Tax Reform Essay
In early May the Senate began debate on the tax cut proposal issued by the Bush administration. The democrats feel that this debate is really about the president’s plan to spend money in ways that are more likely to hurt the economy rather than help spur its recovery.
According to the article one of the benefits of the plan was that the cuts would create a million new jobs by the end of the year. Unfortunately the reality is that the economy has lost 2 million jobs since the first significant cut in 2001. The republicans control the Joint Committee on Taxation and their latest reports indicate only a slight positive impact in the short term and potentially a negative impact in the next few years due to public borrowing.
The democrats feel that the tax program is just another way for the republicans to pursue their own interests. They believe that the republican plan is to incur large federal budget deficits through borrowing which eventually limits the size of government. The belief is that the so-called tax cut is really a tax shift that will eventually result in taxpayers paying off debt incurred due to cuts that were meant for the wealthy. By pushing for tax cuts, the president will be able to claim he's doing something to revive the economy going into his 2004 re-election campaign. If he gets his tax cuts, he can reward wealthy Republican constituencies and take credit if the economy gets better. If he's thwarted by Congressional Democrats, he can then blame them for any economic problems that might ensue (New Dem Daily).
Another questionable element within the policy is the proposal to overhaul retirement savings accounts like IRAs and 401(k) s. The proposal would create Employer Retirement Savings Accounts (ESRAs). They are similar to a 401k but are sneakily designed to direct most of the retirement contributions to top officials. To top it all off, the administration's proposal eliminates traditional IRAs, which many low-to-moderate income families use to shelter income from taxation. This could well produce a net loss in savings by those who don't have lots of after-tax income to save (New Dem Daily).
I feel that the tax cuts can definitely have a negative effect on the employees within the organization for which I work. First of all the absence of a true IRA plan is a very disturbing issue, it could very well result in a loss in savings by those of us who don't have a lot of after-tax income to save. Then there is the issue concerning the state of the 401k plans, which clearly favors those who earn more. Another concern is that eventually we will be paying more taxes in the future to cover the debt incurred by the so-called cuts that are being implemented now. An increase in taxes in the future would offset any increase in income realized now.
That kind of prospect has a tendency of reducing company morale due to the fact that employees could get the feeling that they aren’t making any progress financially even after receiving promotions and raises. Its never good to have employees who feel as though they are going nowhere fast, but I feel that would be the case with many companies after the effects of these tax cuts are fully realized.
The bottom line is that true tax reform is something that should benefit everyone, not just those in the higher income bracket. The proposal by the Bush administration seems to be one that is focusing on a quick fix and merely shifts the tax burden to the lower and middle brackets. What we need is a plan that is fair and that will be successful in the long term.
According to the article one of the benefits of the plan was that the cuts would create a million new jobs by the end of the year. Unfortunately the reality is that the economy has lost 2 million jobs since the first significant cut in 2001. The republicans control the Joint Committee on Taxation and their latest reports indicate only a slight positive impact in the short term and potentially a negative impact in the next few years due to public borrowing.
The democrats feel that the tax program is just another way for the republicans to pursue their own interests. They believe that the republican plan is to incur large federal budget deficits through borrowing which eventually limits the size of government. The belief is that the so-called tax cut is really a tax shift that will eventually result in taxpayers paying off debt incurred due to cuts that were meant for the wealthy. By pushing for tax cuts, the president will be able to claim he's doing something to revive the economy going into his 2004 re-election campaign. If he gets his tax cuts, he can reward wealthy Republican constituencies and take credit if the economy gets better. If he's thwarted by Congressional Democrats, he can then blame them for any economic problems that might ensue (New Dem Daily).
Another questionable element within the policy is the proposal to overhaul retirement savings accounts like IRAs and 401(k) s. The proposal would create Employer Retirement Savings Accounts (ESRAs). They are similar to a 401k but are sneakily designed to direct most of the retirement contributions to top officials. To top it all off, the administration's proposal eliminates traditional IRAs, which many low-to-moderate income families use to shelter income from taxation. This could well produce a net loss in savings by those who don't have lots of after-tax income to save (New Dem Daily).
I feel that the tax cuts can definitely have a negative effect on the employees within the organization for which I work. First of all the absence of a true IRA plan is a very disturbing issue, it could very well result in a loss in savings by those of us who don't have a lot of after-tax income to save. Then there is the issue concerning the state of the 401k plans, which clearly favors those who earn more. Another concern is that eventually we will be paying more taxes in the future to cover the debt incurred by the so-called cuts that are being implemented now. An increase in taxes in the future would offset any increase in income realized now.
That kind of prospect has a tendency of reducing company morale due to the fact that employees could get the feeling that they aren’t making any progress financially even after receiving promotions and raises. Its never good to have employees who feel as though they are going nowhere fast, but I feel that would be the case with many companies after the effects of these tax cuts are fully realized.
The bottom line is that true tax reform is something that should benefit everyone, not just those in the higher income bracket. The proposal by the Bush administration seems to be one that is focusing on a quick fix and merely shifts the tax burden to the lower and middle brackets. What we need is a plan that is fair and that will be successful in the long term.
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