this part is unwittingly hilarious, and frankly, absurd: Our government’s goal should be to bring in revenues of 18.5 percent of G.D.P. and spend about 21 percent of G.D.P. — levels that have been attained over extended periods in the past and can clearly be reached again. As the math makes clear, this won’t stem our budget deficits; in fact, it will continue them. But assuming even conservative projections about inflation and economic growth, this ratio of revenue to spending will keep America’s debt stable in relation to the country’s economic output.
is it absurd because you don't understand the simple concept of debt dynamics? ^note MINUS g aka growth. Assuming real GDP growth of about 2.5% (a conservative estimate I suppose), debt-to-GDP ratio will remain constant. Factor in a couple of extra percents (the averaged one year yield of T-bill matures at about 0.18%), et voila. Buffett didn't get rich being an idiot at math and finance. just sayin.
..But the problem with any ideology is that it gives the answer before you look at the evidence. So you have to mold the evidence to get the answer that you've already decided you've got to have. It doesn't work that way. Building an economy; rebuilding an economy is hard, practical nuts and bolts work. -Bill
My tax plan: 1) Revise tax brackets. Add an additional bracket for those making over $2 million in income a year. Set the bracket at 40%. Maintain the rest of the taxes as they are. 2) Set a floor and ceiling for tax burden and deductions. After deductions, etc. no American with earned income can reduce their federal tax burden to less than $120 a year. Additionally, no American can take tax deductions in excess of $50,000. 3) Change the interest and dividends tax system. Set a flat rate of 25% of dividends, interest and capital gains with an exemption for the first $100,000. No deductions (other than losses). This to me is a good way to help middle and lower income Americans who are not using interest and dividends as a way to get rich or get income from corporations without taking salary, but are rather saving to survive in retirement. Helping Americans in that bracket save more now will cost us less in the long run. 4) Make health insurance premiums and medical costs paid by an individual fully tax deductible. I'm not a tax expert. Please tell me why my plan is good, terrible, flawed, etc. Seems to me that this strategy would accomplish a lot of stated goals. It would raise revenue, preserve tax cuts for the middle class and small business owners who we debate as to whether they are rich, AND accomplish the goal of many Republicans that EVERYONE should pay something. I think it would help spur individual retirement savings and would help people with medical costs.
1. Revise tax rates. Go back to the Clinton rates with the 40% bracket you mentioned at 43%. 2. I agree with your assessment. 3. Income is income. Dividends, capital gains, interest, all gets taxed at the rate the individual pays for regular income. a $100,000 exemption, if you are talking about exempting the first $100,000 of this kind of income, is too much. $50,000 is plenty to avoid overtaxing the middle class. 4. Up to the maximum limit of $50,000 in deductions, sure. That would be my revision of your tax plan, mine will be re-posted below...
http://coffeepartyblogger.blogspot.com/2011/02/isnt-it-time-for-consumption-tax.html Isn't it time for a consumption tax? In a recent discussion, a tangent regarding tax policy developed in which I stated that I would support a consumption tax, much like the FAIR Tax, but with a couple of caveats, changes that I would make. This post will describe the tax I would implement to replace the income tax. Basic Structure: The Consumption Tax (CT) that I would create would not have a set percentage rate, but would have a "base rate" set each year (automatically, no ability for politicians to interfere) to generate the amount of money spent by the federal government plus five percent. This implementation has a couple of goals, the first of which being a balanced budget and the second being a plan to retire the debt over time. In addition, setting the tax rate based on last year's spending would create a completely transparent system of taxation as everyone would be completely aware of government spending because the base rate would rise with increased spending. Exemptions: I would give every adult a $5000 annual tax exemption and the parents of dependent children $2500 for each child. This exemption would be implemented using the same infrastructure that currently exists for food stamps and flex accounts. I would exempt food and medicine from the tax and, after the debt is paid off, would give a CT holiday every year at back to school time, much like Texas does already. Application: The CT would apply to new goods and would not be charged on used items. Refurbished goods would only be taxed on the value of the new parts used to refurbish the item. Applying the tax only to new goods would give people a market in which they could avoid the tax altogether if they wanted. This application would also encourage the production of more durable goods as such products would hold their resale value. It is likely that such a system would encourage more recycling of products rather than the production of disposable goods that are so prevalent today. Optional component: It is my opinion that some goods should have higher tax rates applied to them than other goods due to the potential for societal damages or costs that are higher. The prime examples would be tobacco products (which cause cancer, leading to higher healthcare costs for people who use these products). For such products, I would allow for a "tax multiplier" to be applied. If the tax multiplier were 1.5, then the base tax rate would be multiplied by 1.5 to calculate the total tax rate for that product. This kind of system would ensure that tax rates would be completely transparent if the product in question was taxed at a higher rate than the base rate.
I like most of these, but this is the key to me. I've never understood why we think capital gains should be taxed at a substantially lower rate than regular income. Why should someone's own work be taxed at a higher rate than investments? I don't think the argument that "it encourages investment" makes a lot of sense - what else are people going to do with their money? As Buffett and others have pointed out, no one makes investment decisions based on tax rates. I think the way you designed it is perfect - you can change the rate or the exemption as necessary, but the idea of not taxing the first amount, and then more aggressively taxing larger amounts seems like a fairly simple and easy way to do it.
What infrastructure is that exactly? Everyone would carry around a government issued debit card that every business would have to accept?
The infrastructure is the debit card infrastructure and the only reason you would need to bring your card is if you wanted to claim a tax-free purchase. You could also just enter your SSN, though I would prefer an exemption card.
From a small business perspective, this would be a nightmare / pain in the ass. That works great for Walmart. Not so well for the locally owned food truck down the street.
Why would you want to go through the hassle of claiming a $0.86 exemption from the food truck? I would likely only start doing that towards the end of the year if I had exemption money left. Either that or I would sell my exemptions.
If the goal of exemptions is primarily to help the poor, I think you'd would want them to use it every opportunity they could so they could max it. It's not just food trucks - it's many small, locally owned businesses. The neighborhood barbershop. The cash-only babysitter. The seamstress that works out of her home part time. etc. In rural communities and poor areas, these are big parts of people's spending habits. Huge chunks of minority communities function in a cash-only society. These businesses don't have debit card infrastructure.
Edit: I misread your post. I don't believe the super rich are making decisions based on taxes. However, I do think the tax code should favor investments. That's just my opinion. I still raised it over the current rate, but I don't think investments should be treated the same as income. A lot of risk comes with investments. Gladiator's early suggesting of putting it at $50,000 would work fine for me as well. Also to Gladiator's point about health insurance and medical bills being limited to the $50,000 deduction, I agree. My deduction limit would be on anything.
If you can sell exemptions, that's just an opportunity for the rich to take advantage of the poor. Having a tough time? I'll buy your $5k in exemptions for $3k NOW. The poor would be extremely tempted to take it because they need money immediately. And now you have a more regressive tax structure where the wealthy are paying less.
Agreed - to be clear, I'm saying your system on cap gains is great. The other stuff could have a small impact here or there (not too many people have $2million in regular income), but the cap gains is the big one to me. I think this would be key to creating a more effective progressive system, as having your income in cap gains is the primary "loophole" the wealthy currently exploit. I like the deductions cap and think it will likely be the way the GOP and Dems come together for this fiscal cliff. But I am disappointed in the sense that the original goal was to "simplify" the tax code and this does nothing in that regard - it leaves all the current exemptions there and adds yet another step in the tax calculation process. Interestingly, the AMT that everyone hates is already basically a flat tax for people who have too many deductions.
