The Issues: Permanent Tax Cuts

CBS News continues an election-year series titled "What Does It Mean To You?" focused on where the presidential candidates stand on major issues and how a vote for one or the other candidate might affect average people's lives.

In this report, CBS News Correspondent Mika Brzezinski compares the Bush and Kerry positions on whether tax cuts that benefit the wealthiest Americans should be made permanent or repealed.

"I don't give grades," says Heleny Cook. "You earn them."

Cook is a passionate teacher – and passionate in her belief that President Bush's tax cuts only help the rich.

"If you want to give out tax breaks, if you want to prime the economy, then do it for working people," she says. "Don't do it for privileged people who have millions of dollars in the bank."

She talks like a working stiff, but in reality, Cook says, "Honey, I'm upper class. I have two houses, a sailboat, I summer in Martha's Vineyard. I'm very comfortable."

In fact, she's a millionaire many times over and a member of the group Responsible Wealth, advocates for narrowing the gap between the rich and, well, everybody else. The tax cuts Cook derides directly benefit her.

"Without lifting a finger, I am keeping 20 percent more money than I did the year before," she says.

John Kerry says he'd repeal the tax cuts for the wealthiest Americans.

"We're going to roll back the tax cut of the wealthiest Americans and put money back in pockets of average Americans," Kerry said in Detroit in June.

That might not sound like much, but households in the top 20 percent of income, earning an average of about $204,000 annually, pay more than 80 percent of all tax revenue. That's why, some say, it's no surprise that they receive the most tax relief.

You simply cannot give tax relief to people who either pay no income taxes at all, or in some cases, receive benefits back," says Scott Hodge, president of the Tax Foundation.

President Bush wants to make his tax cuts permanent. And now he's talking about simplifying the tax code.

"Iwill lead a bipartisan effort to reform and simplify the federal tax code," the president said at last month's Republican convention.

Former IRS commissioner Fred Goldberg says something has to be done.

"Tax reform is an imperative at this point," Goldberg says. "I think the current system is broken beyond repair."

But it's not gonna be easy.

"Fundamental tax reform will bring the lobbyists out of the woodwork like cockroaches," Hodge says.

That's because the current tax code includes incentives for social policies that we've gotten used to – like deductions for home mortgage interest, charitable donations, even the purchase of fuel-efficient cars. The simpler the tax code, the less likely all these special exemptions will be in it.

"Fundamental tax reform will bring some of these politically motivated social policies to an end," says Hodge.

For Heleny Cook, tax reform is simple math.

"Those who have more can pay more," she says. "Those who have less, pay less. That makes sense to me."