lotstodo
aka "The Jackal"
The New Tax:
First of all, the goal should be a balance between consumption and investment, with a progressive component to aid the lower income worker. It should also attract investment in this country from foreign corporations, and insure an equal footing for American producers.
I like some components of the flat tax, especially it’s simplicity and the fact that everyone has a dog in the fight, but feel that a pure consumption tax rewards importation of goods over investment in the US.
What about the following:
The Progressive Component:
Impose an 18% flat tax on all income from wages or personal profits from business including the value of unpurchased stock sold by an employee and other employment perks with a personal deduction of $14,000 per adult and $5,000 per child or dependent, and a minimum $19,000 deduction per household. There would be no separate payroll taxes, effectively eliminating the current cap, and providing an additional savings on income related taxes for the working poor over the current system. This would also insure a minimal “death tax” if a spouse died and the deduction was cut. There may be some tweaking involved here to balance multiples of poverty level, any marriage penalty, and any defacto death tax. This means that a couple with 2 children would pay no tax whatsoever, not even payroll tax, on income below $38,000, or about 1.8 times the poverty level. Index the deduction to inflation, so there is no “tax creep” as wages rise with inflation. This would mean a postcard size tax form and much smaller IRS. It also means no tax on interest from savings or capital gains, so money is only taxed once. There is also no tax on withdrawals from your savings plans or on cash from any type of investment. The effect is like one big IRA for everybody and would encourage personal savings. Since most senior income is from investments anyway, none of which are taxed under this plan, this should amount to a good tax cut for seniors.
The Consumption Component:
Here is the tricky part. We all know that businesses don’t really pay taxes. The tax is passed along in the price of goods sold, therefore it is a defacto sales tax. Should we tax business then? For PR purposes, and as a way to encourage domestic investment and simplify collection, this might be a good idea. There is also already a 20%± imbedded tax in all goods sold, so prices should not be greatly affected by this plan. It will also provide a way to limit the flow of cash out of the US.
Impose an 20% tax on corporation’s profits that remain within the US. Deductions for the costs of goods sold or services provided would include any capital expenditures in the US, which is like an automatic investment tax credit. There will be no special carve outs for particular industries or companies by law. The only other allowable deductions would be direct costs, rent, utilities, and other "normal" indirect costs. The remaining profit would be fully taxable.
The Border tax swap:
This would be an additional 10% tax on profits that leave the US for investment or distribution abroad by any corporation, foreign or domestic. It would be balanced by a 10% tax credit for profit or investment entering the US by any corporation. The swap balance can carry over and be applied for 5 years to balance large one time investments with annual profits. Carry over can only be applied to the swap. In no case can the credit exceed all tax liabilities combined for any year. In other words, the government could never owe a corporation money. This plan follows the money and rewards domestic investment.
This would mean that all corporations would have an incentive to keep money at work in the US. Ford can build an auto plant in India and offset the 10% tax on capital leaving the country to build the plant with a 10% tax credit on profits from overseas operations that are repatriated. Conversely, Toyota can offset profits sent to Japan with investment in plants in the US.
Additional Thoughts:
The best that I can tell, this would be about revenue neutral. Some tweaking of the numbers is inevitable.
I think that this plan balances a consumption tax (business tax component) with a progressive tax (income tax component), and encourages investment by business and individuals alike by removing all tax from non compensatory investment. The border tax is somewhat tricky, but it removes any incentive to export profit, and does not create a tax shelter for foreign corporations not producing within the US. It is the opposite of the double taxation currently facing US based corporations and making them less competitive overseas.
I’d also like to see this tied to a balanced budget amendment to the Constitution which limits the budget increase to the inflation percentage plus population increase over last years tax receipts, requires maintaining a 3% of revenue rainy day fund every year there is no recession, requires that the national debt principal be reduced by 2% minimum every year, and limits short term treasury bonds to 2% of last year’s budget, and long term treasury bonds to 15% of last year’s budget. The only exception should be the declaration by the President and Congress of a national emergency like a war or natural disaster, and such a declaration can only raise funds to directly pay for that emergency. Any debt incurred from such a declaration must be included and payable in the budgets for no more than the next 8 years after the end of the emergency, and paid off by then. No more raising the debt ceiling to pay for favored projects in the absence of a true need.
That’s my idea, what do you think?
First of all, the goal should be a balance between consumption and investment, with a progressive component to aid the lower income worker. It should also attract investment in this country from foreign corporations, and insure an equal footing for American producers.
I like some components of the flat tax, especially it’s simplicity and the fact that everyone has a dog in the fight, but feel that a pure consumption tax rewards importation of goods over investment in the US.
What about the following:
The Progressive Component:
Impose an 18% flat tax on all income from wages or personal profits from business including the value of unpurchased stock sold by an employee and other employment perks with a personal deduction of $14,000 per adult and $5,000 per child or dependent, and a minimum $19,000 deduction per household. There would be no separate payroll taxes, effectively eliminating the current cap, and providing an additional savings on income related taxes for the working poor over the current system. This would also insure a minimal “death tax” if a spouse died and the deduction was cut. There may be some tweaking involved here to balance multiples of poverty level, any marriage penalty, and any defacto death tax. This means that a couple with 2 children would pay no tax whatsoever, not even payroll tax, on income below $38,000, or about 1.8 times the poverty level. Index the deduction to inflation, so there is no “tax creep” as wages rise with inflation. This would mean a postcard size tax form and much smaller IRS. It also means no tax on interest from savings or capital gains, so money is only taxed once. There is also no tax on withdrawals from your savings plans or on cash from any type of investment. The effect is like one big IRA for everybody and would encourage personal savings. Since most senior income is from investments anyway, none of which are taxed under this plan, this should amount to a good tax cut for seniors.
The Consumption Component:
Here is the tricky part. We all know that businesses don’t really pay taxes. The tax is passed along in the price of goods sold, therefore it is a defacto sales tax. Should we tax business then? For PR purposes, and as a way to encourage domestic investment and simplify collection, this might be a good idea. There is also already a 20%± imbedded tax in all goods sold, so prices should not be greatly affected by this plan. It will also provide a way to limit the flow of cash out of the US.
Impose an 20% tax on corporation’s profits that remain within the US. Deductions for the costs of goods sold or services provided would include any capital expenditures in the US, which is like an automatic investment tax credit. There will be no special carve outs for particular industries or companies by law. The only other allowable deductions would be direct costs, rent, utilities, and other "normal" indirect costs. The remaining profit would be fully taxable.
The Border tax swap:
This would be an additional 10% tax on profits that leave the US for investment or distribution abroad by any corporation, foreign or domestic. It would be balanced by a 10% tax credit for profit or investment entering the US by any corporation. The swap balance can carry over and be applied for 5 years to balance large one time investments with annual profits. Carry over can only be applied to the swap. In no case can the credit exceed all tax liabilities combined for any year. In other words, the government could never owe a corporation money. This plan follows the money and rewards domestic investment.
This would mean that all corporations would have an incentive to keep money at work in the US. Ford can build an auto plant in India and offset the 10% tax on capital leaving the country to build the plant with a 10% tax credit on profits from overseas operations that are repatriated. Conversely, Toyota can offset profits sent to Japan with investment in plants in the US.
Additional Thoughts:
The best that I can tell, this would be about revenue neutral. Some tweaking of the numbers is inevitable.
I think that this plan balances a consumption tax (business tax component) with a progressive tax (income tax component), and encourages investment by business and individuals alike by removing all tax from non compensatory investment. The border tax is somewhat tricky, but it removes any incentive to export profit, and does not create a tax shelter for foreign corporations not producing within the US. It is the opposite of the double taxation currently facing US based corporations and making them less competitive overseas.
I’d also like to see this tied to a balanced budget amendment to the Constitution which limits the budget increase to the inflation percentage plus population increase over last years tax receipts, requires maintaining a 3% of revenue rainy day fund every year there is no recession, requires that the national debt principal be reduced by 2% minimum every year, and limits short term treasury bonds to 2% of last year’s budget, and long term treasury bonds to 15% of last year’s budget. The only exception should be the declaration by the President and Congress of a national emergency like a war or natural disaster, and such a declaration can only raise funds to directly pay for that emergency. Any debt incurred from such a declaration must be included and payable in the budgets for no more than the next 8 years after the end of the emergency, and paid off by then. No more raising the debt ceiling to pay for favored projects in the absence of a true need.
That’s my idea, what do you think?
