Death from Taxes

The more I think about it, the Democrats are screwed on the whole taxes issue. First, the Republicans have successfully tagged the Democrats as tax-and-spend. Now, Bush is talking about “tax reform” (anytime Bush mentions “reform”, grab your wallet and run). However, there’s a “bipartisan” commission meeting on this issue that won’t adjourn until 2006. If the Democrats attempt to campaign on this issue before then, they’ll be tagged as ‘partisan’ (at this point, maybe Democrats should be beyond caring about this).

This should be a natural issue for Democrats: remove all the deductions except for those for children and charitable contribution, and remove the alternative minimum tax. Then cut massively the bottom two rates. Do not use this as way to increase revenue–in terms of receipts, keep it revenue neutral. If not, the tax-and-spend tag will stick.

What would this major simplification accomplish? First, it makes the tax code much easier to fill out; this isn’t a trivial thing for most people. Second, roughly 13-17% of tax receipts go to pay for someone else’s tax fraud–not loopholes, fraud; this fraud happens without any consequences because the tax code is so complex that it is very hard to audit many returns. If Democrats can’t run on the issue of tax fraud by the wealthy…. Third, this could play very nicely into a theme of “we value the work ethic, they value the stock/free market”; those who are middle and lower income earners will gain the most from this (and it’s time to help the base). Fourth, the Republican plan will inevitably screw the main Democratic constituency; protect your base.

If the Democrats fumble this, the Republicans will be able to run as the “tax reform” party for a long time. That makes me puke.

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