A government sets its redistributing priorities through taxation by deciding how to spend the money that reaches the government coffers, be it through deductions or tax breaks, or through investments in human and material infrastructure.
The tax cuts for the private sector and the rich initiated 30 years ago by Ronald Reagan – and continued ever since – altered an economic balance that led to a reduction in infrastructure spending and to create the massive wealth gap dividing the American society today.
At the federal level, President Barack Obama recently offered a list of tax proposals designed to benefit families and lower-income sectors. The problem is, Republicans oppose funding these investments by closing Wall Street loopholes and increasing top income-tax rates.
Both the President and the GOP want to simplify the tax code, but they have opposing views on who wins and loses in Washington.
The situation is different in states like California and New York, where their governors, Jerry Brown and Andrew Cuomo respectively, are proposing investments in their budget plans – although less ambitious since they need to make sure they don’t create deficits, which the federal government can do.
The tax credit for homeowners and renters in New York will relieve the middle class, as well as the tax breaks for small businesses. But school aid remains to be decided, as well as what to do with the unused part of the $5 billion surplus.
Meanwhile, in California Brown is facing Democrats who want to extend the Proposition 30 tax increases to fund education as well as to reinstate social benefits canceled during the Great Recession.
Tax cuts strangled the government’s productive investments. They created voids that must be overcome by a middle classed that needs to make up lost ground. Financially empowering this sector will create a healthier economy