Lynda Johnson Robb, daughter of President Johnson, speaks Wednesday during an event to mark the 50th anniversary of his declaration of the “war on poverty” in the Capitol Visitor Center. Democrats have used the anniversary to focus on questions of income inequality.
“There are definitely specific things that help the extremely wealthy” in the federal code too, Wamhoff said. He points to the note by billionaire investor Warren Buffett, who says he pays a lower tax rate than his secretary because his income comes from capital gains.
Sen. Ron Wyden, D-Ore., who may become the next Finance Committee chairman, said a tax overhaul should form “a very, very substantial part of” the debate over economic inequality.
Wyden highlighted his prior efforts to overhaul the tax code, pointing to a plan he drafted with then-Sen. Judd Gregg, R-N.H., and Sen. Dan Coats, R-Ind., as he called for expanding a break rather than ending one.
“We tripled the standard deduction, which in effect for the working class and people of modest income would be a significant amount of tax relief,” Wyden said Tuesday.
Some Republicans say there may be a problem with unequal distribution of tax liability and breaks, but say that is a result of inefficiency and complexity in the code rather than because of the lack of progressivity.
Finance Committee member Sen. Rob Portman, R-Ohio, said taxes have a “huge role” to play in the debate over economic inequality because the tax system is stunting economic growth.
“It’s the most antiquated, inefficient tax code you could possibly imagine, so it needs a lot more improvement, and it’s urgent, because we’re losing good-paying jobs every day because of it,” Portman said.
Anti-tax advocate Grover Norquist said it’s a mistake to concentrate on inequality in the first place. “By focusing on the difference, you’re acting as if, well, if you shoot 100 of the richest people you’ve done a good thing,” Norquist said. “There are fewer people working, 100 dead people, but there’s less income inequality!”
Instead, the debate needs to be about the economy and employment, Norquist said, echoing Holtz-Eakin’s assertion that “the difference between being poor and not poor is having a job.”
In his campaign to overhaul the tax code, House Ways and Means Chairman Dave Camp, R-Mich., has promised to maintain current progressivity levels. Camp makes another point about taxation and the wealthy — that the complexity of the code itself inherently disadvantages middle-income taxpayers without the resources to find and use the breaks that apply to them.
“The complexity of the code hurts average Americans who cannot afford the best tax planners and accountants to take advantage of everything in the code,” said Ways and Means spokesman Michelle Dimarob. “The code needs to be simplified to treat all families more fairly.”
If lawmakers are interested in addressing poverty by looking at progressivity in tax distribution, they may find few real models outside the U.S. The Organisation for Economic Co-operation and Development already names the U.S. tax code as the most progressive in the world, even though the income disparity in the United States is roughly average, according to Gallup data.
Terri Henderson, 6, center, whose mother is El Salvador, attends a rally with members of Congress at Union Station's Columbus Circle to announce the Restore Opportunity, Strengthen, and Improve the Economy (ROSIE) Act on July 29, 2014. The legislation provides incentives for government contractors to pay a living wage and other benefits that would help low-income workers.