Robert Bloink and William H. Byrnes Robert Bloink and William H. Byrnes

As a means of protecting lower- and middle-income taxpayers from future tax hikes, the Democratic House Minority Leader has proposed a piece of legislation that would require a three-fifths “supermajority” vote in order to take any legislative action that would have the effect of raising taxes on lower- or middle-income taxpayers. The proposal would protect the lowest-earning 80 percent of taxpayers. Taxes on the top 20 percent of earners could be raised with a simple majority vote.

Although the bill has yet to be finalized, we asked Professors Robert Bloink and William Byrnes, who are affiliated with ALM’s Tax Facts, and hold opposing political viewpoints, to share their opinions as to how the Democrats’ supermajority voting requirement would work, and whether it might be an effective means of equalizing lobbying power.

Their Votes:

Bloink
Byrnes

Their Reasons:

Below is a summary of the debate that ensued between the two professors.

Bloink: This new Democratic proposal is a great way to protect lower- and middle-class taxpayers from situations like we saw last year, where a sweeping tax reform bill was passed and primarily benefited the wealthy.  I do see potential issues with the proposal, but it’s far from finalized yet and could see substantial changes before its even subject to a vote in the new Democrat-led house.

Byrnes: My first problem with this proposal is–how do we determine which tax provisions solely raise taxes on the top 20 percent of earners?  This new rule would make it incredibly difficult to ever raise taxes on anyone—not that I’m in favor of raising taxes, but we do need to consider the potentially detrimental impact on tax revenues.

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Bloink: Professor Byrnes’ argument doesn’t actually seem to be a problem with the idea of protecting lower income taxpayers at all, and is more of a technicality that can be addressed in the bill’s final form.

Byrnes: But how?  It just seems to me that this bill would make it virtually impossible to change most of the tax code without excessive support for any given change.  Consider the lower long-term capital gains tax rates.  The 20 percent rate that applies to certain carried interest and strongly benefits extremely wealthy hedge funds and other private investment funds also benefits…well, any American taxpayer with an investment that would be subject to long-term capital gains tax rates when sold.  Raising the corporate tax rates?  Well, that could impact the lower and middle classes because the corporations would pass those tax hikes along in the form of reduced wages and higher priced goods.

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Bloink: Don’t get me wrong, I do think the bill needs work—we need to figure out how to define upper-income taxpayers in a way that makes sure those taxpayers who have used loopholes to lower their “on paper” taxable income aren’t included in this protected class simply because they were able to take advantage of tax loopholes.

Byrnes: And that brings up another point, I think that the “top 20 percent” of American taxpayers earn a lot less than most people might think—some research shows that a couple making a combined $110,000 could fall within this range, and that’s far from wealthy.  I’m sure the line could be drawn in a better way, but it still seems like an overly complex way to deal with tax reform debate.

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Bloink: The bill is a step in the right direction toward protecting those lower and middle income taxpayers who are suffering or merely breaking even under the new tax law because of the elimination of, or limitations placed on, valuable deductions and exemptions that helped the middle class—look at the suspension of the dependency exemption, which hurt taxpayers with multiple dependents or the limitation on deducting state and local taxes, which can be a huge burden for lower income taxpayers struggling to continue to live and work in high tax states.  Yes, these tax changes also hurt higher income taxpayers, but those taxpayers also see a more significant tax rate reduction under the new law.

Byrnes: I just think that if a majority of voters want a certain result, and elect their representatives based on their views, that majority should have the ability to pass a provision even if it does hurt lower income taxpayers.  We have plenty of provisions built into the tax code that offer protection for lower- and middle-class Americans—we don’t need to eliminate the basic premise of majority rule in the tax law as a protective strategy.

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