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Topics: Obamacare

The end of the 47 percenters

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Conn Carroll,Taxes,Obamacare,Senate,Republican Party,Analysis,Mike Lee

Republicans may be stubbornly refusing to cave to liberals on amnesty for illegal immigrants, gun control, and abortion, but two policy proposals from stalwart conservatives last week show that a revolution is underway among Republicans on at least one issue: taxes.

Everybody remembers Mitt Romney's quote from the secret video recording that arguably cost Republicans the 2012 election. “There are 47 percent of the people who will vote for the president no matter what ... who are dependent upon government ... These are people who pay no income tax.”

Romney would later try to distance himself from this statement as much as possible. But the driving sentiment behind it, that far too many Americans pay no income tax, was widely shared in the Republican presidential field.

“Part of the problem,” Rep. Michele Bachmann, R-Minn., said at a Republican primary forum in July 2011, “is that only 53 percent pay any federal income tax at all; 47 percent pay nothing. We need to broaden the base so that everybody pays something, even if it’s a dollar.”

There were always a number of problems with this argument, the first one being that the 47 percent number can be quite volatile. In fact, thanks to a number of expiring tax breaks in 2012, just 43 percent of American households will pay no income tax this year, according to the Tax Policy Center.

Also, the 43 percent and 47 percent numbers ignore the payroll taxes that are taken out of every working American's paycheck every month. Once payroll taxes are factored, just 14 percent of all households pay no federal taxes, and two-thirds of those households rely on Social Security for their income.

But more importantly for conservatives, isn't the Republican Party supposed to be about cutting taxes for everyone? President Reagan's famous 1986 tax reform significantly expanded the Earned Income Tax Credit, which greatly reduced tax burdens for millions of working-class Americans. Isn't that what the GOP used to be all about?

Fortunately, two major policy proposals last week show that conservatives are beginning to move the Republican Party back to its populist Reaganite roots.

First on Tuesday, speaking at the American Enterprise Institute, Sen. Mike Lee, R-Utah, unveiled a new tax plan that vastly simplifies the tax code into two rates (15 percent for the first $87,850 of income and 35 percent for everything above that).

Virtually every tax deduction would be eliminated, except for the current child credit, the charitable tax deduction, and the mortgage interest deduction (which would be capped at $300,000).

On top of this, Lee would create a new $2,500-per-child tax deduction that could be applied to both income and payroll taxes. That means Lee’s plan would greatly increase the number of Americans who pay no taxes to the federal government.

"Some might worry that increasing the child credit would take more people off the income tax rolls altogether. And it would," Lee said Tuesday. "But then again, people who pay no income tax do pay federal taxes – payroll taxes, gas taxes and various others. Working families are not free riders."

Separately, on Thursday, Rep. Steve Scalise, R-La., introduced the Republican Study Committee's preferred replacement for Obamacare, the American Health Care Reform Act.

The centerpiece of the RSC's health care bill is a $20,000-per-family tax deduction for purchasing health care that, also, can be applied to payroll taxes.

“This tax benefit will be portable, will provide payroll tax relief to the working poor, and will give families the flexibility to choose a plan that best fits their needs,” the RSC said.

The 2012 Romney Republican focus on cutting top marginal tax rates for the rich is out. Targeted payroll tax cuts for working-class Americans is in. Hopefully the 2016 nominee will get the message.

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