It’s Tax Day! Let’s talk about fairness

Allison Burket, Emerson National Hunger Fellow
April 17, 2012

Today is Tax Day and DC is abuzz with efforts to use the tax code to take on poverty and the wealth gap. From President Obama’s call for a balanced approach to deficit reduction, to yesterday’s action in Congress on the Buffett Rule, to RESULTS efforts to use the tax code to preserve the EITC and Child Tax Credit. On this Tax Day, I’d like to take this opportunity to reflect a bit on the state of tax policy, and what it means for the fight to end poverty in the US.

First, let’s look at the facts. The program lifts more people out of poverty is none other than a tax provision. The Earned Income Tax Credit (EITC) is the largest poverty-reduction programs in the U.S. The Center on Budget and Policy Priorities estimates that in 2010 alone, the EITC lifted 5.4 million people out of poverty, including 3 million children. It is also estimated that the EITC lifted 3.4 million women and girls out of poverty in 2010. This has important implications for those women’s projected employment and earnings levels, as well as Social Security retirement benefits. In a new Congressional Budget Office working paper, researchers project that by raising employment and earnings levels for working-age women, the EITC will boost their Social Security retirement benefits. 

But tax policy is broader and more complicated than just one important program.  While the tax code remains somewhat progressive overall, Congress has been changing federal tax policy in ways that shift more and more of tax responsibility off the wealthiest in our country and on to everyone else. By lowering the tax rates on capital gains and dividends, enacting corporate tax loopholes, cutting the estate tax, or cutting income tax rates on the highest tax bracket, the wealthy in America are paying less in taxes than they have in decades. (Read a good overview from Economic Policy Institute on why and how the tax code could be more progressive, or their report The Facts Support Raising Revenues from the Highest-Income Earners.)

Progressivity in the tax code, i.e. the higher your income, the more you pay, is important not just because of where the money comes from, but also where that money goes. Taxes are the only reason our government can pay for the important services it provides, including education, infrastructure, defense, health care, and the social safety net. Well over 90 percent of government revenue comes from taxes, with a nearly 50 percent coming from individuals. Former U.S. Supreme Court Justice Oliver Wendell Holmes had it right when he famously said, “I like paying taxes. With them I buy civilization.”

Unfortunately, many of our elected officials in Washington choose to ignore the connection between taxes and our “civilization.” Instead, they use the guise of fiscal discipline and deficit reduction to justify draconian cuts to important services that millions of Americans rely upon, all the while refusing to consider any options to raise revenue. In fact, they push for more tax cuts, putting further strain on the programs that protect and support working families.

The Bush-era tax cuts of 2001 and 2003 are prime example. Wealthy households benefitted tremendously from these cuts. Yet these cuts have consequences. Each millionaire will receive an average of $143,000 in 2012 from the Bush tax cuts. That is equal to providing 18 at-risk children access to Head Start. And the budget that recently passed out of the House only makes matters worse.

Although RESULTS specifically focuses on protecting and expanding tax credits for low-income working families as well as using the code to help them build savings and assets, we also recognize that these issues are part of a larger context. The “Occupy” movement and the99spring.com are putting the issue of wealth inequality front and center, and it couldn’t come at a more important time. We are at a crossroads in America about the kind of country we want to be. Are we a nation that coddles the ‘have’s” at the expense of the “have-not’s”? Or are we a nation that stands together to ensure that all Americans have an equal opportunity to achieve the American Dream?

RESULTS is committed to justice and fairness in the tax code, and supports the larger movement to close the astounding income and wealth gaps facing our nation today.

To learn more about taxes, check out this round-up of some of my favorite tax-related recent reads and resources: