Two Tax Proposals

By Bob Gerecke

Our thoughts about taxes are stuck in a rut.  Gerecke provides fresh possibilities.

(1) Reduce Taxation of Low-Income Workers

Low-income workers owe no income tax, but their already low pay is reduced by the employee's half of the combined Social Security and Medicare tax, which is 7.65%.  The U.S. government should rebate that to a low-income worker as a "refundable" income tax credit without requiring the employee to file a tax return if he/she doesn't otherwise have to.  The tax paid should continue to go into the Social Security and Medicare trust funds, to keep them solvent, and the rebate should come out of the government's general fund, like other refundable tax credits do.  This would require the Social Security Administration to share information with the Internal Revenue Service, which is not a burden in the computer age.  At the end of each year, the IRS would then know the amount of the employee's pay from all employment for the year, as reported to it by the SSA, and should issue a rebate check to the employee if the pay meets the criteria.  The rebate should be on a sliding scale, gradually disappearing as total yearly pay increases, and should be adjusted for inflation.

This should be implemented not in lieu of a living wage, but in addition to it, for the sake of the workers who serve the rest of us at low pay, and for the sake of the economy as a whole, since these workers will spend that money, providing retail businesses with the means and need to add jobs, buy supplies from other businesses,etc.

A conservative U.S. Senator has advocated an increase in the Earned Income Tax Credit in lieu of a higher national minimum wage. However, the EITC requires filing a tax return, which many low-income workers will not otherwise have to do and may not know how to do.  His proposal is more burdensome and will leave some people out, while simultaneously and unnecessarily denying them a better wage.

(2) The Non-Wealthy pay a Wealth Tax on Wealth They Don’t Own

If you're a homeowner, you pay the property tax on your residence. However, you probably don't own all of the equity in it; the bank owns the rest, possibly the lion's share.  You are being taxed on wealth that you don't own, while the bank gets a pass on the wealth that it owns.

If you're a renter, you pay the property tax on your residence, too.  How?  You reimburse your landlord for the property tax he pays.  You are paying tax on his wealth; you don't own any of it.

Yet the most  wealthy, whose assets consist primarily of securities, pay no property tax on that wealth, those securities.

As real estate tycoon Leona Helmsley once said: "Only little people pay taxes."