Akin, like McCaskill, supports extending the Bush-era tax cuts. He differs from her stance, however, because he wants to include tax cuts for incomes of more than $250,000 in the extension.
The Republican challenger also wants to replace the federal income tax, corporate taxes and payroll taxes entirely. He has supported legislation to do so and has proposed replacing the federal income tax with a national sales tax, set at 23 percent for 2013, with a rebate to offset the impact of the tax. Akin wants to dismantle the Internal Revenue Service and replace it with an agency in the Treasury Department that would be in charge of collecting taxes.
Dine said the federal government is wasting all the money it gets from taxes. He wants to cut taxes across the board, saying it will mean more income for people to start businesses, pay debts and make purchases. He, like Akin, wants to repeal the federal income tax and abolish the Internal Revenue Service.
McCaskill, like Akin, wants to extend the Bush-era tax cuts but only for families with an income of less than $250,000.
She also wants to enact broader tax policy reform to eliminate items such as subsidies for the oil and gas industry and interest deductions for families owning second homes. McCaskill also is willing to cut corporate tax rates.
What experts said
Dean Crader, research analyst with the MU Economic and Policy Analysis Research Center, said politicians are cutting taxes and losing that revenue when they complain about debt and deficits.
“They will need to get revenue somehow from someplace,” he said. “If the objective is to reduce the deficit, it's either you stop spending and raise taxes or enact a combination of both.”
Crader said that halting the Bush-era tax cuts for households with incomes of more than $250,000 would help that objective but that raising taxes reduces the amount of money in consumers’ pockets and money businesses have to expand. He said that while lowering corporate tax rates would help businesses, corporate tax collections are dwarfed by individual federal income taxes.
Whether to extend the Bush tax cuts for incomes of more than $250,000 rests on political leanings, Mueser said.
“We know that we had higher taxes on higher-income people in the 1990s, and those taxes have been cut since then,” he said. “We had even higher taxes on higher-income people in the 1980s. Democrats point to that and say increasing taxes on higher-income people won’t hurt the economy. Conservatives say it will, even if you can’t measure it directly. “
“Replacing income taxes with sales taxes has been attempted in a few states, but to use those states as case studies for a national sales tax would be infeasible,” he said. “Income taxes tend to be more representational, while a sales tax would be a very flat tax. Consumption is typically most of the budget of poor income families, and a sales tax, therefore, would be harsher on lower-income families.”
Crader said he would hope that a national sales tax wouldn’t apply to major asset purchases such as houses or cars that already are sustained by loans and debt instruments.
MU economics professor Saku Aura said that while there is much disagreement among economists and politicians on tax policies, it is generally agreed that letting the Bush-era tax cuts expire completely would be a bad idea.
“Letting the Bush-era tax cuts completely expire now would create a tax increase when the U.S. economy is not yet out of the economic downturn that began in the late 2000s,” he said. “It would increase the chance of going further into recession, which would exaggerate economic risks coming from abroad, namely from Europe.”
Aura said that while Democrats might talk about raising taxes on higher incomes in the short run, it is undeniable that tax increases on incomes of less than $250,000 also will be needed eventually. He said the Republican position of not raising taxes at all is unsustainable, too.
As for a flat tax like a consumption tax, Aura said that would make it much easier to administrate taxes but would shift a lot of the burden toward people with lower incomes.
Peter Mueser, professor of labor economics, said most economists say replacing payroll taxes would not be a bad move.
“Payroll taxes are paid by mostly middle-class workers,” he said. “Historically, seven and a half percent of the first dollar a worker makes goes to Social Security, and then the employer pays an equal amount. That’s 15 percent that even the poorest worker pays. Cutting payroll taxes disproportionately benefits lower-income working people.”
Mueser said politics makes it highly unlikely that the government will replace payroll and income taxes.
Supervising editor is Scott Swafford.