Reagan's tax 'reform': Welfare for the wealthy

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On May 28 the American people heard some startling news. The Second American Revolution is coming and Ronald Reagan is going to lead it. For the last two months the president has campaigned around the country in an attempt to rally the troops.

The target of this crusade is that scourge of mankind-the tax collector. Inscribing on his banner the slogans "fairness" and "simplicity,' Reagan promises the American people a new tax code that will usher in a golden age of painless federal taxation.

When the income tax law was first enacted in the United States in 1913 a New York Times editorial charged that the new tax "transferred the burdens of the many onto the shoulders of the few."

In that year less than 1 percent of the taxpayers had to file a return and pay 1 percent of their income.

Today, 72 years later, over 93 million returns are filed, and wage earners pay at least 20 percent of their income to the federal government. The income tax law that was intended to tax citizens in proportion to their ability to pay has been turned into a mechanism for putting the major burden of taxation on working people. Today the many are supporting the few.

By voting subsidies, exemptions, depletion allowances, depreciation writeoffs, business loss refunds, tax shelters, and numerous other tax-avoidance gimmicks, a bipartisan Congress cut the taxes of the rich to the point where a multimillionaire could pay no income tax at all. Only recently has a small minimum tax been put on these wealthy freeloaders.

It is estimated that a multimillionaire and a factory worker each pay about 30 percent of their income in taxes when state and local levies are included. No Second American Revolution worthy of the name could ignore this glaring injustice inflicted on the nation's working people.

A tidbit Reagan and his crusaders are charging to the "relief" of the low-income taxpayer. The Reagan plan proposes exempting the first $2000 of the wage earners' income and $4000 if a person is married. This compares to the $1200 AMERICA NEEDS TAX REFORM -THAT HELPS THE FAMIL... THE NEW IMPROVED 1040 500E50 personal exemption now in force. A few million more of the lowest-paid workers would now escape the income tax.

But after offering this tidbit to the poor, Reagan delivers a blow. Under his plan workers would have to pay taxes on company-sponsored health care plans. Workers would be charged up to $10 a month for individuals and $25 if their family is covered-even if they never collect on the benefits. If workers lose their job, they would have to pay tax on their unemployment compensation.

The working mother who puts her child in a child-care center would no longer be able to deduct this expense. Nor would a worker be able to deduct money contributed to a political candidate.

A safety net for the rich Having taken care of the poor to his own satisfaction, Reagan comes to the relief of his wealthy friends. Under the new guidelines, some 70 percent of people with incomes over $200,000 would pay less taxes.

Reagan proposes cutting the maximum tax rate from 50 percent to 35 percent. This means that any multimillionaire can be assured of keeping $650,000 out every million dollars of income. It is estimated that Reagan would save some $28,000 in taxes for himself under this provision.

Devising tax loopholes for the wealthy has been developed into a fine art by tax lobbyists and compliant congressmen. They prefer to enact these giveaways for the rich with no publicity. When this is not possible, the congressmen announce that they are reforming the tax code in the interest of "fairness and simplicity."

We have seen nine of these "simplifications" pass Congress since 1954. Nearly every one has added several pages to the taxpayers' instruction manual.

Claims of fairness in the nine tax revisions have been refuted by such conservatives as the late Senator Walter George of Georgia, who called the system of exemptions "a very cruel method by which the tax upon the people in the low-income brackets has been constantly increased."

With a sound safety net under the millionaires, Reagan feels he can eliminate some of the more notorious exemptions that the wealthy have enjoyed. No more three-martini lunches at taxpayers' expense. Henceforth no business lunch can cost more than $25 a person to qualify for a tax deduction. This would not reduce executives to eating at Doggie Diners, but overpriced restaurants are screaming in pain.

Unearned income

To ease some of the pain in executive circles Reagan proposes to cut the capital-gains tax from 20 percent to 17.5 percent. This is the tax applied to profit derived from the sale of stocks, bonds, or more tangible property. Capital gains are an important source of saving to the wealthy since these profits are always taxed at a lower rate than ordinary income.

Wealthy people also save tax money on their large stock dividends and interest income, which have always been taxed at a lower rate than income earned as wages and salaries from productive labor. It has been estimated, for example, that four people who each receive an income of $7000 a year could pay very different amounts in income tax according to the source of their income.

A steel worker earning $7000 a year by heavy labor would pay $1282. (These ECONOMICS COCAL OHIO UAN.

Here the going gets a little sticky for Reagan. He has cut the taxes of the very poor, and he has cut the taxes of the very rich. But Reagan says his tax plan is "revenue neutral."

That is, it will bring in as much money as the old tax code. If the rich and the poor pay less, then middleincome people must pay more.

Many features of Reagan's tax code show how that would happen. Taxpayers would no longer be able to deduct mortgage payments on a vacation or second home. They would not be able to deduct their state and city taxes. There would be no more deductions for households where both partners work. Donations to charities would not be deductible unless itemized and receipted.

Reagan's hopes of rekindling the drive and enthusiasm of his first term through his tax crusade is stumbling on two fronts. Reagan's middle-income supporters are not convinced that his tax reform will benefit them. They have seen "reforms" before.

Last month a Business Week poll found that 77 percent of Americans believe that Reagan's plan would be fair to rich people, but only 47 percent think it would be fair to themselves.

In addition, the "revenue neutral" tax bill would not reduce the horrendous national debt by a single penny. In revenue under Reagan's new tax code.

Democratic Party joins the crusade The Democrats, who are big spenders and wasters to Reagan's way of think-

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THE GETTY FAMILY. HUNT FAMILY. THE MELLON ....

C'MON RON... STOP THE BONZO

fact, recent estimates indicate that the government would actually lose some