Posted By RichC on October 16, 2016
I love simplicity … so when tossing around political footballs, I generally join the team that at least "attempts" to simplify government and taxes. I’m not naïve enough to believe it will ever happen or even work well, but after filing personal (for friends and family), organizations and business taxes for years, it would sure would be nice to give it a try.
When Steve Forbes was campaigning on his "flat tax" pproposal a couple of decades ago or even Herman Cain and his "9-9-9 plan" … I was intrigued. Enough so that I somewhat studied and evaluate each plan to determine if they were even remotely do-able (provided enough tax revenue, reduce enough credits and deductions or lead to growth enough to make up for rate cuts). That’s when I started to think about my own proposal.
Rich’s Plan …
I first concluded that it would need to be "progressive" enough to gain Democratic support and yet a cut in rates enough to keep Republicans interested. So I inched my way into the the math by looking at the exponential curves and needed revenue. What I came up with was a simple graph-able formula that could take most current U.S. incomes and plot them on a curve in order to generate the tax revenues required to run our country. I’ll admit that eliminating all deductions and credits except the $3000/dependent credit is going to be a tough sell, but besides the well connected who take "full" advantage of the taxcode, the American people as a whole come out winners.
One of the points I highlighted in the above graph, is that the lowest income American would continue to pay no income taxes (something I disagree with but requiring ALL to pay income tax would be a non-starter for many left-leaning politicians — personally I think ALL should have some "skin in the game"). Those those in the middle who have home interest and those at the top may gripe as well at the loss of at big deduction, but the lower rates benefit exceeds such a deduction in most cases. In fact, only those over $800,000 would be paying the top percentage of 25% … a number that would also be equal to the "new" U.S. corporate rate. Back to simplicity, it doesn’t help those who shift incomes for tax benefits to corporate shells, etc. Same for capital gains; would also be "simply" treated as income. Top earners lose on long term capital gains (a big gripe against the uber wealthy at the moment anyway) and most of the middle-class does better by treating their cap gains at the income tax rate (all lower than $350,000 income would see such income at lower than the current capital gains rate).
On the business side … in an attempt to encourage growth … the corporate rates move down to 25% (not low enough for a pro-business lobbyist, but not high enough according to big government progressives — therefore it must be about right). Business should be encouraged to function in the U.S. … and small busnesses and individuals will all appreciate the savings in simplifying and costly tax planning alone. The IRS work load would be reduced as their role would be looking at an individual’s postcard or online entry and they could focus on tax cheats, non-payers and corporate taxpayers, which by the nature of capital markets, still require some complexity. In order to function in our economy, business need to be able to borrow, invest and take risk. They need to offset potential losses with profit and be encouraged to expand — not penalized to do so. We all want jobs and a growing economy.
Currently I’m not convinced just lowing the corporate rate to 25% (still on the high side for developed nations) is enough to encourage multinational corporations to bring profits back to the U.S. that have been parked overseas due to favorable treatment, but do believe a more in-line corporate income tax rate would be a step in the right direction. Hey … we can always have a tax holiday for companies wanting add jobs or build facilities as a way to encourage investing in the U.S.
Give this some thought … and let’s see if something like this could gain traction?