portland independent media center  
images audio video
newswire article reposts united states

economic justice | government selection 2004

Wesley Clark on Taxes

Gen. Wesley Clark revealed his plan for tax reform known as Families first tax reform. here's the link for it
 http://www.clark04.com/issues/familiesfirst/
Wes Clark's Families First Tax Reform
Restoring Progressivity, Relieving the Working-Family Squeeze, and Reducing Poverty


Wes Clark's Families First Tax Reform is the most sweeping tax reform proposal in years. It will restore progressivity to the tax code, relieve the working-family squeeze, and reduce poverty. Unlike President Bush's policies, which have been highly regressive and have dramatically increased the deficit, Wes Clark's proposal is paid for without raising the deficit by a dime.


Under Wes Clark's Families First Tax Reform, a family of four making up to $50,000 will pay no federal income taxes and all taxpaying families with children making up to $100,000 will get a tax cut. The Families First Tax Reform will shift the tax burden from those who are struggling to get by to those with the most to spare. The entire proposal is offset by closing corporate loopholes and by a 5 percentage point rate increase on income over $1 million a year. The rate increase will only reach the income-over $1 million-of the top 0.1 percent of taxpayers.


The tax breaks in Wes Clark's Families First Tax Reform all come from consolidating the existing confusing and uneven set of tax benefits for children, including the Child Tax Credit, the Additional Child Tax Credit, the Earned Income Tax Credit (EITC), and the Dependent Exemption... and then expanding them to provide a $2,250 tax credit per child.


With Families First Tax Reform taxpayers will only need to fill out a simple, three-line form to find out if they need to pay federal income taxes, providing their income, number of children, and marital status. And the majority of families won't be forced to file any tax forms with the government.


The Clark Tax Reform provides relief for millions of middle-class families. Under the watch of George W. Bush, their incomes fell by nearly $1,500, their health care premiums rose by $2,600, their property taxes went up and their tuition at four-year public colleges increased a record 28 percent (adjusted for inflation). Rather than relieving the squeeze on working families, President Bush provided an average tax cut of $128,000 to taxpayers making over $1 million.


For lower-income families, Families First Tax Reform will increase the reward for work, helping to lift hundreds of thousands of children out of poverty.


Wes Clark's Families First Tax Reform will meet his five principles for tax reform: making the tax code simpler, fairer, more progressive, and more pro-growth - without increasing the deficit. It will eliminate hundreds pages from the Internal Revenue Code and dozens of pages of different IRS forms and instructions. This builds on Wes Clark's previous simplification proposal to eliminate the Hope Scholarship tax credit and consolidate it into a Universal College Grant.



HIGHLIGHTS OF FAMILIES FIRST TAX REFORM


All working families benefit.
No families of four making under $50,000 will pay income taxes. Currently, a family of four making $50,000 pays $1,549 in income taxes.
All taxpayers with children making up to $100,000 a year will get a tax cut.
In total, 31 million families will get a tax cut; the taxes of the typical family with children will be cut by $1,477.

Low-income families get crucial additional assistance
Additional tax relief for 15 million low-income working families currently receiving tax refunds through the EITC and the refundable portion of the child tax credit.
Reduce or eliminate the marriage penalty for millions of low-income families.
Help lift hundreds of thousands of children out of poverty.
And tax breaks for 3.2 million poor childless workers, which can be used to defray payroll taxes and work-related expenses.

Simplify taxes for working families
Families will find out if they need to pay federal income taxes by filling out a simple, three-line form.
The majority of families will not need to file any tax forms with the government.

How this will benefit families
A married couple with two children-making $50,000-will get a $1,583 tax break.
A married couple with three children-both earning the minimum wage or $21,000 annually-will get an additional tax credit of $2,287.
A married couple with two children-making $85,000-will get a $975 tax cut.

Families First Tax Reform Works by Providing a $2,250 Tax Credit Per Child


Families First Tax Reform consolidates and expands on the existing set of tax benefits for children-raising the benefit to a standard $2,250 tax credit per child. All families, whether they make $20,000 or $50,000 or $100,000, will get the same tax break for their children.

Paying for Tax Reform

The plan will provide poverty-reducing relief and middle-class-tax-burden reduction of $33 billion annually. This will be paid for without increasing the deficit by:

Shifting the burden to those who can most afford it-a 5 percentage point rate increase only on income over $1 million per year. This increase, which can be used only for working families' tax relief, will not apply to the first $1 million of income or to any capital gains. It will not affect 99.9 percent of taxpayers.
Closing corporate loopholes, including the one that costs America jobs by giving companies a tax break for moving their headquarters overseas.


DETAILED DESCRIPTION OF FAMILIES FIRST TAX REFORM


Benefits for Families


Eliminating income taxes for all families of four making under $50,000. Under Wes Clark's plan, no family of four making under $50,000 will have to pay income taxes.

A simple three-line form determines who pays federal income taxes. Under Wes Clark's plan, families will only need to fill out a simple three-line form to find out if they need to pay federal income taxes, providing their income, number of children, and marital status. A simple table will tell them whether or not they need to pay any income taxes:
Families Will Not Pay Federal Income Taxes If They Make Less Than:

Number of Children
Married
Single (Head of Household)

1
$35,000
$28,000

2
$50,000
$43,000

3
$65,000
$54,000




The majority of families will not need to file tax returns. Under Wes Clark's reform, more than half of American families will no longer need to file tax returns. The government will withhold the correct amount of taxes from the families paycheck or provide them with the correct tax credit. If they still want to file a tax form, they can. This system has been proven to work in thirty-six countries, including the United Kingdom.[1]

Attacking poverty: 3.2 million lower-income taxpayers will be taken off the tax rolls. Professor Jeffery Liebman of Harvard's Kennedy School of Government has done estimates of the Wes Clark's Tax Reform and found that it will take 3.5 million taxpayers off the tax rolls - resulting in 54 percent of working American families with children paying no income taxes.[2] This means, the majority of working families with children will pay no income taxes.


Encouraging opportunity and responsibility by making work pay. Family First Tax Reform, combined with Clark's proposal to raise the minimum wage to $7 by 2007, will raise the reward for families that work. At the same time, the new, expanded tax credits can be used to pay for transportation and childcare, enabling more families to work. Studies show that this will increase labor force participation, move families from welfare to work, and thus help the economy.

Reduce or eliminate the marriage penalty for millions of low-income families. The 2001 tax cut ended the marriage penalty for millions of middle-class families but left a marriage penalty for low-income families. Wes Clark's Tax Reform will fix that injustice- reducing or eliminating marriage penalties for millions of low-income families.


Hundreds of thousands of children will be lifted out of poverty. Currently the EITC does not provide any additional help for families with more than two children. Wes Clark's plan will fix that-consolidating and expanding on the EITC and lifting hundreds of thousands of children out of poverty.

Helping Squeezed Middle-Class Families: All middle-class taxpayers with children making up to $100,000 will get a tax cut. Wes Clark's Tax Reform will restore fairness to the tax code, providing a tax cut for all families with children making up to $100,000 annually. Of these families, 15 million low-income families currently receiving net tax credits through the EITC and other credits will get larger tax credits. In addition, 3.2 million low-income adults without children will get expanded tax breaks. In total 31 million families will benefit-with the typical tax cut being $1,477.[3]



Families First Tax Reform: Representative Families
Helping typical families: A police officer married to a part-time worker raising two children on $50,000 annually-no more federal income taxes. Currently this family pays $1,549 in federal income taxes, Wes Clark's plan will eliminate their taxes - and the government will give them a tax credit refund of $34. That's a $1,583 tax cut. What this means to a typical family:

$1,500 is five months of groceries[4]
$1,500 is more than seven months of the worker contribution to a typical health insurance plan[5]
$1,500 is a year of utility bills for the typical New Hampshire family.[6]


Expanding EITC benefits to reduce poverty: A cashier married to a custodian raising three children while working for the minimum wage-an extra $2,287 tax break. A couple working full-time for the minimum wage - $5.15 an hour -earns $21,000 annually. Under current law their EITC is limited to the first two children. Wes Clark's plan will end that limitation - providing them an additional tax credit of $2,287.



Helping all middle-class families: A firefighter married to a teacher raising two children on an annual income of $85,000-a $975 tax cut. Currently this family pays $7,445 in taxes. Wes Clark's plan will cut their taxes by $975.

Helping single parents: A single parent raising one child on the $30,000 a year she makes in her own small business-$793 to help with the bills. Wes Clark's Families First Tax Reform will eliminate her income taxes and replace them with a credit - in total $793 in tax relief to help with the bills.

Reducing the marriage penalty for low-income couples: Married army privates with two children each making $15,000-Marriage penalty reduced substantially. Under current law, this family faces a marriage penalty. Like many low-income families, they pay more in taxes than they would pay if they were single-$1,499 more. Wes Clark's plan will reduce their marriage penalty, providing a $882 tax cut.


How Families First Tax Reform Works

$2,250 tax credit per child - Consolidating existing tax breaks. Families First Tax Reform will consolidate and expand on four tax breaks for families with children: The Child Tax Credit, the Additional Child Tax Credit, the Earned Income Tax Credit, and the dependent exemption. Instead of filling out forms for each of these tax credits, families will just reduce their taxes by $2,250 per child.

Available for children up to age 17. The Families First Tax Credit will be available for children up to age 17. This and other eligibility rules will be based on the rules for the existing Child Tax Credit. The credit will phase down for families making over $100,000.

Incentives for lower-income families to work. Like the current EITC, the new Child Tax Credit will phase-in with income. A family making $5,000 will be eligible for a refund of up to $2,000 and a family making $10,000 will be eligible for a refund of up to $4,000 annually. The refund will be capped for families with more than three children.

Expanded benefits for low-income adults without children. Clark's Tax Reform builds on the existing EITC for childless adults, raising the maximum credit from $382 to $500.

No families with incomes under $200,000 will be hurt by Families First Tax Reform. No families with incomes under $200,000 will pay more in taxes than they do today.


Paying for Families First Tax Reform


Wes Clark's Tax Reform will restore fairness to the tax system without increasing the deficit. The Family First credits will cost $33 billion annually - which will be fully paid for by:

A 5 percentage point rate increase on income over $1 million annually-Only impacting the top 0.1 percent of taxpayers. The rate increase will apply to families making more than $1 million annually. In tax year 2004, an estimated 200,000 tax units or 0.1 percent of tax filers earned over $1 million annually.[7] As under current law, the rate increase will not apply to any capital gains and will not apply to the first $1 million earned.

Receipts will be earmarked for lower-income and middle-class families tax reform and could not be used for any other purpose. The money from the 5 percentage point rate increase could only be used for tax reform and could not be used for new spending.

Closing corporate tax loopholes, including ones that reward companies for shifting jobs overseas. Currently the United States provides tax breaks for companies that shift their headquarters - and their jobs - overseas. Wes Clark will crack down on these and other tax shelters, endorsing the Senate Democratic legislation to close tax loopholes that will save an average of $10 billion annually.[8]

$2.35 trillion Savings for America's Future Plan. Previously, Wes Clark announced a Savings for America's Future Plan. This plan includes the repeal of Bush tax cuts that benefit families making over $200,000 annually, cutting corporate welfare, streamlining government, and a success strategy for Iraq. This plan ensures that middle class families are protected from the repeal of the dividend and capital gains tax cuts. It also increases the size of estates exempt from the estate tax from their current-law level. More details of this plan can found at www.clark04.com.


Major Tax Reform


Wes Clark established five basic principles for tax reform: It should make the tax code simpler, fairer, more progressive, and more pro-growth - without increasing the deficit.

Simpler - Eliminating hundreds of pages of the tax code and dozens of pages of forms. Families First Tax Reform will make it possible to reduce hundreds of pages of the tax code down to one easy-to-use form. The IRS could eliminate dozens of pages of forms and publications that confuse taxpayers.[9] All of the confusing definitions of a child used for different parts of the tax code will all be boiled down to one simple definition.


No-returns tax system. More than half of American families will not have to fill out a tax form.
Simplicity will benefit low-income EITC families. Currently, as many as 14 percent of the families with children that could benefit from the EITC fail to sign up for the credit.[10] In addition, there are serious concerns about error rates for the EITC. Many errors stem from the confusing definitions of children. These complications cost low-income families-according to the IRS, 68 percent EITC filers use a paid preparer because the forms are too complicated to figure out on their own.[11]
Simplifying capital taxation. Wes Clark is committed to further simplifying taxes for middle-class families by reforming the taxation of capital.
Fairer - ending the "Middle Class Parent Penalty" and the low-income marriage penalty. Currently millions of low-income families get a marriage penalty in the form of higher taxes. And middle-class families receive less of a tax break for their children than high- or low-income families.[12] Under Families First Tax Reform families will get the same tax break for having a child.

Middle Class Parent Penalty Under Current Law and Wes Clark's Solution

Married Couple With One Child
Current Tax Break Per Child
Families First Tax Credit Per Child

$23,000
$1,763
$2,250

$32,000
$1,305
$2,250

$50,000
$1,458
$2,250

$100,000
$1,763
$2,250






More progressive. Under President Bush, families making over $1 million annually got an average tax break of $128,000-while the income of typical families declined by nearly $1,500. Wes Clark's plan will redress this imbalance, providing tax reform that benefits lower- and middle-income families.

More pro-growth. Wes Clark's Tax Reform will help make work pay for lower-incomes parents while lowering marginal tax rates that provide a disincentive for millions of taxpayers to work. Studies consistently find that the EITC provides a major incentive for work and a way to pay for childcare, transportation and other costs associated with getting a job.


According to one study, more than 60 percent of the increase in the employment of single mothers has been due to expansions of the EITC. Bruce Meyer and Dan Rosenbaum find that 63 percent of the change in the employment of single mothers between 1984 and 1996 can be explained by the expansions of the EITC.[13]
Another study predicted that the 1993 EITC expansion will induce 516,000 families to move from welfare to work. Stacy Dickert, Scott Houser, and John Karl Scholz found that the 1993 EITC expansion will induce 516,000 families to move from welfare to work. [14]
Another study shows that increasing the reward to work, increases labor force participation. Nada Eissa and Jeffrey Liebman found that the EITC significantly increases labor force participation among single mothers, especially less educated women.[15]
Deficit neutral. Reforming the tax code should not be an excuse to increase the deficit. Wes Clark's Tax Reform will be fully paid for, simplifying and improving the tax code without increasing the deficit. This is part of Wes Clark's broader plan to reduce the deficit each and every year, a major down-payment on the goal of eventually balancing the budget.



Background on Families Struggling to Get By

The best-off Americans have the highest share of income since Herbert Hoover was President. The top 0.1 percent of American families get 7.4 percent of the income (not including capital gains) - the highest share of income since 1928.[16]

The typical family's income declined by nearly $1,500 under President Bush, compared to a $7,200 increase under President Clinton. Under President Clinton, family income rose from $45,940 in 1992 to $53,142 in 2000 - a $7,202 increase. Under President Bush the typical family's income fell to $51,680 in 2002 - a $1,461 decrease.[17]

From 1970 to 2000 incomes for middle-class families stagnated while incomes for the best off exploded. The average inflation-adjusted income for the bottom 90 percent of Americans fell 2 percent from 1970 to 2000, while the average inflation-adjusted income for the top 0.1 percent rose 357 percent (not counting capital gains).[18]


Nearly 3 million private-sector jobs lost. The economy has lost nearly 3 million private-sector jobs under President Bush, including 2.6 million manufacturing jobs - with manufacturing job loss each and every month under President Bush.[19]

Health insurance premiums up $2,630. The typical family's health insurance premium has risen by $2,630 between 2000 and 2003 - a 41 percent increase.[20]

Record personal bankruptcies - growing 7.8 percent in 2003. Personal bankruptcies grew 7.8 percent in FY 2003 to over 1.6 million - the highest number of filings on record.[21]

Half of personal bankruptcies are due to health care costs. A study by Jeanne Lambrew found that "about half of all Americans who file for personal bankruptcy protection do so because of health care costs."[22]





--------------------------------------------------------------------------------

[1] William Gale and Janet Holtzblatt, 1997, "On the Possibility of a No-return Tax System," National Tax Journal.

[2] Jeffrey Liebman, 1/04/03, "Preliminary Estimate of the Effects of General Wesley Clark's Tax Reform Proposal."

[3] Jeffrey Liebman, 1/04/03, "Preliminary Estimate of the Effects of General Wesley Clark's Tax Reform Proposal."

[4] Based on Bureau of Labor Statistics, Consumer Expenditure Survey.

[5] Based on Kaiser Family Foundation, 2003, Employer Health Benefits: 2003.

[6]  http://www.nhhfa.org/programdocs/2003rentsurvey_state.pdf.

[7] Urban-Brookings Tax Policy Center, 9/30/03, "Combined Effect of EGTRRA and JGTRRA: Distribution of Income Tax Change by AGI Class, Pre-EGTRRA Baseline, 2004."

[8] Joint Committee on Taxation, 5/13/03, "Estimated Budget Effects of the ‘Jobs and Growth Tax Relief and Reconciliation Act of 2003,' Scheduled for Consideration by the Committee on Finance on May 13, 2003."

[9] Rahm Emanuel, 10/15/03, "Democrats Can Win on Taxes," "Wall Street Journal.

[10] Len Burman and Deborah Kobes, 1/18/2002, Urban-Brookings Tax Policy Center Policy Note,  http://www.taxpolicycenter.org/commentary/eitc_gao.cfm.

[11] Internal Revenue Service, 8/3/03, "Earned Income Tax Credit (EITC) Program Effectiveness and Program

Management FY 2002 - FY 2003."

[12] David Ellwood and Jeffrey Liebman, 2001, "The Middle-class Parent Penalty: Child Benefits in the U.S. Tax Code," Tax Policy and the Economy.

[13] Bruce Meyer and Dan Rosenbaum, September 1999, "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers." National Bureau of Economic Research Working Paper No. 7363.

[14] Stacy Dickert, Scott Houser, and John Karl Scholz, 1995, "The Earned Income Tax Credit and Transfer Programs: A Study of Labor Market and Program Participation." Tax Policy and the Economy.

[15] Nada Eissa and Jeffrey Liebman, 1996, "Labor Supply Response and the Earned Income Tax Credit," Quarterly Journal of Economics.

[16] Calculations based on data from Thomas Piketty and Emmanuel Saez, originally in "Income Inequality in the United States, 1913-1998," NBER Working Paper No. 8467. Available at  http://emlab.berkeley.edu/users/saez/.

[17] Calculations based on Census Bureau data.

[18] Calculations based on data from Thomas Piketty and Emmanuel Saez, originally in "Income Inequality in the United States, 1913-1998," NBER Working Paper No. 8467. Available at  http://emlab.berkeley.edu/users/saez/.

[19] Bureau of Labor Statistics data.

[20] Kaiser Family Foundation, 2003, Employer Health Benefits: 2003.

[21] American Bankruptcy Institute, 11/14/03, "Personal Bankruptcy Filings Continue to Break Records."

[22] Jeanne Lambrew, November 2001, "How the Slowing U.S. Economy Threatens Employer-based Health Insurance," Commonwealth Fund.
yawn 06.Jan.2004 00:40

yer mom

What an easy promise to make, knowing full well that congress will never approve of such a plan. He might as well promise single payer health care, a repeal of Taft-Hartley, and a doubling of social security payments.

Meet Stealth Republican Wesley Clark 06.Jan.2004 10:33

more militarism is not the solution

Only the Democraps would be stupid enough to run a Republican as one of their own. For a full expose on Republican war criminal Wesley Clark, see comments at:
 http://portland.indymedia.org/en/2003/09/271764.shtml


Piling on the wrong people. 14.Jan.2004 11:07

Adam Smith

A person that makes 1 million dollars a year recieved a tax break of about $30,000 under Bush's tax plan. That sounds like a lot until you realize that they paid $380,000 in federal taxes! I'm all for providing for those that are less fortunate, but lets stop beating up on the people in this country that actually pay for it.