What is the EITC? EITC is an
acronym for the Earned Income Tax Credit. The EITC is a tax credit
received by low income individuals and families after filing their tax
returns. For many conservatives
this tax credit is seen as another part of the over-bloated welfare
state. This is a simplistic view of tax policy because the EITC is not
merely a welfare program but essentially a negative income tax. The
next question you might ask in this conversation is what is a negative
income tax? Well a negative income tax is a tax system which was
advocated by the late and great economist Milton Friedman. In one model
proposed by Friedman, if for a family of four
the amount of allowances came out to $10,000, and the subsidy rate was
50% and the family earned $6,000, the family would receive $2,000,
because
it left $4,000 of allowances unused, and therefore qualifies for $2,000,
half that amount. (Source: Wikipedia) This system in Friedman's mind
would only work if it was implemented largely in lieu of the current
welfare system.
A
major plank of the conservative and even liberal counterargument is
that this system would be prone to high levels of fraud. This I think
would be patently false. Let us think about this problem for one moment
and ask ourselves is their a certain amount of welfare fraud now? The
answer is surely yes, but there are not many statistics on the exact
amount. Next how do we police current welfare fraud? Well, through the
bevy of welfare agencies currently in charge of such programs. Now if
welfare was reduced to just one agency, the IRS (I know no one trusts
them at the moment), it would be a lot easier to police welfare fraud.
This would also reduce the amount of government bureaucrats necessary to
administer federal and state welfare programs.
Not
only do I believe that an increased role of the EITC would reduce
welfare fraud it would also be a pro-growth and pro-free market reform.
Unlike welfare programs where you have to prove certain conditions and
fill out endless paper work. The EITC would require first being
employed and second filing a tax return. This reform would free up time
for people by making receiving benefits an easier task and it would
also provide an incentive for people to find employment (think tanks on
the left and right are in agreement about this specific outcome). This
reform I think turns our welfare system into a workfare system.
As
a much overused quote eloquently says, "give a man a fish, and you feed
him for a day; show him how to catch fish, and you feed him for a
lifetime." I believe that embracing a larger role for the EITC or a
negative income tax would be a positive change for our nation.
Next we must confront this awful strain of elitism in the Republican Party as displayed by Mitt Romney:
"There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. ... My job is not to worry about those people. I'll never convince them they should take personal responsibility and care for their lives."
This may true to some extent, but it is an attitude which needs to wiped out of our party's collective psyche. First
of all belittling a wide swath of people will never ever help you to
convince them to come to your side. Writing people off as lazy and
useless reinforces their belief in their supposed victimization. In
order to stop this vicious cycle we as a party must talk positively
about all Americans in order to inspire them to take charge of their
lives.
The
next thing I would like to address in this quote is the belief there
are so many takers in American society. I would like to ask you a
question? Why should lower or middle income people pay any income tax
at all? The answer I will probably receive from a great deal of
conservatives is a question in retort, why should the rich bear the
brunt of income taxes? I will now say something shocking, something you
might have thought only a liberal would dare say, because they can.
Lower and middle income citizens should pay as few taxes as possible,
because it provides them the opportunity to save a greater portion of
their income. This would allow them to save for retirement and possible
entrepreneurial endeavors.
(A big point I would like to make is that I use the terms lower and middle income. I do this because I believe if you use the word class your sponsor the idea that there are classes in our society. Also being poor is a state of mind that is hard to change, but being broke is just a temporary state)
(A big point I would like to make is that I use the terms lower and middle income. I do this because I believe if you use the word class your sponsor the idea that there are classes in our society. Also being poor is a state of mind that is hard to change, but being broke is just a temporary state)
For
all intensive purpose the average American household did not pay any
income taxes until the 1950s. The first cutoff for the lowest bracket
was usually far beyond the average median income in the United States.
Was this wrong? No it was not, it allowed people a greater degree of
freedom than many of us enjoy today. One caveat in my opinion though is
that I am not advocating for lower and middle income people to pay no
pay roll taxes. Since pay roll taxes provide revenue for programs we
all benefit from directly I believe that in fairness everyone should
contribute. I know you would argue that everyone receives benefits from
income taxes in the form of programs like the military and federal
infrastructure projects. I would counter with the argument that yes
they do benefit from what income taxes are spent on though indirectly,
but I would also argue that more people would be in an income tax
bracket high enough to pay income taxes if they were able to keep a
larger percentage of their income when they made less money allowing
them to be more successful in the future.
To sum up the tax system I am advocating I will give you all some bullet points, because I know everyone likes bullet points (because I certainly do):
- Eliminate our confusing tax brackets and change to a flat rate of 25% kicking in at $100,000 (just a random number, I would have to ask an actual economist for a reasonable number)
- Eliminate all deductions
- Eliminate corporate taxes in order to eliminate double taxation of dividends, thus allowing dividends to be taxed as regular income (this ensures people like Warren Buffet do not pay a lower tax rate then their secretaries)
- Expand the use of the EITC for lower income individuals and families and eliminate the majority of other federal and state welfare programs
- Eliminate the cap on pay roll taxes
- Means test Medicare and Social Security benefits to reduce program costs
- Raise the Medicare and Social Security retirement age to 70 and then index to life expectancy thereafter
- Adjust tax bracket and benefits for inflation every year so there is no bracket creep
This is just a simple overview
of my idea for a tax system overhaul. This overhaul will surely be
reviled by some of my readers and many conservatives, but this overhaul
has something I think everyone will like (except the most radical of
leftists who just think the rich should give all their money to
everyone). I think this plan would especially appeal to moderate
conservatives, moderates, and independents. I think this is a program
of reforms that would disarm any and almost all liberal arguments that
conservatives are curmudgeonly and coldhearted. This program of reforms
would also be pro-growth, pro-free market, and pro-liberty. I only ask
you to consider these ideas not necessarily agree with me one-hundred
percent.
Guest posted by http://www.theenlightenedrepublican.com/
Guest posted by http://www.theenlightenedrepublican.com/
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