Why A Minimum Income Tax Rate Is A Terrible Idea

After Mitt Romney’s comments about the “47 percent” brought the notion of a dependent class of non-taxpaying Americans to the fore of American political discourse, it was almost inevitable that someone would propose a minimum federal income tax. Former Governor and Senate candidate Tim Kaine (D-VA) did it today, saying, “I would be open to a proposal that would have some minimum tax level for everyone” in a televised debate.

But this idea, also raised by Rep. Michelle Bachmann (R-MN) as a solution to the “problem” of 47 percent of Americans not paying federal income tax, would work against the design of several bipartisan anti-poverty tax initiatives. Almost all of the 47 percent that don’t pay federal income tax are either elderly, federal payroll taxpayers, or adults with incomes under $20,000, and most of them pay plenty of other taxes at the federal and state level.

The reason these groups don’t pay income taxes is straightforward: it helps keep them out of poverty and capable of providing for themselves and their families. The centerpiece of the tax reform that brought about this state of affairs is the Earned Income Tax Credit (EITC), which provides tax relief for families that make under $36,000 and individuals that make under half that.

This bipartisan tax credit, hailed by President Reagan as “the best antipoverty, the best pro-family, the best job creation measure to come out of Congress,” is the central mechanism allowing working families to buy necessities and stay out of poverty. The effect has been an estimated 3 million less impoverished children per year. The benefits of the EITC have been magnified in recent years by the greater need generated by the Great Recession:

Moreover, the tax breaks that benefit the 47 percent in no way foster a culture of “dependency” on the federal government. The EITC has been “more important than welfare reforms” in moving low-income Americans into the workforce and improving poor students’ performance in school. The Center on Budget and Policy Priorities’ summary of research on the EITC found evidence suggesting “[m]ost EITC recipients claim the credit only temporarily when a job disruption or other significant event reduces their income.” The majority of EITC recipients use it for only one or two years and “EITC recipients as a whole pay far more in federal income taxes than they receive in EITC benefits.”


Kaine responded to a reporter’s question about a minimum tax rate after the debate by saying:

David [Gregory] asked me a question which is would I be open to a discussion about something broader like that and I said sure I’d be open to. Shouldn’t be news that somebody wants to go into the Senate as willing to start from a position of openness and a dialogue. I’ve got a track record. When I was governor we raised the thresholds and took tens of thousands off Virginians, low income Virginians, off the tax rolls and that was the right thing to do under those circumstances but we can’t start with non-negotiables. So when my opponent says we have to solve our problems but we can never consider any new revenue even one dollar for every ten dollars of cuts, or we could never find one dollar of savings on the defense side, you’ve got to start with an openness and not with non negotiable positions.

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