On The Issues: Balancing The Burden Of Income Inequality

BOSTON (CBS) – "This country today has more income and wealth inequality than any major country on earth," says Bernie Sanders, who has made such inequities a centerpiece of his candidacy for the Democratic nomination.

Actually, at least 41 other countries have more inequality, according to the World Bank, including Russia and Mexico. But years of stagnant working-class wages and persistent poverty have put income inequality front and center in the current campaign. Says Hillary Clinton: "It's our job to rein in the excesses of capitalism."

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So what's the key difference between the two Democrats?

Both want to help close the gap by growing job and wages through federal stimulus. But Sanders backs more sweeping taxes on corporate profits and inheritance, which Clinton claims would hurt the middle class.

Give the political edge to Sanders for now, says Joe Mathieu of WBZ Newsradio 1030. "He's found a sweet spot in painting this as a contradiction for Hillary Clinton, who appears to be a Wall Street darling," he says.

Related: On The Issues - Job Creation and Free Trade

But politics aside, to Boston College School of Social Work Professor Tiziana Dearing - a former president of Catholic Charities who co-directs BC's Center for Social Innovation - the key question for the candidates is: "Do you actually understand the forces of inequality in the US? You get everything from Bernie Sanders on the extreme end, [promoting a] heavily regulated [system with] lots of centralized programming, a tax code to match it. Then you'll get a Ted Cruz on the other end; pretty much anything he does say about inequality is actually about the role of government."

And that's where most of the Republican candidates draw the line. "The innovation's never gonna come from the federal government," says Marco Rubio.

But while Rubio, Cruz, and other Republicans stress decentralized approaches to inequality, Dearing credits them with supporting greater economic mobility and tax code changes such as increasing the Earned Income Tax Credit to help boost working class incomes. "Anytime you have the word tax and you can say it's favored by both the Republican and Democratic candidates, that's fairly remarkable," she says.

Some Republicans go even further. "We've also enforced the laws in Ohio on set-asides because we want minorities to develop entrepreneurship so they can rise," says John Kasich.

But with the exception of Kasich, none of the GOP candidates support raising the federal $7.25 an hour minimum wage. "We cannot do this if we are gonna compete against the rest of the world, we just can't do it," says Donald Trump. "Every time we raise the minimum wage, the number of jobless people increases," says Ben Carson.

It's a mantra that frustrates Prof. Dearing: "'Let's not do anything about the minimum wage' just makes me want to pull my hair out."

IN DEPTH: CANDIDATES' POSITIONS

HILLARY CLINTON:

"I've said I want to be the small-business president, and I mean it. And throughout this campaign, I'm going to be talking about how we empower entrepreneurs with less red tape, easier access to capital, tax relief and simplification. I'll also push for broader business tax reform to spur investment in America, closing those loopholes that reward companies for sending jobs and profits overseas.

And I know it's not always how we think about this, but another engine of strong growth should be comprehensive immigration reform…. Bringing millions of hardworking people into the formal economy would increase our gross domestic product by an estimated $700 billion over 10 years.

Then there are the new public investments that will help establish businesses and entrepreneurs, create the next generation of high-paying jobs…let's establish an infrastructure bank that can channel more public and private funds to finance world-class airports, railways, roads, bridges and ports. And let's built those faster broadband networks and make sure there's a greater diversity of providers so consumers have more choice. And really, there's no excuse not to make greater investments in cleaner renewable energy right now.

And let's fund the scientific and medical research that spawns innovative companies and creates entire new industries, just as the project to sequence the human genome did in the 1990s and President Obama's initiatives on precision medicine and brain research will do in the coming years.

It's time to recognize that quality, affordable childcare is not a luxury. It's a growth strategy. And it's way past time to end the outrage of so many women still earning less than men on the job and women of color making even less.

Fair pay and fair scheduling, paid family leave and earned sick days, childcare are essential to our competitiveness and our growth. And we can do this in a way that doesn't impose unfair burdens on businesses, especially small businesses….We also need fair growth and that will be the second key driver of raising incomes….. We do have to raise the minimum wage, and implement President Obama's new rules on overtime, and then we have to go further. I will crack down on bosses who exploit employees by mis- classifying them as contractors or even steal their wages. To make paychecks stretch, we need to take on the major strains on family budgets. I will protect the Affordable Care Act and build on it to lower out-of-pocket health care costs.

I will produce ways to encourage companies to share profits with their employees…..Another priority must be reforming our tax code. …[And] we do need to set a high bar for trade agreements. We should support them if they create jobs, raise wages and advance our national security. And we should be prepared to walk away if they don't. To create fair growth, we need to create opportunity for more Americans."

Source: Clinton speech to New School, 7/13/15

BERNIE SANDERS:

"As president, Sen. Bernie Sander will reduce income and wealth inequality by:

Demanding that the wealthy and large corporations pay their fair share in taxes. As president, Sen. Sanders will stop corporations from shifting their profits and jobs overseas to avoid paying U.S. income taxes. He will create a progressive estate tax on the top 0.3 percent of Americans who inherit more than $3.5 million. He will also enact a tax on Wall Street speculators who caused millions of Americans to lose their jobs, homes, and life savings.

Increasing the federal minimum wage from $7.25 to $15 an hour by 2020. In the year 2015, no one who works 40 hours a week should be living in poverty.

Putting at least 13 million Americans to work by investing $1 trillion over five years towards rebuilding our crumbling roads, bridges, railways, airports, public transit systems, ports, dams, wastewater plants, and other infrastructure needs.

Reversing trade policies like NAFTA, CAFTA, and PNTR with China that have driven down wages and caused the loss of millions of jobs. If corporate America wants us to buy their products they need to manufacture those products in this country, not in China or other low-wage countries.

Creating 1 million jobs for disadvantaged young Americans by investing $5.5 billion in a youth jobs program. Today, the youth unemployment rate is off the charts. We have got to end this tragedy by making sure teenagers and young adults have the jobs they need to move up the economic ladder.

Fighting for pay equity by signing the Paycheck Fairness Act into law. It is an outrage that women earn just 78 cents for every dollar a man earns.

Making tuition free at public colleges and universities throughout America. Everyone in this country who studies hard should be able to go to college regardless of income.

Expanding Social Security by lifting the cap on taxable income above $250,000. At a time when the senior poverty rate is going up, we have got to make sure that every American can retire with dignity and respect.

Guaranteeing healthcare as a right of citizenship by enacting a Medicare for all single-payer healthcare system. It's time for the U.S. to join every major industrialized country on earth and provide universal healthcare to all.

Requiring employers to provide at least 12 weeks of paid family and medical leave; two weeks of paid vacation; and 7 days of paid sick days. Real family values are about making sure that parents have the time they need to bond with their babies and take care of their children and relatives when they get ill.

Enacting a universal childcare and prekindergarten program. Every psychologist understands that the most formative years for a human being is from the ages 0-3. We have got to make sure every family in America has the opportunity to send their kids to a high quality childcare and pre-K program.

Making it easier for workers to join unions by fighting for the Employee Free Choice Act. One of the most significant reasons for the 40-year decline in the middle class is that the rights of workers to collectively bargain for better wages and benefits have been severely undermined.

Breaking up huge financial institutions so that they are no longer too big to fail. Seven years ago, the taxpayers of this country bailed out Wall Street because they were too big to fail. Yet, 3 out of the 4 largest financial institutions are 80 percent bigger today than before we bailed them out. Sen. Sanders has introduced legislation to break these banks up. As president, he will fight to sign this legislation into law."

Source: berniesanders.com

JEB BUSH:

"First, I want to lower taxes and make the tax code simple, fair and clear. It should be easy to understand and make it easy for people to fill out their own tax forms.

We will cut individual rates from seven brackets to three: 28%, 25% and 10%. At 28%, the highest tax bracket would return to where it was when President Ronald Reagan signed into law his monumental and successful 1986 tax reform.

With this reform in place, roughly 15 million Americans will no longer bear any income-tax liability. The plan nearly doubles the standard deduction now taken by roughly two-thirds of all filers. It eliminates the marriage penalty, expands the Earned Income Tax Credit, ends the death tax, retires the Alternative Minimum Tax and ends the employee's share of the Social Security tax on earnings for workers older than 67….

Second, I want to eliminate the convoluted, lobbyist-created loopholes in the code. For years, wealthy individuals have deducted a much greater share of their income than everyone else. We will retain the deductibility of charitable contributions but cap the deductions used by the wealthy and Washington special interests, enabling tax-rate cuts across the board for everyone. And while we're doing that, we will treat all noninvestment income the same, so unless you stake capital in an investment, you won't be able to claim the capital-gains tax rate on your market gains.

Third, I believe that the tax code should no longer be an impediment to the nation's competitiveness with China, Europe and the rest of the world. Liberals will tell you that we need walls and tariffs to protect U.S. businesses from international competitors. The liberals are wrong; we need tax reform. To stop American companies from moving out of the country, I will cut the corporate tax rate from 35%—the highest in the industrial world—to 20%, which is five percentage points below China's….

By focusing on tax reform like I did in Florida, America can grow faster, too. But tax relief and reform is only part of what we must do. We still have to reduce the regulations that choke so much of the U.S. economy, especially farms, factories and power plants. We have to fix the broken immigration system so that it helps drive a growing economy. We have to take full advantage of America's energy revolution.

Finally, we have to transform the education system so that all children are prepared to succeed in college and at work, and participate fully in the economy we're trying to build. Taken together, these policies will unleash increased investment, higher wages and sustained 4% economic growth, while reducing the deficit."

Source: Jeb2016.com

BEN CARSON:

"Treatment Plan: Repeal the Entire Tax Code and Replace It With a True 14.9 Percent Flat Tax

Replace the tax code with a true flat tax – no deductions, tax shelters or loopholes.

Tax all income at a uniform 14.9 percent rate.

To protect those rising from poverty, apply the flat tax only to income above 150 percent of the Federal Poverty Level (FPL). For example, a family of four will not pay the 14.9 percent tax on their first $36,375 of income.

Treat everyone in America as citizen-owners and require those whose income is at or below 150 percent of the FPL to make a de minimis tax payment annually.

Tax income only once: no more double taxation of capital gains, dividends and interest income at the personal level.

Eliminate deductions for home mortgage interest, charitable giving and state and local taxes. The overwhelming majority of Americans do not benefit from these itemized deductions.

Eliminate the Alternative Minimum Tax (AMT). Under the current tax system, the AMT forces middle-class Americans to calculate their tax liability twice and punishes them by requiring them to pay the larger of the two tax bills.

Abolish the death tax in its entirety.

My Pledge: A Simple, Transparent and Fair Tax System for All Americans

My flat tax plan will increase our existing anemic 2.2 percent economic growth rate by an additional 1.6 percent, resulting in nearly 4 percent growth annually.

I am confident that over the first 10 years of my plan, this surge in growth will increase our real gross domestic product by more than 16 percent.

This expanded growth will result in more than five million new jobs over the coming decade and an increase in wages of nearly 11 percent during the same period."

Source: bencarson.com

TED CRUZ:

"Cruz Simple flat tax plan:

Creates a simple, single-rate flat tax for individuals. The existing seven different rates of individual income tax will become one low rate: 10%. A family of four will pay no taxes on their first $36,000 of income.

The plan exempts a large amount of initial income for low- and middle-income taxpayers, with a $10,000 standard deduction and $4,000 personal exemption. It also keeps the Child Tax Credit and expands and modernizes the Earned Income Tax Credit with greater anti-fraud and pro-marriage reforms.

The plan keeps the charitable giving deduction and features a home mortgage interest deduction, capped at principal value of $500,000.

The corporate income tax along with the payroll tax are abolished, replaced by a 16% Business Flat Tax.

The current corporate tax code is riddled with years of accumulated loopholes and special favors, burdening U.S. businesses with the highest top tax rate among the advanced nations. This convoluted and anti-competitive structure will be replaced with a simple 16% tax on net business sales (gross sales minus expenses and capital expenditures).

The current payroll tax discourages work and job creation. The vast majority of Americans pay more in payroll tax than in income tax. The Simple Flat Tax will eliminate the payroll tax, boosting jobs and wages for working Americans, while guaranteeing funding for Social Security and Medicare.

The Simple Flat Tax creates Universal Savings Accounts (USA) allowing savings of up to $25,000 per year in tax-deferred dollars. Savers can withdraw the funds at any time for any reason – whether it be for college tuition, a down payment on a home, or their son or daughter's wedding. This savings feature harmonizes with the tax elements of the Cruz Simple Flat Tax to move toward encouraging savings and investment – a recipe for economic growth and jobs.

RESULTS: GROWTH AND OPPORTUNITY – The Tax Foundation estimates that the Cruz Simple Flat Tax will, over ten years, increase the size of the U.S. economy by 13.9% above what is currently projected, create an additional 4.86 million jobs, and boost wages by 12.2%. Every category of worker will see a double-digit increase in after-tax income.

OTHER TAXES ELIMINATED: Death Tax; Overseas profits tax; Alternative Minimum Tax; Obamacare taxes.

Abolishes the IRS as we know it, and ends the use of the tax code as a political weapon, with a simple tax code that is transparent and resistant to corruption.

Eliminates the complexity that invites government mischief, corporate welfare, and cronyism so that public faith in the tax system's fairness can be restored.

Reduces tax evasion and makes sure all businesses pay their fair share at one flat rate.

Defeats the army of lobbyists allied with politicians – the Washington Cartel – that now sneaks benefits into the tax laws for friends and punishments for foes. Instead of the government choosing winners and losers, individuals and businesses will be free to prosper on their own merit.

Ends the injustice of cronyism and the hidden costs associated with it, which currently damage the nation's competitiveness and stifle the wages of ordinary Americans. By breaking the Cartel, these costs will end too, and businesses will be free to thrive, hire, and grow.

Establishes a simple rate for individuals and businesses that is highly visible, which deflects the tendency of politicians to raise tax rates.

Repeals the corporate income tax, with the highest top rate among developed nations, and stops driving jobs and business overseas. By replacing the corporate income tax with a Business Flat Tax, jobs and growth will return to American soil, and a chronic source of temptation to tinker with the tax code through corporate loopholes will be eliminated.

Allows for full and immediate expensing of business equipment, which will remove the burdens imposed by the current system on heavy industry, mining, energy, farming, ranching, and manufacturing.

Removes the current tax penalty on American businesses that earn profits abroad, encouraging those businesses to bring profits home. Businesses will flock to America rather than keep money abroad or move overseas to escape high tax rates – and jobs and growth will come home with them. Under the Simple Flat Tax, U.S. businesses could return their overseas profits to American soil for a one-time 10 percent repatriation fee.

Eliminates a current competitive disadvantage for American products through border adjustability: foreign imports will be subject to the Business Flat Tax and American exports will have the tax removed, giving U.S. businesses a level playing field.

Spares citizens from hundreds of wasted hours and expenses in tax compliance – Americans will instead be able to file their taxes on a postcard or a phone app.

Ensures that low- and middle-income Americans have the opportunity to build their wealth and prosper by exempting the first $36,000 of income for a family of four.

Allows for automation of compliance. Instead of having individuals report every detail about dividend or interest income, for example, banks, brokers, and financial institutions would simply withhold the tax.

Eliminates the injustice and burdens of the Death Tax, the Alternative Minimum Tax, and the Obamacare taxes. Family farms and businesses can stay in the family.

Enables Americans to save up to $25,000 annually tax-deferred in the Universal Savings Accounts (USA), allowing them to begin a nest-egg and secure their future and that of their children."

Source: tedcruz.org

JOHN KASICH:

"John Kasich's extensive experience as U.S. House Budget Committee chairman, in the private sector and as governor of one of the largest states in the nation helped him develop a keen understanding of what it takes to create opportunity, empower job creation and foster economic growth. America needs that experience.

Bringing Ohio's Economy Back: When John Kasich took office as governor of Ohio in 2011, Ohio had lost 351,000 private sector jobs and was 48th in the nation in job creation. Under his leadership, however, Ohio has enacted jobs-friendly policies that have helped Ohio job-creators get back on their feet and create hundreds of thousands of new private sector jobs. Additionally, Ohio has become a top-ten state for job creation and far outperformed its own historical job creation performance. Wages are growing faster than the national average, the unemployment rate is better than the national rate and under Governor Kasich the number of new businesses created in Ohio has increased every year and is now at record high levels.

The Largest Tax Cut in the Nation: Understanding that a more competitive tax environment is essential to job creation, Gov. John Kasich teamed up with Ohio's legislature to cut taxes by $5 billion since 2011—the largest tax cut of any sitting governor. The elimination of the death tax, a 16 percent income tax cut and a complete phase out of income taxes for small businesses will free up more capital for growth and job creation.

Eliminating Wasteful Red Tape: Recognizing that unnecessary regulation stifles job creators and discourages investment, John Kasich created the Common Sense Initiative (CSI) in 2011. Charged with being a one-stop shop for reviewing regulations, CSI has so far reviewed more than 5,500 state regulations with the goal of reducing hardships that government too often places on businesses.

An Innovative Approach to Economic Development: John Kasich replaced Ohio's outmoded state-run economic development system with an innovative private sector approach called JobsOhio, a non-profit organization staffed by industry experts that can move at the speed of business. An undeniable and quantifiable success, JobsOhio is positioning the state as a go-to location for aerospace, advanced manufacturing, biohealth, financial services, logistics and information technology."

Source: johnkasich.com

MARCO RUBIO:

"Marco has a tax plan that . . .

Cuts taxes, letting taxpayers keep more of their own money instead of sending it to Washington.

Dramatically simplifies the tax code by eliminating all itemized deductions and tax "extenders."

Under Marco's tax reform plan, the charitable-contribution deduction and a reformed mortgage interest deduction would be available to all taxpayers.

Creates a new $2,000 (individual) / $4,000 (married filing jointly) refundable personal tax credit in place of the standard deduction: Credit phases out beginning above $150,000 (individual) / $300,000 (married filing jointly) and would be unavailable to taxpayers with an annual income in excess of $200,000 (individual) / $400,000 (married filing jointly).

Eliminates the Marriage Penalty and the Alternative Minimum Tax (AMT).

Consolidates the maze of higher education tax incentives into a single, $2,500 universal tax credit for the first four years of post-secondary education and costs related to eligible job skill training. The credit phases out between 400 – 500 percent above the Federal Poverty Level (roughly $97,000 – $121,250 for a family of four).

Addresses the tax treatment of health care as part of a comprehensive effort to repeal and replace Obamacare with consumer-centered reforms. The plan repeals all 21 Obamacare taxes.

Creates a new, partially refundable Child Tax Credit of up to $2,500 per child. The new child tax credit is applicable to taxpayers' total income and payroll tax liability, to offset the parent tax penalty and help working parents. The credit phases out beginning above $150,000 (individual) / $300,000 (married filing jointly) and would be unavailable to taxpayers with an annual income in excess of $200,000 (individual) / $400,000 (married filing jointly).

The new child credit is in addition to the current child tax credit. The new child credit is refundable against the payroll taxes that are the biggest tax burden on low-income families. It provides a meaningful incentive for work.

Rejects big government proposals put forward by Democrats that hit small businesses with new mandates and workers with new tax increases.

Cut the Tax Rate for All Businesses to 25%

Integrates all business income into a single tax rate no higher than 25%.

Ensures that all businesses, large and small, are subject to the same rate

Allows immediate expensing of capital expenditures (equipment, structures, inventories, and land), ending confusing depreciation schedules and leading to a massive increase in job-creating investment.

For American companies and individuals doing business overseas, eliminates the double-taxation of income earned abroad by transitioning to a competitive "territorial" tax system. For currently deferred overseas earnings, the plan provides a 6% deemed repatriation rate, payable over ten years.

Eliminates unfair carve-outs benefiting large corporations and high-tax states.

Taxes all business income once (at the entity level) and eliminates harmful double-taxation of saving and investment income.

Provides a transition period, which requires a one-time booking of investment at current law capital gains and dividend rates, minus the 3.8% investment tax hike from ObamaCare.

Immediately eliminates the federal estate tax, a tax that penalizes family-owned farms and businesses and reduces saving and investment in our economy.

Ends the Taxation of Interest Income

Fully removes interest from the tax base; interest income is no longer taxable or deductible.

Ends the bias in favor of debt rather than equity, leading to a more stable financial system and healthier economy."

Source: marcorubio.com

DONALD TRUMP:

"America needs a bold, simple and achievable plan based on conservative economic principles. This plan does that with needed tax relief for all Americans, especially the working poor and middle class, pro-growth tax reform for all sizes of businesses, and fiscally responsible steps to ensure this plan does not add to our enormous debt and deficit.

This plan simplifies the tax code by taking nearly 50% of current filers off the income tax rolls entirely and reducing the number of tax brackets from seven to four for everyone else. This plan also reduces or eliminates loopholes used by the very rich and special interests made unnecessary or redundant by the new lower tax rates on individuals and companies….

Simplifying the tax code and cutting every American's taxes will boost consumer spending, encourage savings and investment, and maximize economic growth….

This lower tax rate cannot be for big business alone; it needs to help the small businesses that are the true engine of our economy. Right now, freelancers, sole proprietors, unincorporated small businesses and pass-through entities are taxed at the high personal income tax rates. This treatment stifles small businesses. It also stifles tax reform because efforts to reduce loopholes and deductions available to the very rich and special interests end up hitting small businesses and job creators as well. The Trump plan addresses this challenge head on with a new business income tax rate within the personal income tax code that matches the 15% corporate tax rate to help these businesses, entrepreneurs and freelancers grow and prosper.

These lower rates will provide a tremendous stimulus for the economy – significant GDP growth, a huge number of new jobs and an increase in after-tax wages for workers.

The death tax punishes families for achieving the American dream. Therefore, the Trump plan eliminates the death tax."

Source: donaldjtrump.com

JON KELLER'S ANALYSIS:

This issue provides a clear road map to the philosophical differences between the two parties. The Democrats argue for the federal government and unions to play a central role in spurring job and wage growth and easing the income gap. Bernie Sanders is more aggressive than Hillary Clinton about hiking taxes on corporations and the wealthy. The Republicans prefer to cut taxes on businesses and individuals to unleash market forces they believe will raise incomes and create jobs. They all call for major spending decisions on programs aimed at elevating the poor and increasing working-class incomes to be made at the state and local level rather than in Washington.

One area of partisan overlap – trade. Cruz and Trump join Clinton and Sanders in opposing the latest major free trade initiative, the Trans Pacific Partnership, which Bush, Carson, Kasich and Rubio support. And these days you'll also hear denunciations of corporate cronyism and greed from across the political spectrum.