Rep. Levin Warns on Cutting Top Tax Rate

Jun 3, 2011

The Wall Street Journal
June 3, 2011 Kristina Peterson
Staff Writer 
 Rep. Levin Warns on Cutting Top Tax Rate 
 Lowering the top individual tax rate shouldn’t be paid for with measures that penalize working families, the top Democrat on the House Ways and Means Committee said Friday.

While lawmakers from both parties agree that the country’s complicated tax code should be simplified, Rep. Sander Levin (D., Mich.) cautioned that reducing the top U.S. individual tax rate shouldn’t be achieved at the expense of eliminating key tax breaks for lower- and middle-class citizens.

“While a top rate of 25% may sound tantalizing to some, to raise the revenue necessary to keep the reform revenue neutral, you would have to eliminate virtually every tax incentive for middle-income and poor families,” Mr. Levin said in a speech at the Center for American Progress Action Fund, a liberal-leaning think-tank.

Republicans have pushed to lower the top corporate and individual tax rates to 25%, but haven’t specified which tax breaks they would eliminate to pay for a lower rate.

“It is irresponsible to throw out goals, numeric or otherwise, without any indication of how to achieve them, as done in the Republicans’ budget,” Mr. Levin said. He also criticized the GOP’s insistence that taxes can’t be increased to reduce the federal deficit. “There is no way to address our problems by saying that revenues are off the table — it just won’t work.”

The tax credits and deductions that would likely have to be repealed to keep the tax code “revenue neutral” could disproportionately affect middle- and lower-income families, Mr. Levin warned.

A study by the Joint Committee on Taxation found that 92% of tax credits and deductions by value benefited individuals rather than corporations in 2007, he noted. For instance, 70% of the benefit of the mortgage interest deduction goes to 31 million households making less than $200,000, he said. Mr. Levin said the exclusion for employer-provided health care and credits for education are key to building and strengthening the middle class.

Reducing the top tax rate to 25% “likely means a tax cut for many of those at the top and a tax increase for broad portions of the middle class,” even if tax breaks for capital gains and dividends were eliminated, Mr. Levin said.