The Subcommittee on Select Revenue Measures heard testimony on September 26 about various Congresspersons' pet tax measures. The Subcommittee link above provides links to statements from participants. You can find text of various bills at Thomas.gov.
The presentation included only two Democrats--Benjamin Cardin from Maryland and Donna Christensen from the Virgin Islands. Cardin's tax dream is H.R. 1549, a bill providing a tax credit for construction and rehabilitation of lower-income homes. Christensen raised concerns about IRS audits of Virgin Islands residency issues.
Several of the presenters want to provide federal revenues (in the form of tax expenditures rather than outright spending provisions) to support private schools--Vito Fossella (R-NY) argued for H.R. 5230, providing a tax credit for every dollar spent on private school tuition; Heather Wilson (R-NM) wants a $2000 credit for every K-12 teacher, counselor, principal or aide; and Trent Franks (R-AZ) wants a matching federal credit for states that provide tax credits to finance private school tuition. This generosity with scarce tax revenues (after five years of rigorous revenue reductions) for privatization of education contrasts sharply with a scarcity of ideas for using federal tax revenues to buttress universal public education. Federal tax dollars to support private school tuition undercuts efforts by states and municipalities to create quality public schools, tends to benefit religious education contrary to basic American ideas of liberty founded on separation of church and state, and may well predominantly benefit better-off families who can and do already afford private school tuition.
Ms. Wilson's desire to give a kickback to elementary and secondary educators surely has no chance of enactment. Why teachers and not nurses? or firemen? or policemen? or janitors? or the lowest paid clerical staff in universities and hospitals? or any other profession that is essential to a decent life in every community and paid too little in a highly unequal society? Wouldn't it be more reasonable to increase the exemption amounts so as to raise the threshold income level necessary before anyone pays tax? The revenue reduction could be offset by increasing revenues from the wealthiest 1%, with a higher tax rate or surcharge applying to those with incomes above $1 million.
Several representatives support bills dealing with energy. In spite of an overwhelming American consensus favoring preserving the pristine Arctic National Wildlife Refuge for ourselves and future generations, Devin Nunes (R-CA) wants to let Big Oil get a foot in the door by opening 'just' 2000 acres. We'll develop that, he says, and use the profits for renewable, alternative and advanced energy programs. Will those be like the tax credits that coal companies can get by essentially spraying coal to make it into a "synthetic" energy source? See this 2003 article from Time magazine, The Great Energy Scam and this 2006 article about recent developments benefitting the synfuel lobby. If the Congress is really serious about alternative energy and energy conservation (which it should be, for our economic and environmental livelihood depends on it), it needs to actively develop and fund far-reaching programs that do not depend on or subsidize further the oil and extractive industries. Putting much more money into the National Science Foundation to support basic research at universities might be a good start.
It would be impossible to have a gathering like this without having broader "tax reform" brought up. Michael Conaway (R-TX) and Steve King (R-IA) doggedly put forward John Linder's (R-GA) H.R. 25 bill for creating a "progressive" national retail sales tax to replace most existing taxes. King's testimony attacked the current "irretrievably broken tax system" and argued instead for the bill's proposal for a flat tax (purportedly at 23%, see below) on consumption above the poverty level exemption.
A good tax system should exempt the poor from tax and allow everyone to meet the necessities of life before paying tax. Once the necessities of life have been met, however, a good tax system should treat people equally without favoring one set of taxpayers over another. King testimony.
The claim that a national sales tax at such a low rate would raise enough revenues to provide important infrastructure, monitoring, research, and safety net funding (not to mention maintenance of the current military complex) while still exempting the poorest from tax, up to the poverty level, is hardly credible. The effective tax rate on those just above the poverty level would be higher than under the current system, while those in the top income brackets would pay much less than their fair share based on ability to pay. Furthermore, the 23% rate quoted in the bill is a deceptive tax-inclusive rate (of total $1.30 paid, 30/130 or 23% goes to tax). On a tax-exclusive basis, the rate would be 30% (for $1 purchase, tax paid is $.30). If you are feeling adventuresome, you can explore a number of discussions about the problems with the Fair Tax proposal in the various articles collected at this libertarian blog.
It may be interesting to compare the "tax dreams" revealed on September 26 to the tax legislation enacted over the last quarter century. The Tax Policy Center released a comprehensive Summary of Major Enacted Tax Legislation from 1981 - 2006, with detailed analysis of each major tax bill. The following is an excerpt from the introduction to the analysis.
In the past 25 years, there has been a major tax bill about every 2-3 years, and since 2001, there has been at least one every year. This legislation has substantially altered our tax laws. In 1980, the top individual income tax rate was 70 percent and the top rate on corporations was 46 percent. Today, the top rates on both are 35 percent. In 1980, individual income taxes were 8.9 percent of GDP; today they comprise 8.1 percent. Payroll taxes have increased as a share of Federal revenues and corporate income taxes and excise taxes have declined. In addition, over the past quarter century, the Congress has enacted numerous new and expanded exemptions, tax credits, and special deductions for favored activities, while limiting and reducing others. The tax law is a major component of Federal policy towards health care, housing, retirement security, education, energy, support for low-income families, states and localities, and non-profit organizations and many other areas. In this way, the tax law affects virtually every aspect of American citizens’ lives.
Finally, on September 27, the House Ways and Means Committee voted out (24-14) H.R. 6134, which expands the availability of Health Savings Accounts (HSAs). Eric Cantor (R-VA) hopes to get the bill through in the lame duck session after the election. Criticism of the bill within the committee questioned the idea that increasing the dollar amount of HSA and making consumers take on more of the burden of their own health care through HSAs would ultimately reduce the number of the insured.
Ways and Means member Fortney "Pete" Stark (D-Calif.) said during the markup that the bill would largely help those who already have HSAs, which act more as billion-dollar tax shelters to upper-income taxpayers than vehicles for reducing the number of uninsured. He said HSAs are part of a movement to shift more of the coverage burden onto workers, creating an excuse for employers to cut back. Daily Tax Report No. 188 (Sept. 28, 2006), at G-1.