By LESLIE WAYNE
Published: July 27, 2007
The New York Times
Calling the current tax code “badly out of whack,” former Senator John Edwards yesterday proposed increasing the capital gains tax on upper-income investors and using the money to provide tax-free savings accounts and expanded tax credits for lower-income workers.
In a speech in Des Moines, Mr. Edwards, a candidate for the Democratic presidential nomination, said he would “rewrite our tax code to make sure it is fair” and added that tax policy under President Bush had led to “more wealth for the wealthy and more power for the powerful.”
The Edwards campaign said his plan would raise the tax rate on capital gains, which are profits from investments, to 28 percent from the current 15 percent for taxpayers with incomes over $250,000. It would remain at 15 percent for those who earn less than $250,000.
Mr. Edwards, of North Carolina, is the first Democratic candidate to call for a broad-based increase in taxes on investment income, and his plan is in keeping with the populist tone of his campaign. On taxes, as on health care and other issues, the Edwards campaign has sought to promote him as more of a champion of the poor and the working class than Senators Hillary Rodham Clinton of New York and Barack Obama of Illinois. Mr. Edwards repeated his calls to repeal the Bush tax cuts for families with incomes over $200,000 and to raise taxes on hedge fund and private equity managers. And he said he would “declare war” on off-shore tax shelters and put limits on executive compensation.
Mr. Edwards said the revenue gained from these tax increases would pay for a variety of tax cuts aimed at middle- and lower-income people, including exempting the first $250 of investment income from capital gains taxes, expanding the earned-income and child and dependent care tax credits, setting up special tax-free savings accounts of up to $500 a year and a program where the government would match the first $500 in savings.
Mr. Edwards would eliminate taxes on estates less than $4 million. Republicans are pressing for a permanent total elimination of the federal estate tax. Under current law, estates valued at less than $2 million per couple are exempt from taxation. The exemption gradually increases to 2010, when it is eliminated. But unless the Bush tax cuts are extended by a future Congress and president, the estate tax would be reinstated in 2011.
Dennis J. Goldford a political science professor at Drake University in Des Moines, said Mr. Edwards’s tax plan is “consistent with his populist image of going after the wealthy and helping the poor.” But, he cautioned, “he’s got to be careful, everyone wants to be rich.”
The Edwards campaign said that after paying for the programs outlined yesterday, Mr. Edwards’s tax plan would generate an extra $50 billion a year that could be used for other social programs like his health care proposal. Mr. Edwards has said his health care program would cost $90 billion to $120 billion and would be financed, in part, by rolling back the Bush tax cuts on those with incomes over $200,000.
The Edwards campaign said it would retain the Bush tax cuts on incomes below $200,000. But the campaign did not factor this cost into its calculation because it assumed a future Congress would not eliminate this tax break, said James Kraal, a policy analyst for the campaign.
Robert S. McIntyre, director of Citizens for Tax Justice, a labor-backed group whose calculations are widely respected by tax experts, said that if the cost of extending tax cuts for people earning less than $200,000 was added to the calculation, the plan would create a $35 billion revenue shortfall instead of the extra $50 billion predicted by the Edwards campaign.
“John Edwards is trying to do something nice for low-income people,” Mr. McIntyre said. “The question is whether he has a way to pay for it. He is repealing tax cuts on the rich that really do not exist and the only part of substance is that he is expanding the Bush tax cuts to everyone else, but doesn’t count it. I don’t want to go overboard in the criticism, but this is very deceptive.”