Yesterday I had a post titled: “The Screw the Poor, Screw Them, Screw Them, Screw Them, I Hope Poor People Die Tax Reform Proposal”. It dealt with this article by Ramesh Ponnuru and Robert Stein where they detail a tax proposal.
I quoted them as follows:
The two of us are among the conservatives who have proposed a tax reform that permanently reduces tax rates on capital gains, dividends, and estates, cuts the top income-tax rate and the corporate-tax rate, and abolishes the alternative minimum tax on individuals.
Robert Stein, in comments to that post, has provided a response. The response, which is posted below the fold, leads to a very different conclusion than one would reach from my first look at it.
The tax reform proposal that Ramesh Ponnuru and I have outlined would be substantially more progressive than the current tax code. It would also be substantially more progressive than the system under President Clinton. This is true whether one uses our framework to lower overall taxes or maintain revenue neutrality.
We would enhance progressivity in three ways:
First, we would provide a $4,000 tax credit per child that would be refundable versus both payroll taxes and income taxes.
Second, although we would reduce the top marginal income tax rate, we would let the new lower rate kick in at a lower level. As a result, people in upper income brackets would end up making much higher overall tax payments despite facing a lower top marginal rate.
Third, we would alter the mortgage interest deduction and charitable donation to make it available to more middle and lower income taxpayers (while less generous to the upscale) while getting rid of other itemized deductions that are predominantly used by upper income taxpayers.
On net, almost everyone now in the 15% bracket or below would pay less in taxes. For those now in the 25% bracket or above, their aggregate taxes would go up, although (in general) not when they have children ages 0-18, and their top marginal rate would decline.
While this isn’t quite a guest post, I will treat it as such and post my response in comments.