Why favor married people? If he's interested in fairness in the tax system, he should support taxing all households equally.

Still giving homeowners tax breaks? Another regressive -- and complicated -- piece of the tax system. Ditch it!

Wyden's proposal is intriquing. I still think the marginal rates are too high, although I don't know the levels at which they kick in. I just sent in a check for $10,550 to the IRS today, of which $6800 was AMT - the 7th year in a row that s.o.b. tax bit us. We're among the working schmucks who derive virtually all our income from W-2 forms. Our "investment" income amounts to only about 5% of our taxable income. So, while we may be "rich" by many people's standards, we still fall into the "working class" and feel utterly slammed by the current tax structure. Between the Federal, State, Social Security, Medicare, Property, and I-Tax, nearly 50 cents of every dollar we earn is taxed. So much for "tax breaks" for the "rich". It is tax-breaks for the investment and stock option class, not for the "working" class. If Wyden's proposal gives us true tax relief, we'd be all for it.

the homeowners mortgage interest deduction is surely one of the most abused deductions. sure it "helps" people afford homes, but mostly it helps home sellers make more off their house, and lenders make more money off bigger loans. many homeowners do not even qualify for the write off because their interest isn't high enough!

that said, in our world of asset bubbles, and creative financing, eliminating that deduction would be devastating for too many people. even if it were phased out with a revenue neutral shift (a general lowering of the income tax), homeowners would cry foul because it could make their homes worth less than their loans, which would also require them to purchase mortgage insurance. this makes them unable to sell without a loss, and raises their monthly costs--not a good combo. i think the best we could do is eliminate the deduction for 2nd homes, and lower the cap on deductable interest.

darrelplant writes:

"Wyden's plan doesn't do anything to address the mounting national debt. The $100 billion in deficit reduction he proposes takes place over 5 years. When the debt's increasing at a rate of something like $400 billion/year, an average annual reduction of $20 billion means that if this plan was enacted tomorrow, the debt (the limit for which was recently raised to $9 trillion) is still going to increase to about $11,000,000,000,000. That just kicks the fiscal ball down the road another half decade."

So what's your proposal? Eliminate all deductions? Raise the effective marginal tax rate even higher? What? Instead of criticizing Wyden's proposal, offer a competing alternative that simultaneously addresses flattening the tax code, reducing the deficit, and reducing the national debt.

mr. fearless writes: Instead of criticizing Wyden's proposal, offer a competing alternative that simultaneously addresses flattening the tax code, reducing the deficit, and reducing the national debt.

If one is running for office, there's an expectation that any criticism of one's opponent will be followed up by an alternative plan.

It's becoming commonplace however to respond to someone's criticism of a politician by a constituent just as you have here mr. fearless: with outrage that no competing plan has been offered. Why have we gotten to this place? It ends the discussion without any discussion having taken place and it should be enough to say an idea is misguided, misplaced, or just plain wrong.

If a book reviewer criticizes a new book, should that person have to lay out how the book would have been better written? Should a movie critic have to come up with a better plot? If I don't like President Bush's handling of Iraq do I have to come up with my own plan for dealing with such an evil bastard as Saddam Hussein, or is it enough to critize Mr. Bush and let him know where I disagree with his ideas?

Like darrelplant, I was also disappointed Wyden's wimpy approach to the deficit. $100 billion over five years is chicken feed. I'm guessing Wyden capped the tax rate at 35% for political reasons -- maybe he figured 40% (as in a 10-20-30-40 system) would be "too high" to get through Congress.

I'd be curious, though: what if he added a 45% bracket that affected the top 1% of taxpayers? (It could be indexed every year to ensure that no more than 1% fall within that bracket.) Would that bring in enough to balance the budget and start paying down the national debt?

darrellplant opines:

"Some Republican could come up with a plan virtually identical to Wyden's and promise $50 billion in deficit reduction a year. It could be just as flat, and it would have two-and-a-half times the deficit reduction Wyden's plan has. But it would still do virtually nothing, given the size of the national debt. And I'd oppose that as window dressing, too."

When was the last time we had no national debt, as opposed to a budget deficit? No tax reform that has a snowball in hell's chance of getting by any administration (democrat, republican, or independent) if the focus is on reducing the national DEBT. The rates would have to be close to 70% at the highest levels and return to Eisenhower levels to see that kind of government revenue. And imagine what impact that would have on the overall economy. Forget about the national debt; worry about the deficit. Forget about taxing the upper 5% - 1% equally; all income is not "earned" equally. Some of us actually work very hard for ours, while others are rewarded for incompetence (corporate CEOs), had the good fortune of inheriting wealth, or been part of a firm that pays in stock options instead of cash.

Overall I think Wyden's plan is probably a good thing.

But, it lacks detail. I know, I know, it has tons of details. But let me give you an example.

I'm self employed, and use a Schedule C to figure gross income less expenses for net taxable. Wyden talks about eliminating loop holes, and cutting health care inefficiency. One of the deductions I have as a self-employed person is to write off my health insurance costs. -- I can't find reference as to whether that stays or goes. Oddly, in the entire plan it doesn't say whether Schedule C would still be used.

I own rental real estate. I use Schedule E to report income and expenses to calculate my annual loss. Yep, I'm into subsidised housing out of my own pocket! Anyway, no word how this will be handled, whether it is considered a tax loophole, whether Schedule E will still be used or not. --

Lots of questions. When I follow the website links to the actual language of the legislation, the answers just aren't there that I can find. -- If anyone can see the answers in all that stuff, please let me know!

And again, oddly, when I was first exposed to the Flat Tax Plan months ago, I asked Wyden's staff to clarify these issues, and never got word one back.

So, its a good idea, but like a lot of good ideas, the details are what is important.

Until I hear more details, and get my questions answered, I can neither support nor dispute this plan. I can't even call it a plan yet - just an idea.

"When was the last time we had no national debt, as opposed to a budget deficit?"

I thought Clinton had a couple of years without a debt early in his presidency.

"I thought Clinton had a couple of years without a debt early in his presidency."

No, this is a common confusion between the national debt versus the budget deficit. Clinton brought us a budget surplus, which has the side effect of reducing the national debt nominally. But as far as I know, the National Debt has been building since at least the Civil War, perhaps longer than that. There is no way that the national debt could be erased or even significantly reduced by any tax increase proposal that anyone could propose. I suppose it could be reduced by simply sending all one's income directly to the government, but I don't think anyone's about to suggest that as "tax reform".

darrellplant remarks:

"But by cutting taxes on the wealthy and spending far more than they bring in for the past five years, the Republicans in control of the country have dug a huge hole that we need to get out of."

I won't dispute anything you've said here, but as a non-Republican in a two-income family that is doing well by most criteria, I challenge you to show me how Bush's "cutting taxes on the wealthy" has benefitted me. This is a very common misperception that exists, especially among liberal and progressive bloggers and repeated ad nauseum by nearly every Democrat running for office. During Bush's administration our family income has increased by approximately 14%. In that same time period, our gross income tax bill has risen by nearly 30%, just at the federal level. What Bush's tax cuts did was to place a taxing premium on earned income, driving more and more people into the AMT hell, and negating any possible benefit that the tax cuts were intended to bring. Because of multiple surgeries, my wife's income has decreased substantially over the past 3 years. Her 2005 income was nearly 30% less than her 2004 income; my income was, to the penny, identical in 2004 and 2005. The only difference between 2004 and 2005 was a small increase in the amount of investment earnings we had - we had approximately $4500 in taxable earnings in 2004 and about $6000 in taxable earnings in 2005. The net result was that our 2005 taxable income was about 27% less than than our 2004 net income. Yet, with Bush's tax "cuts", our tax bill was $7000 higher in 2005 than it was in 2004. We had no underwithholding penalty and we paid quarterly estimated taxes. Our deductions were slightly less in 2005 than in 2004. We fall in the upper 5% of wage earners in the country; perhaps in the upper 2%. But, because virtually all our income derives from W-2 forms and not from Schedule D, we pay one hell of lot in taxes - much more than we paid BEFORE Bush's tax cuts for the "wealthy".

I get very tired of the broad brush used to characterize the "wealthy". We are just as "working class" as any other people the Democrats try to lay claim to as their constituency. But whenever I hear a liberal or a progressive start talking about the "big giveaway" to "the wealthy", my skin begins to crawl and my blood pressure rises.

One of the reasons that Wyden's proposal intrigues me is that it no longer makes a distinction between different categories of income. I'm not looking for any tax break, but I am looking for tax fairness. I pay what I consider to be far more than my fair share of taxes; it is the superaffluent who's annual wealth comes from stock options, from investment earnings, or from the proceeds of inherited wealth - among many others - who are not contributing equitably to the tax system.

If you want to make my skin crawl or my blood boil, suggest I'm not paying my fair share of taxes. It might lead to an ugly confrontation with me being forced to show you just much I DO pay and then let you decide whether I'm a slacker or a republican bootlicker. I promise you that you'll be stopped dead in your tracks when you see my tax bill - and the tax bills of a lot of other very hard-working people whose "wealth" comes the old-fashioned way, by working really hard and really long hours.

I agree with your income level reports in your post. Now show me where any progressive or liberal blogger, or any recent democratic candidate for any significant office has made the income levels you describe a significant part of any tax reform proposal (other than to raise the taxes on those folks again). Let's take the presidential primary candidates for 2004. Did any of them propose rolling back the tax cuts for people reporting income in the upper 1% only. No! The generally accepted arbitrary figure for "wealthy" has been for the past 5 years, about $200,000. In Wyden's proposal the point typically mentioned is $150,000. My blood boils whenever people toss around the word "wealthy" without defining what it is. You've suggested a 45% rate for people in the upper 1%, but if you make no distinctions about the source of the income then a 35% rate applied to the upper 5% of income earners (regardless of the source of income) makes the truly wealthy (upper 0.5% pay one hell of lot more than they're paying now. You'll hear howls of pain from them about confiscatory tax rates, but you won't hear complaints from me). I have no problem paying my fair share, but when people like Bill Gates or Phil Knight or Neil Goldschmidt (in his heyday) pay a LOWER marginal tax rate than I do, it royally pisses me off. Worse still, when I get lumped together with people like that for the purposes of scurrilous accusations that I don't pay my fair share, my blood does boil. I've not accused you specifically of anything except your use of the term "wealthy" (until your last post) without any definition. It's a word devoid of any meaning except perhaps "anyone who makes more than someone else does". I'm going to continue to hammer away at anyone who alleges that Reagan or Bush gave me anything. Ironically, the Clinton tax increases cost me less than the Bush tax cuts. Go figure.

<hr/>