large number of home foreclosures;

* the increases in energy and food costs;

* the costs of unnecessary wars; and

* the economic slowdown.

The candidate who offers the better proposals for confronting this financial crisis will have improved his electoral chances. Clearly local, state and the federal governments will need more revenue. However, how can a candidate suggest raising taxes when a large percentage of the population is hurting? Conventional wisdom says that proposing tax increases is political suicide, but revenue can be increased if candidates think outside the box.

Over the past fifty years politicians have rigged the tax system against workers. For example, as late as 1954 corporations paid about one-third of federal taxes; now their share is under 10%. Politicians have also dramatically reduced the tax rates on unearned income (e.g., interest, dividends and capital gains) while raising the level of inherited wealth that is not taxed. These changes primarily benefit the wealthy. Since the great majority of us are not wealthy, restoring fairness to the tax system should be a winning strategy for a candidate.

Three principles guide my thoughts about taxes:

* We should use taxes to encourage ‘desirable’ activities and to discourage ‘undesirable’ activities.

* Those that financially benefit the most from our nation should pay a greater share of the taxes.

* We need to conserve our finite natural resources and to protect the environment that enables us to enjoy life on this planet.

Because we want to encourage work, taxes on wages should be low to nonexistent. Therefore we should eliminate the income tax on wages under, for example, $100,000, and implement a progressive tax on larger amounts. Since the individual accumulation of great wealth is toxic for democracy and also does not aid the economy, we should have a progressive tax on wealth above, for example, $2 million. We should also add a small fee on every stock transaction. In addition, because currency speculation disrupts the international economy, coordinate with other nations and charge a small fee on all large international currency transfers.

There are many other fees that can be used. David Morris, Vice President of The Institute for Local Self-Reliance, presented numerous examples in an informative article in 1994, and the fees he discussed are still relevant ( Examples included fees on air pollution from fixed sources, on contaminated property and on solid waste. James Robertson provided additional information on eco-taxes in the April 1996 New Internationalist magazine ( In addition, instead of subsidizing private corporations in mining, logging and energy extraction, governments should charge reasonable fees when these corporation take natural resources from our public lands. We should also charge the communications industry substantial fees for the use of our public airwaves.

Our current tax system is badly broken. If we don't perform radical surgery on it, politicians will gut more programs benefiting the Average Joe/Jane to pay for additional tax cuts for the wealthy. For example, in 2005, then Federal Reserve Chairman Alan Greenspan testified before the Senate Banking Committee in support of extending Bush's tax cuts. To afford this huge giveaway to the wealthy, Greenspan said we should offset these tax cuts with spending decreases of $1 trillion, including reductions in future Social Security benefits.

There are many innovative tax reforms that can get the U.S. back on track. However, we need the mainstream media to spread the word about these possibilities. If the public is not aware of these alternatives, it is hard to create a movement that can pressure political candidates for a tax system that is fair and promotes a sustainable economy and environment.

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