A Tale Of Two Tax Plans

Two things in life are inevitable - death and taxes. I'm not certain who said that (I think it was Benjamin Franklin), but it's true. Now we have a very interesting scenario shaping up regarding the second of the pair, one that clearly illustrates one of the key differences between the two major political parties. Taxes will be on the "to-do" list of Congress this fall, and there are two competing plans out there (at least, at the moment). Both would affect you -- though in incredibly different ways -- so you need to understand what's involved.

The Democrat Plan
The Democrats are happily willing to tax you until they're tired (which would be never). Hillary Clinton freely admitted it: "I have a million ideas. The country can't afford them all." All Democrat presidential hopefuls have pledged tax increase after tax increase after tax increase. Well, you haven't seen anything yet! Rep. Charles B. Rangel, chairman of the House Ways and Means Committee, is working on a tax reform [meaning: increase] proposal that would amount to $1 trillion in new taxes! Let me put that in perspective for you...our current entire budget is somewhere around $3.4 trillion, and he's going to expand it by almost another third! Let me say it again: $1 trillion in new taxes! Don't forget this number, because that's what the Democrats are going to stick you with if they get their way. The details of their plan are in the article - go check it out if you want to read them (although the plan is still being formulated), but some ideas being discussed are taxing the rich, taxing the middle class, and taxing the poor. Of course, there are a number of different ways that are being considered, but rest assured everyone will see more taxes. Regardless, the most important thing to remember is: $1 trillion in new taxes! One more time, just to really burn it into your memory: $1 trillion in new taxes!

The Republican Plan
In a stark contrast, the Republican plan is almost completely opposite. First, it would be voluntary - filers could choose to use the new system or the current one. The new system would radically simplify the tax code, make some of Bush's tax cuts permanent, and establish an almost-flat tax for almost everyone. Basically, everyone would pay a 10% tax rate on earnings up to $100,000, and then 25% on anything above that. Every filer would get a whopper of a deduction (about $39,000 for a family of four), and it would also repeal the Alternative Minimum Tax (if you don't know what the AMT is, you probably aren't being hit by it; if you do know what it is, you probably hate it), which would trim about $840 billion out of government over the next 10 years. That loss -- and here's the REALLY radical part -- would not be made up, so government would have to 'get leaner'.

Got the picture?

Dems = $1 trillion in new taxes!
Reps = simpler taxes, one tax rate, permanent tax cuts, no AMT, smaller government.

Now, keep in mind that these two plans are in their infancy stages, and are going to see a LOT of change before anything actually comes up for a vote. For the Democrats, it's business as usual - they're spending your money faster than you can make it. The Republican party would have to drop their current spend-happy ways and go back to what put them in power in 1994, but it could be done if they have the will (or if their constituents do).

Now you know what each side represents. Pay attention...or pay up.

There's my two cents.