Now that President Bush's tax cut has taken its rocky ride through Congress, the time has arrived to discuss meaningful tax alternatives that average Americans can understand. This issue that affects all Americans, and our voices should be heard. But a complex numbers crunch, such as the President's plan, simply baffles most of us and leaves no possibility of meaningful public debate.
The challenge is to design a tax cut proposal that we can understand so that we can all stand and be counted.
Ever since the presidential campaign, Republicans and Democrats have locked horns on how to design a fair tax cut. Gore attacked the Bush plan for favoring the wealthiest Americans. Later, Democrats pointed out that under the President's plan the rich would save enough to buy a new car, while folks of moderate income would have to settle for a new muffler.
While the Democrats might have won a few debating points with clever rhetoric, their proposed alternative - targeted tax breaks for education and other specific needs - were ironically subject to the same attack. The big savings would go disproportionately to certain people. And while those benefitting from the Democratic plan might not be the richest, neither would they be the most needy.
Through it all, the average American had little basis for making an independent evaluation of the competing tax-cut plans. Recently, however, the Democrats have come forward with a new proposal that provides a real alternative that average Americans can understand. The Democratic proposal would give all taxpaying Americans the exact same number of additional dollars. Bill Gates and I would both get, say $400. To be sure, the circulated proposal was for a one-time tax break to stimulate the economy. But Democrats would be wise to expand this type of proposal into a full-blown alternative to the President's plan.
The proposal could be flushed out by following the teachings of one of the great philosophical discussions of fairness: John Rawls' 1971 book A Theory of Justice. In essence, Rawls concluded that fairness compelled us to maximize the position of the worst-off member of a society. While that approach may not always be wise, something akin to Rawls' principle could provide an easily designed and understood tax cut plan that most Americans would consider fair.
The case is easy to make. There appears to be broad agreement that the current tax structure is fundamentally fair. That is, the reason we need a tax cut is not that rich Americans pay more than their fair share. Rather, we need a tax cut because everyone pays too much. The government is simply collecting more money than it needs. And we should put some back in the people's pockets. While one might argue about the message sent by the election results, it is probably fair to conclude that Americans believe that a tax cut for everyone is the fairest approach.
The remaining question is how do we provide a fair tax cut for everyone. The President's plan, to be sure, would have cut taxes for everyone. Rich folks would have gotten a great deal. Middle class folks a little. And poor folks a little less than that. Here's how a tax cut plan drawing on Rawls' philosophy could work:
Taxes would be cut for all taxpaying Americans equally on a dollar for dollar basis. And, before any American could receive a larger - in absolute dollar terms - tax cut than anyone else, every American with a lower income must have had their taxes reduced to zero. For example, assume that you have a modest income and pay $5,000 in federal income tax. Before the multimillionaires can receive a tax cut that exceeds $5,000, your tax bill would have to be reduced to zero.
The rich would still get back more than the poor. But a Rawlsian tax relief plan would maximize the return to the poorest taxpaying Americans, while still providing a tax cut for everyone. Would that be fair? Let's see what the American people think.
Steven Semeraro is an assistant professor at Thomas Jefferson School of Law in San Diego.
