Chicago Columnist Illinois Leader Political Analyst Entrepreneur Business Advisor Chicago Illinois Review

SEIFFE:  Fairer, Flatter Tax Tricks

Tuesday, February 21, 2006

By Ralf Seiffe

One of President Bill Clinton’s real political triumphs occurred when he seized the street crime issue from the Republicans.  By announcing he was putting “100,000 cops on the street”, Clinton reversed the presumption that Democrats mollycoddled criminals and had no real concern for the crooks’ victims and this brilliant strategy reclaimed many of the Democrats that had drifted towards the Republicans during the Reagan years.  Now, two smart Democrats are apparently reprising this co-option strategy, this time attempting the larceny of tax reform.  

One of those present at the creation of the street crime issue was our own Rahm Emanuel, now the congressman from the Fifth District.  As one of the former philanderer’s able strategists, Emanuel was most responsible for raising the money Clinton needed to best his primary rivals and then to win in the 1992 general election.   

Many of the Clinton initiatives must have been shaped by Emanuel’s intellect and political sense. When he left the administration, he was rewarded with a sinecure at an investment bank and made a personal fortune doing deals that stripped Illinois of several corporate headquarters and the contributions they made to our state’s economy and cultural environment.  Then, when Rod Blagojevich decided to become governor, Emanuel came off the bench to succeed the governor in Congress.  

The congressman hasn’t made much of a difference for most residents of the Fifth District; the Brown Line disaster being just one example.  On the other hand, Emanuel’s behind the scenes sort of talent is evident to his fellow Democrat Congressmen--they have made him the Democrat Congressional Campaign Chairman. 

In that role, Emanuel’s talents are further estranged from his district as he spends his time identifying and supporting Democrats running in the few districts that haven’t been gerrymandered into safe Republican or Democrat seats.  Locally, his fingerprints are all over the race to replace Henry Hyde where he’s high-handed local Dems with Tammy Duckworth as his nominee.  

Late last year, Emanuel teamed up with one of the moonbeam Democrats, Ron Weyden of Oregon, to make an assault on the one issue that is dear to Republicans and unites them--taxes.  They have proposed something called the Fair Flat Tax of 2005, a piece of fiction now working through Congress as S. 1927.  For all its faults, Republicans dallying on real tax reform should pay attention because this plan can peel off some Republicans just as Reagan was able to snag some Democrats in the 1980’s. 

Democrat Tax Reform is, of course, an oxymoron.  Reading the actual bill is an exercise in futility; it refers to all manner of other tax laws and, on its face, is simply more unintelligible tax code.  One page alone refers to 22 other laws it repeals. For that reason alone, it should be rejected as a vestige of the 19th century system that time has simply passed.  But, from the marginalia, it appears that the plan repeals the Bush tax cuts despite accumulating evidence that the U.S. Treasury is the big winner.  It reinstitutes the marriage penalty and apparently taxes investment income and capital gains at much higher rates.  

Emanuel is also sticking his hands in his constituents’ pockets by making sure that the government gets a big piece of the most likely capital gain most people actually realize--the sale of a family home.  For example, does a $300,000 profit made on selling the family home qualify as a capital gain under the Emanuel “Flatter” tax plan?  If so, it appears that the family will wind up sending the Treasury a check for $75,000 that they wouldn’t now.  Just think what that will do to the value of Fifth District real estate--and everybody else’s.      

The Weyden-Emanuel plan not a serious effort to reform our tax system but it is a serious political plan.  Sure, the sponsors have sprinkled in some attractive features such as larger standard deductions, credits for local taxes and eliminating of the Alternative Minimum Tax for individuals.  But the real purpose is to redefine Americans into income tax payers and non-payers, thereby re-establishing the battle lines in the Democrats’ 80 year old class war.  These changes are simply adjustments to preserve their most important weapon system, a complex, inherently unfair tax code.   

© 2006 Ralf Seiffe

Ralf Seiffe advises business start-ups and product launches from Chicago, Illinois and is a political analyst and columnist for the Illinois Leader and Illinois Review.