Thursday, May 5, 2011

Orrin Hatch Thinks The Tax System Is Unfair Because It Doesn’t Tax Poor People Enough

In an effort to fend off Democratic budgetary proposals that include higher tax rates on the rich and corporations, Congressional Republicans are dusting off one of their favorite talking points: that America’s debt and deficits are caused entirely by spending and not at all by decreasing revenue streams. Senate Minority Leader Mitch McConnell (R-KY) made the argument on the Senate floor yesterday, saying: “We all know that raising taxes would stall the rebound we all claim to want. Let’s just admit we don’t have a revenue problem. We have a spending problem.”

Sen. Orrin Hatch (R-UT), the ranking member on the Senate Finance Committee, has been making the argument in a different way, pushing a recent report that 51 percent of Americans don’t pay any income taxes. To Hatch and his Republican colleagues, the report is perfect evidence that the rich already pay too much in taxes. The answer to that problem, as Hatch explained on MSNBC’s Daily Rundown today, is to revamp the tax code in order to make middle- and lower-class Americans pay their fair share:
HOST: Do you reform the tax code system? The president’s own fiscal commission came out and said that if we reform the tax code, you could save and add a trillion dollars.
HATCH: Well, Bastiat, the great economist of the past said, the place where you’ve got to get revenues has to come from the middle class. That’s the huge number of people that are there. So the system does need to be revamped. As far as, I think I made the point that if you just go with what the president says about the wealthy, you might get $36 billion compared to the $1.5 trillion expenditure this year, or should I say deficit this year. And the problem with that is that you hit about 800,000 small businesses where the jobs are created that would hopefully get enough people to pay taxes. So, yeah, we have an unbalanced tax code that we’ve got to change.
I tell you, if we get control of that committee, the Finance Committee, I intend to see that it’s changed. Not to hurt the poor. We should help the poor. But to make sure that there’s a civic duty on the part of every one of us to help this government to, uh, to be better.
Watch it:

By using the report to make the assertion that poor and middle class Americans aren’t paying their fair share in taxes, Hatch and his Republican colleagues are ignoring all sorts of realities. The majority of Americans who do not pay federal income taxes don’t make enough money to qualify for even the lowest tax bracket, a problem made worse by the economic recession. That includes retired Americans, who don’t pay income taxes because they earn very little income, if they earn any at all.
And while many low-income Americans don’t pay income taxes, they do pay taxes. Because of payroll and sales taxes — a large proportion of which are paid by low- and middle-income Americans — less than a quarter of the nation’s households don’t contribute to federal tax receipts — and the majority of the non-contributors are students, the elderly, or the unemployed.

Meanwhile, tax rates for upper-income Americans continue to drop. As ThinkProgress’ Zaid Jilani has reported, the 400 richest Americans — who have more wealth than half of America combined — are paying less than they were a generation ago. As a result, the United States now boasts one of the largest income gaps in the industrialized world, as our level of income inequality is now comparable to that in Uganda and Pakistan.

Hatch is also wrong in his assumption that raising tax rates on the rich would hurt job creation. As Wonk Room’s Pat Garofalo notes, fewer than two percent of American businesses fall into the top two income brackets, the only two brackets that would be affected should taxes on the rich increase. Only three percent of Americans who claim business income would be affected by the increase.

Hatch attacked low-income Americans on Twitter earlier this week, saying, “51% of US households did not pay any federal income tax in 2009. It’s easy to want more gov’t benefits when you aren’t paying.” Though Hatch and his colleagues pretend that their hardline stance on budget cuts to vital programs is about “shared sacrifice,” they have made it clear that if they get their way, the only Americans sharing in the sacrifice will be those who can afford it least.

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