RALEIGH, N.C. — Democratic presidential candidate John Edwards, as part of an effort to address the nation's growing income gap, proposed a new tax policy Thursday that would increase taxes on the affluent while providing new tax breaks for those struggling to break into the middle class.
In a speech in Des Moines, Iowa, Edwards proposed tax increases on those earning capital gains, those earning more than $200,000 per year and hedge fund investors. He also called for putting new limits on executive pensions and an end to some tax breaks for multi-national corporations.
At the same time, Edwards called for new tax breaks for low-wage earners, new efforts to help people build savings accounts, and new assistance to help subsidize child care.
"It's time to restore fairness to a tax code that has been driven badly out of whack by the wrongheaded rules of the Washington establishment - more wealth for the wealthy and more power for the powerful," Edwards said in prepared remarks. "In America, when the middle-class makes money from hard work they shouldn't pay higher taxes than when the rich make money from money."
The tax proposal is the latest in a series of detailed proposals by the former North Carolina senator as part of a larger campaign to reduce poverty.
Edwards said his tax plan would help strengthen the middle class, end special tax breaks for "insiders," and require wealthy Americans to pay more.
Edwards said he was making the proposals because income inequality in the United States is the greatest it has been since 1928. He said the top 300,000 taxpayers now make more than the bottom 150 million Americans.
Edwards blamed lobbying by powerful corporate interests in Washington, and the support of President Bush for the growing inequality.
Among the tax increases Edwards proposed are:
_Raising the top rate on capital gains to 28 percent from 15 percent - the same level, he said, that it was under President Reagan in the 1980s. He said such a change would ensure that investors' incomes would be taxed at the same rate as wage earners.
_Roll back the income tax cut pushed through Congress by Bush for families who make more than $200,000 per year. He said more than half of the $132 billion in tax cuts will go to the top one percent of taxpayers in 2010.
_Cap executive pensions. He proposes to limit the amount of money a person can invest annually in an IRA or a 401(K) Plan to $1 million.
_Close hedge fund and private equity loopholes. Edwards said such investors pay only 15 percent capital gains rather than ordinary income tax rates.
Edwards would also provide tax breaks for the middle class and poor to encourage more savings.
Among his proposals for tax breaks:
_Help low-income people build personal savings by creating a Get Ahead Credit plan to encourage savings by providing up to a $500 tax credit for low-income people who save $500. The savings could be used for retirement, a college education or a home down payment. Edwards would also provide another tax credit for targeted low-income groups. The two programs could mean as much as $1,000 for families with little personal savings.
_Exempt from taxes each family's first $250 earnings in interest, capital gains and dividends. The idea is to encourage savings.
_Expand the child and dependent care tax credit to pay up to 50 percent of child care expenses, up to $5,000, and make it partially refundable to benefit low-income working families.
_Triple the earned income tax credit for the four million adults without children, to more than $1,200 for poor single workers. Now the tax credit applies to the working poor with children.
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