The Reagan Administration undermined popular support for our system of taxation by riddling the tax code with loopholes, then rode a wave of cynicism to cut taxes on the rich by promoting the notion of a flat tax. Corporate income taxes have plummeted. Changes in our tax laws since 1977 have increased after-tax income for the rich. Since the wealthiest Americans own most investment assets, this capital gains tax reduction is tax relief for the rich. The Federation opposes further capital gains tax cuts on either the federal or state levels and advocates that capital gains taxes should be further increased.
Republican politicians continue to push flat income tax proposals.
The flat tax proposal also targets working people for added tax burdens because it exempts unearned income such as stock dividends and capital gains, which are overwhelmingly the province of the rich. California is enjoying renewed state tax revenues due to the economic recovery. Unfortunately, the legislature and governor chose to use some of this taxpayer money to give tax breaks to corporations. We argued that California should have invested all of this state surplus in human services, education and infrastructure programs that serve our residents. State legislators have been too eager to provide corporate tax breaks.