Addressing Poverty, Protecting the Environment: PEW religious survey and its implications for tax policies

PEW has released the second part of its major survey of religion in America in the twenty-first century (this part on religious beliefs and practices, social and political views), described in Neela Banerjee, Survey Shows U.S. Religious Tolerance, NY Times, June 24, 2008.  It seems that one major conclusion of the survey is that Americans, though accurately described as a religious people, are also a tolerant people.  The survey report notes an "openness to a range of religious viewpoints [that] is in line with the great diversity of religious affiliation, belief and practice that exists in the United States."  Survey, linked above. 

Along with that tolerance go a few other attitudes that, I believe, are important to a sustainable democracy.   While Americans continue to differ strongly on issues that the right has for decades attempted to define as boundary "religious values" issues such as abortion and gay marriage, they are pretty consistently in favor of social and environmental justice, as evidenced by two views reported in the survey.  First is a view that we have an obligation through government to help the poor (more than two-thirds of those surveyed thought the government should aid the poor, even if it means more debt).  Second is a view that we have an obligation to protect the environment as a natural resource for people across generations (almost two-thirds agree that environmental protection and regulation is an important government obligation).

These findings are particularly interesting at this time, when an economic crisis means more ordinary Americans are finding it difficult to make ends meet while life remains an easy street for those few extraordinarily wealthy people at the top of the income distribution. 

On the concern for Americans in the lower income distribution, most politicians remain agonizingly silent.  We have known that we have a health care crisis for millions of Americans, but we continue to foster a private insurance system that makes its most profit by denying care.  At the same time, the country declines to take action to ensure that even the most helpless among us are protected--as shown by the decision on SCHIP.  We know that the economic crisis is extraordinarily stressful on those with few resources, but understanding and action on unemployment compensation extensions, foreclosure assistance, and infrastructure needs are terribly slow.

On the environmental front, some politicians have determined to take advantage of the ordinary person's pain from the increased price of gas to urge action --offshore drilling and opening of the Alaskan wildlife refuge--that does nothing in the short or long run to help those struggling with transportation costs but actually harms the environment and leaves us with an even more precarious energy dependency on oil.  We don't have the refining capacity to refine more oil if we got a tad more from the dangerous drilling; globalization of the energy industry means that a tad more oil here would do next to nothing to lower prices here (it's a global market, and the prices are set by global demand, including the rising powers of China and India); drilling offshore and in wildlife refuges has huge detrimental costs to wildlife and natural resources that swamp the piddling gains in energy availability; and it is time (in fact, it was time forty years ago) to take much more drastic action to reduce our dependency on oil and move us to alternate energy sources and conservation measures, both of which will improve the environment, conserve resources, and help cut our outsized contribution to global warming.

Taking the citizenry's clear support for helping the poor and protecting the environment, the idiocy of responding to high gas prices by subsidizing Big Oil and ensuring that Big Oil gets no-bid contracts in Iraq, and the need for fiscal and tax policies that better reflect the concerns of ordinary Americans, what could we do in our tax policies to make things better?  How about some or all of the following:

1. change the payroll tax system to make it progressive rather than regressive:  reduce taxes on the lowest-income Americans and increase them on the highest-income Americans by removing the cap and taxing capital gains as well as wages
2. eliminate corporate tax breaks that make moving offshore easy and profitable, for tax purposes, for big companies (e.g., define domestic companies by state of incorporate OR place of management and control; stop deferral of income--starting with the end of the active financing exception to Subpart F income and then transitioning over time to a complete no-deferral regime; and by all means, even if we don't get rid of deferral, for goodness' sake don't enact another corporate welfare provision like the 2004 de minimis tax on repatriated income that let the "bad" companies that keep their income overseas get a tax break for bringing it back to do all kinds of things other than create jobs (many of the companies actually laid off workers!)--see Lynnley Browning's NY Times story today on the windfall for 843 corporations that saved $265 billion in taxes); 
3. increase the Earned Income Tax Credit,
4. index the AMT rate brackets and exemption amount, creating an exemption amount that ensures that the lower 50% of the income distribution is not subject to the AMT; while at the same time adding various current preferences back into income for AMT purposes, such as the capital gains preference and mortgage interest deduction (if those aren't eliminated by other reforms)
5. Bring the regular tax rates into the 21st century by recognizing the way annual incomes have grown for those at the very top (CEOs making more in half a day than their average workers make in a year is not uncommon) while wages have remained stagnant (at best) for most ordinary Americans:  that means keep rates low at the bottom income tax brackets, but let them go back to their 2000 levels for the highest bracket AND add a rate bracket to the regular tax for taxpayers with more than $2 million in annual income (the current highest rate is reached at considerably less than half a million)
6. transition to a phase out of the mortgage interest deduction at lower mortgage levels
7. retain the Estate Tax (with something close to the 2001 rates and exemption levels) and at the same time eliminate gimmicky ways (from four-letter entities like GRATs and GRUTs to "valuation discounts") that the wealthy use to avoid the Estate Tax, and
8. eliminate the preferential rate for capital gains that favors accumulations of passive investments over productive engagement in enterprise--starting with the way "carried interest" is taxed for fund managers.

There are, I'm sure, a number of other things that should be done in the tax code to reflect the priorities that Americans consistently demonstrate--caring for those who are less fortunate, protecting the environment, having a fair tax system that doesn't let people off the hook just because they are wealthy enough to hire expensive "guns" to help them.   But some of these would be a welcome start.  Congress, are you listening to what ordinary Americans are saying?