Concrete Proposal for Intergenerational Justice

trillion every year. We agree strongly with Simpson/Bowles that “those of us who are best off will need to contribute the most. Tax reform must continue to protect those who are most vulnerable and eliminate tax loopholes favoring those who need help least.” We should “maintain or increase progressivity in the tax code.” (p. 28) Among the next steps we support are: a. Eliminating most of the special exemptions (“Tax expenditures” is the technical phrase) in the tax code.

The result would be a much more fair, less complicated tax code that would bring in hundreds of billions of additional dollars.

Some propose eliminating all exemptions, but Simpson/Bowles rightly recommend retaining the following: i. Support for low-income workers and families (e.g. the child tax credit and earned income tax credit) ii. Mortgage interest only for principal residences (we would narrows this to only one house and only on the first $400,000). A house of one’s own encourages family stability. iii. Employer provided health insurance iv. Charitable giving (to encourage the flourishing of civil society) v. Retirement savings and pensions. (Simpson/Bowles, 2.1 and 2.1.3, pp. 29-30) b. Taxing capital gains and dividends at ordinary income rates In 2010, the top rate for capital gains and dividends was 15% instead of the significantly higher income tax rate. The change would demand that those more able to pay should pay more.

(Simpson/Bowles, 2.1.3, p. 31) c. Removing special subsidies for different industries (Simpson/Bowles, 2.2.2, p. 33) d. Retaining the current tax brackets There are currently six income tax brackets: 10%, 15%, 25%, 28%, 33%, 35%. Simpson/Bowles favors lowering the upper limit and having just these brackets: 12%, 22%, 28%. (p. 31) That would slightly increase the bottom rate and reduce the top two rates. That seems to ignore Simpson/Bowles’ principle that those who are best off should contribute the most. We favor retaining the current six tax brackets. We also favor a seventh tax bracket of 45% for persons with income over five million dollars. e. Retaining the estate tax We would support an exemption of the first $2-4 million (and up to $6 million for family farms and small family businesses) and a rate of 45%. A substantial estate tax encourages charitable donations, strengthens civil society, recognizes that society has helped make it possible for some to acquire great wealth and, by reducing inherited wealth, encourages each generation to engage in productive labor. f. Modestly increasing the amount of Social Security income subject to the federal income tax for seniors with substantial additional income.

Currently, individuals with combined income of $25,000 – $34,000 pay income tax on up to 50% of their benefits and those with combined income over $34,000 pay income tax on up to 85% of 5