Laws the GOP should pass #7: Tax Reform Part I

Income taxes, gas taxes, capital gains, corporate taxes, death taxes, luxury taxes, import taxes, sales tax, taxes on phones, electricity, cigarettes, car registration, social security and Medicare withholding, excise taxes, fees for every public document you need to file…you get the idea. In the end we pay a lot of our income in taxes. And it gets worse when you consider that (1) if you’re reading a blog on the internet about politics you’re probably in the upper half of population in terms of intelligence, (2) it means that you are or are going to be in the upper half of wage earners in the country. The top 50% of households in the country (in terms of income) pay about 95% of all income taxes. (Income tax accounts for about half of federal revenue, corporate taxes about 15% and Social Security withholdings makes up about 32%, the rest is various other sources). But in final result, we the educated, working people of the country are being really overtaxed.
Now clearly one of the things we need to do is slash and burn government spending. When the government is spending about 40% of its current yearly budget maybe, just maybe, we can slow down in cutting the fat (slow down, not stop). This comes before anything else. And to try and critique what’s coming because we spend too much is a foolish argument because what I’m about to say about taxes can and must only occur in conjunction with massive spending cuts at the federal, state, and local levels of government. But it’s not only spending that’s the problem. Part of the reason we have a spending problem is that deep down those idiots in Washington know that if they need more money they can just invent a new tax. Is it a season when tax increases aren’t popular? Just create a tax on something that most of public doesn’t know enough about or care enough about to complain, i.e., Capital gains or corporate taxes for instance. The general public isn’t always eager to come out and defend the tax rates of big corporations…why? Because the general public has an amazing inability to see more than two steps into the future. They don’t see that a higher tax on corporations comes back to them in the form of lower wages, higher prices and a slower economy.
Now I acknowledge that a tax rate cannot be perfectly static. If we were ever actually to declare a war again (something we haven’t done since WWII) I would acknowledge the need to raise taxes for that. But at the same time giving Congress twenty million different ways to pick the public’s pocket isn’t only unethical and illogical as it makes them less accountable for their actions; it’s incredibly bad economics as any tax is always a tax on the general public and always a depressant on the economy.
The solution to this is to reduce Congress’ avenues of revenue without hurting their ability to fund the running of the government. To make all taxes transparent, obvious and very in your face so that the average member of the public can easily say that this public benefit is worth the cost of the taxes.
This comes into two different parts. The first part is to get simply the change and get everyone ready for the very simple very easy to see and adjust tax rate.
Step 1:
We change all current income based taxes (and any tax rate above 15%) to a flat rate of 15%. (Any federal tax under 15% will remain at its current level). What do I mean by a flat rate?
15% on all income for both individuals and corporate income. No exceptions. No deductions No exemptions. If you only made $2, come April 15th of the next year 30 cents of the $2 belongs to Uncle Sam.
The advantage of this is that first most of the complaints about the rich avoiding taxes come from the creative way they move money around. This simplifies that. The other problem is that the people who get the most per dollar out of the government (i.e. the lower tax brackets) would finally be paying their fair share (15%) and the rich would be paying their fair share (15%) and everyone would be paying their fair share (15%). To those screaming that the rich need to pay more, you need to go back to math class. If it’s a percentage then the more you make the more you pay in taxes.
Same with corporations, no deductions or exemptions based on whatever Congressman you paid off to give your industry a break, no shifting funds between different subsidiaries for tax purposes. Just straight 15%.
Now anyone who actually knows anything about economics will tell you that in the long run, just this step of simple flat taxes will reduce overhead, speed efficiency and improve the economy (and the revenue take for the government). And to as I prefer to phase things in over time it should probably be phased in over a period of three to four years to give people and companies time to adjust.
Next week in step 2 we get rid of even more taxes.


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Filed under Capitalism, Economics, Laws the GOP should pass

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