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Column: Eliminating taxes on working poor should make sense to both parties




Talk of taxes and tax reform is in the air again.

At the federal level, the “fiscal cliff” of Jan. 1 was more about political theater and procrastination than effective solutions. Less publicized, the most recent phase of Obamacare brought some new taxes.

In addition, the 2 percent “holiday” on payroll/FICA taxes resulted in much higher taxes for all workers. Politicians in Washington generally ignore this most burdensome aspect of income taxation — 15.3 percent of every dollar earned (up to a cap of $110,100).

This is regrettable, especially since FICA hammers the working poor and those in the middle class. For example, someone earning $20,000 loses about $3,000; someone earning $60,000 loses about $9,000.

At the state level, Indiana is talking about tax cuts, given its projected budget surpluses. Gov. Mike Pence has proposed a reduction in the marginal income tax rate from 3.4 percent to 3.06 percent.

If I were king, I’d reduce income taxes overall but specifically would eliminate state income taxes on the working poor and expand the state’s Earned Income Tax Credit.

 

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