The 2014 Budget does not go far enough to tax the 1%.
“Mr. Obama would raise an estimated $580 billion in new revenues over a decade mainly through two ways. For the fifth time he is proposing that affluent taxpayers in higher tax brackets must limit their deductions to the 28 percent rate; while Congress has annually ignored that idea, there are signs of growing support as lawmakers seek new ways to reduce deficits. The second change would impose his so-called Buffett Rule, requiring that people with annual taxable income above $1 million pay at least 30 percent in income taxes.”—-NYTimes.
It hints at restoring equality to an income tax system which is oriented to exempting income from taxes through tax exempt retirement accounts. The Fig Leaf of capturing some of that income for taxation does not work for two reasons. First, it is politically unfeasible and second, because it does not capture the vast sums of income which are allowed to escape, untaxed, into the retirement accounts of the 1%. Transactions within tax exempt accounts are also often able to escape taxation. Overall, in sum, these escapee taxes amounted to 6.5% of GDP in 2001.
Non-business related tax expenditures are a vertical transfer of wealth from average taxpayers to the very rich. 6.5% of GDP in 2001. Some examples of tax expenditures are tax deductible contributions to retirement accounts. 401k, IRAs are the foundation of these tax expenditures. They amounted to 6.5% of Gross Domestic Product in 2001.
Compare that figure to Social Security. 6.5% of GDP is close to the projected future cost of future Social Security benefits. Social Security is a contribution-based, social insurance program which the greatest number of low and middle income retirees will rely on for their sole means of retirement income. But instead of serving the needs of 70 million retirees like Social Security is projected to do, tax expenditures will extract 6.5% of GDP to serve the needs of the few.
Many ordinary people have 401k and IRA accounts, but ordinary savers and retirees accounts are much smaller than the tax expenditure protected accounts of the 1%. As a group, American taxpayers are accelerating the wealth of the 1% by exempting it from taxation, and by paying higher taxes to compensate for the loss of taxes not collected from the 1%.
Low capital gains tax rates for unearned income from investments are a form of unequal tax treatment of income. Current capital gains taxes are at a historical low. While a one event—low capital gains tax may benefit the lowly retiree who sells their home to pay for their expenses in retirement, or not; low capital gains taxes are a gift to the rich and to the 1% who can build extreme wealth through low taxes on large accounts and on exempt transactions. To my knowledge, the 2014 budget does not address this glaring unequal treatment of taxable income.
The Social Security FICA Cap Needs to Be Scrapped.
Instead of proposing an across the board cutting measure such as the chained CPI, the Administration could have proposed to scrap the existing limitation on the collection of Social Security taxes. At this point, all income above the cap (above 113K) is not taxed and this creates a long term funding gap. If the administration was truly concerned about strengthening Social Security, they would insist that those affluent people earning more than 113K should pay in their fair share of FICA taxes. But the 2014 budget does not contain this change.
Radical Attacks on The Social Safety Net.
This 2014 budget cuts social safety net programs: