How John Edwards would help the middle class (part 1)

originally posted at Daily Kos

Reading articles about John Edwards, I have noticed the perception that his domestic policy ideas are mainly good for poor people, while other candidates are focusing more on middle-class issues.

David Mizner wrote an excellent diary last Tuesday: “What Edwards is About.” (If you missed it, click here or here–it sparked a lively discussion.) David points out that Edwards has done the most by far to call attention to growing social and economic inequality in the United States. I encourage everyone to check out his plans to reduce poverty in this country and globally.

While I agree that Edwards is the candidate who would accomplish the most for the least fortunate, I want to call your attention to his proposals that would benefit middle-class Americans. 

More after the jump. 

The Edwards education plan would strengthen public schools and make college more accessible. As we know, even many students from middle-class backgrounds find it hard to afford college.

His rural policy agenda would restore some balance to our agricultural policies, which currently favor agribusiness over family farmers, and would do more to support the locally-owned businesses that have been the livelihood of so many people in smaller towns.

And of course, his universal health care plan would cover the 47 million uninsured, most of whom are above the poverty line and therefore ineligible for Medicaid.

I'll need more than one diary to discuss all of the Edwards policies that would benefit the middle class. For now I will focus on tax reform.

The Edwards plan to reshape the tax system has two main components. First, he would “end the war on work.” As he said in July (and here I am quoting from a diary by TomP):

“In America, when the middle-class makes money from hard work they shouldn't pay higher taxes than when the rich make money from money.” 

You can find details and a longer pdf file about his tax reform that rewards work at the Edwards campaign website. Also, be inspired, who blogs at MyDD as sirius, posted a good summary of the plan in this diary.

Edwards proposes three tax breaks “to strengthen the middle class pillars of saving, work and family.” From the campaign website:

    * Savings: A new “Get Ahead” tax credit to match up to $500 a year in savings for families earning up to $75,000—that could be used for retirement, college education, buying a home, investing in a small business or during a financial or medical emergency, and new “Work Bonds” to offer additional targeted savings incentives for low-income families. The credit will be refundable to benefit low-income families and the size of the credit will be reduced for families with higher incomes. All families earning up to $75,000 will be eligible.
    * Families: Expand the Child Care Credit to pay up to 50 percent of child and dependent care expenses up to $5,000 and make it partially refundable, and allow stay-at-home parents to help pay for child care for newborn infants.
    * Work: Triple the Earned Income Tax Credit for single adults and cut the marriage penalty.

In addition, Edwards would raise tax rates on certain types of wealth income. From the campaign website:

Nothing better reflects the problems with our tax code than the lower tax rates for capital gains. As Warren Buffett says, there is something wrong when he pays taxes at a lower rate than his secretary. As president, Edwards will:

    * Raise the tax rate on capital gains to 28 percent for the most fortunate taxpayers – taxing the investment income of the wealthiest Americans similarly to the wages of the middle class.
    * Repeal the Bush tax cuts for the highest-income households and keep the tax on very large estates (above $4 million for couples).
    * Declare war on offshore tax havens by cracking down on tax shelter promoters, cooperating with allies to fight tax havens, and closing the “tax gap” by improving IRS customer service, simplifying tax filing, auditing more large corporations and high-income individuals and requiring more third-party reporting.
    * Close unfair loopholes like the tax breaks for hedge funds and private equity fund managers and unlimited executive pensions.

Speaking of that last point, earlier this month, while most of the media were not paying attention, lobbyists were again able to stymie efforts to get the Democratic-controlled Congress to close a loophole that lets some money managers pay just 15 percent in taxes on their income. (For background on this issue, check out this diary by mariesamuels from July.)

After the tax reform legislation that would have ended that injustice stalled, Edwards released a statement:

“Today, America learns another striking example of how broken Washington is. Congress' failure to pass tax reform that would have closed loopholes that let private equity and hedge fund managers pay only 15 percent in taxes on most of their income is testament to the terrible power that lobbyists have to stop real reform – reform that would ensure a fairer America. As a result, rich private equity and hedge fund managers will continue to pay only 15 percent in taxes on most of their income – which can be hundreds of millions, or even billions, of dollars a year – while ordinary hard-working Americans will pay twice that rate or more in income and payroll taxes. Worst of all, real reform was stopped by one factor alone – D.C. lobbyists.

“Incredibly, for an investment of about $6 million dollars in lobbying fees – and another $6 million in political contributions – these elite Wall Street traders preserved a $6 billion tax break for themselves. America needs a leader who will stand up to these powerful interests and who will fight for real change that makes America better and stronger.

“We can't just trade corporate Republicans for corporate Democrats. We have to end the rigged system in Washington that rewards big corporate interests at the expense of hard-working families. This is a perfect example of why we need to change the way Washington works, and why we need tax fairness so hedge fund millionaires don't pay taxes at a lower rate than middle class families.”

In addition to getting the policy right, I think Edwards has the politics right as well. Many people will respond to the idea of “rewarding work” and ending the unfairness that allows wealthy people to pay lower taxes on money they earn from money.

Edwards often paraphrases that Warren Buffett remark during his stump speech, by the way. He also mentioned it during the AARP forum in Davenport, Iowa, last month (you can read the excerpt in this diary containing the highlights from his remarks at that debate).

For those who scream “class war,” I note that capital gains were taxed at 28 percent during Ronald Reagan's presidency.

The second big component of the Edwards tax reform plan would simplify the filing process for millions of Americans. The overview of this plan is on the campaign website, or you can click this link to listen to a podcast Edwards recorded in April summarizing the main points.

RDemocrat wrote a diary on this plan when it was first released:

The American tax code is unnecessarily complicated and full of shelters and loopholes that favor wealth over work. While corporations and wealthy families can hire expensive accountants and lawyers, ordinary families face unnecessary obstacles in calculating and paying their taxes. It takes seven hours to complete even the simplest tax form, the 1040EZ. One-third of EZ filers pay tax preparers. Meanwhile, for tens of millions of taxpayers who file simple returns, the Internal Revenue Service already has all the data it needs (such as household size, wages, and interest income) to calculate the tax or refund due. [IRS, 2005; GAO, 2006]

    In the first of a series of Saturday Morning E-Casts, John Edwards describes his plan to overhaul the tax filing system. Under his plan, the IRS will calculate millions of families' tax bills and mail it to them on a new “Form 1.” Like a credit card bill, families could verify and recalculate it or simply sign and return it. Form 1 is part of Edwards' vision of a tax code that is simpler and fairer and rewards work.

JSCram3254 explains in more detail how Form 1 would work, saving millions of people time. Benny05's take on the same proposal is here.

I like this idea because it would give many middle-class Americans choices they don't have today. They can save time and money spent on tax preparation by signing and returning Form 1. Or, if they don't trust the IRS to calculate their taxes, or prefer doing things themselves, they can keep filing taxes as they have done in the past.

Again, good policy and good politics.

But don't all politicians promise to help the middle class? Maybe so, but Edwards also refuses to accept contributions from PACs or federal lobbyists. As he noted in a major address yesterday on the “moral test of our generation,” when the bus stops on K Street in Washington, the middle class loses.

By the way, if you missed Tracy Joan's diary yesterday, click the link to read the full text of the address. Like so many speeches by John Edwards, he doesn't just run down a list of good policy ideas–he connects his ideas to the values we share as Democrats and Americans.  

I will sign off here and continue the discussion of Edwards and the middle class another week.

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