Democrats aid Rhode Island’s rich

THANKS TO Lee Farris ("Some corrections on Carcieri") for pointing out an error in an earlier letter by Greg Morse and me ("No end in sight to Carcieri's cuts").

Gov. Donald Carcieri proposed to eliminate the estate tax for all estates worth less than $1 million. The Rhode Island General Assembly rejected this measure, but by "only" raising the exemption level from $675,000 to $850,000. This is, of course, a familiar Democratic method of "stopping" Republican proposals--by partially implementing them. (Incidentally, fewer than 350 individuals were subject to any estate tax in fiscal year 2008, under the old level.)

We were correct to state that there is a flat tax option, and that it primarily benefits the very wealthy. The "normal" state tax system is progressive, ranging from 3.75 to 9.9 percent, as Farris says. But individuals may also choose an "alternative flat tax." Here is how the Poverty Institute of Rhode Island College describes it:

In 2006, the Rhode Island General Assembly passed the alternative flat tax which allows taxpayers to choose between paying the personal income tax rate and applying allowable deductions and credits or paying a flat tax rate which would apply to all income, without credits or deductions. The flat tax rate started at 8.0 percent in 2006 and will be reduced to 7.0 percent in 2008; it is scheduled to fall every year until it reaches 5.5 percent in 2012.

In other words, the alternative flat tax effectively reduces the top marginal rate by presenting the public with an "option" that only makes sense for the wealthiest households. Although the flat tax option costs the state tens of millions each year in lost revenues, the Democrats in the legislature will not touch it--since indeed, they passed it in the first place.

The alternative flat tax also adds an important caveat to the legislature's move to tax capital gains as income. Although this is a welcome retreat from the previous insane policy of eliminating the capital gains tax--a bipartisan brainwave passed in 2002--the overall regime of tax cuts for the rich is precisely the opposite of what's needed.

Farris is right to insist that factual accuracy is essential in the fight for progressive change. Political clarity is also essential. The experience of our state proves that the Democrats are not the agents of change, but merely the second, and more devious, line of defense for the rich. We absolutely require new political organizations and parties to thrust them aside.
Paul Hubbard, Providence, R.I.