Taxes are complicated

Dear Editor:

You might recognize the following chart from the Nov. 2 edition:

                               Now       Cain          Perry

$10,000/year        Over 20%         9%               14-20%

$450,000/year     Less 9%           9%               14-20%

While simple and elegant, it is also misleading. It takes two different sets of numbers and puts them in a single chart. The “Now” column is Minnesota’s tax burden. The “Cain” and “Perry” columns describe what Cain and Perry have proposed be done with income taxes at the national level—which would have virtually no effect on Minnesota’s tax burden. It is wrong to compare national and state taxes as if there were a meaningful correlation between them.

Tax proposals by Perry, Cain, Romney, and Gingrich would all be bad for the middle and lower classes. Unlike Minnesota’s tax burden, the current federal income tax is progressive. Perry and Cain’s flat tax proposals would shift more of the federal tax burden from the wealthy to the middle and lower classes. Individuals who have large amounts of wealth and use that wealth to generate income through investments pay capital gains taxes instead of income taxes on that income. In turn, they pay a tax rate (15 percent) that is lower than the middle class pays in income taxes—15 to 33 percent depending on who you count as “middle class.” Eliminating capital gains taxes, as Romney and Gingrich have proposed, would shift the burden from the very wealthy to the middle class.

T.J. Green