Came across this little sleeper of an article while thumbing through my Weekly Standard this morning. It is worth reading in its entirety, but I will grab a few key sentences for this entry. The first few paragraphs are important:
"Thirty years of Republican tax policy have now completely eliminated federal income taxes on the poor and lower middle-income Americans, and almost eliminated them on middle America.
The latest data from the Congressional Budget Office and the Internal Revenue Service show that the lowest 40 percent of income earners as a group actually receive net payments from the federal income tax system. (They get 3.8 percent of total federal income tax revenues instead of paying any income taxes.) The middle 20 percent of income earners pay 4.4 percent of federal income taxes. Thus the bottom 60 percent of income earners together, on net, pay less than 1 percent of all federal income taxes. (These workers earn 26 percent of national income.)
The data show that the top 1 percent of income earners now pay 40 percent of all federal income taxes, which is almost double their share of the national income. The top 10 percent pay 71 percent of federal income taxes, though they earn just 39 percent of the nation's pretax income.
This is a result of the across the board income tax rate cuts adopted by Ronald Reagan and the current President Bush, plus the Earned Income Tax Credit first proposed by Reagan in the 1970s, and the child tax credit enacted into law as part of the 1994 Contract With America.
Now these kinds of statistics ought to be familiar to CW readers. The plain truth of the matter is that lower class and poor Americans just don't pay income tax, and middle income folks pay very little. Therefore, tax credits that are targeted at these folks' participation in the Federal Income Tax scheme are not tax credits at all, but are simply new entitlements that do not reduce a known tax liability. Or as our Gingrich and Ferrara put it:
What Obama is calling tax cuts for the middle class is really a slew of refundable federal income tax credits that would primarily go to those who are paying little or no federal income taxes now. Such credits would primarily not reduce tax liability, but instead be checks from the federal government for child care, education, housing, retirement, health care, even outright giveaways. These are not tax cuts. They are new federal spending programs hidden in the tax code.
Gingrich and Ferrara do more than just criticize Senator Obama's plans, they offer what I consider to be very constructive plans of their own, centered largely on unleashing capital by lowering corporate tax rates (the US has the second highest in the industrialized world, not to mention the added liability of funding worker healthcare) and lowering capital gains rates.
Interesting article here that I recommend taking a close look at.