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Tax Reform

Today we have a bloated tax code which requires many people to diligently keep track of every minor expense and special interests lobby Congress (and local governments) to ask for special favors in the tax code.  This is the main reason we even have lobbyists is due to all those special carve outs in the tax code.  We also have politicians using the federal tax code to hand out benefits, that needs to stop, the tax code should be a fair system where all people are treated equally and no one should be given more money back from the tax code than they paid into taxes.  There are welfare programs that can be used by individuals to accept government support, the tax code should be separated out as a revenue source for government not a social program to pay lower income people.

 

Tax Reform Solution

The key to tax reform is to remove the tax deductions and credits but have a much larger standard deduction to make up for the removal of those individual deductions/credits (like the mortgage interest deduction).  I would suggest that we create a standard deduction of $20,000/year and then allow married couples to deduct $40,000 together so they can pool their deduction if they happen to be a single income family.  Using a larger standard deduction still protects the poor from being taxed and removes special interests from the tax code.  Then we can set perhaps 3 tax rates for all incomes (after the standard deduction).   By lowering regular income tax rates we can set the capital gains tax rates to the same as those regular income rates, so all income would fall under the same category (capital gains & earned income).  Here is a basic table for single individuals, income would be double for married couples:

$0-$100,000                  -> 15% tax rate

$100,000-$250,000      -> 20% tax rate

$250,000+                     -> 25% tax rate

Businesses would have the same tax rate based on those income scales.

-Jefferson

4 thoughts on “Tax Reform

  1. I have no problem with raising standard deductions… but we can’t use the tax code to subsidize those being hurt by right wing ideas such as the relentless war on labor. If the 1968 minimum wage were simply adjusted for inflation it would be worth $7300 more today. We give plenty of freebies* to corporations that greatly enhance their wealth and power yet it wasn’t until the 30’s that government tried to level the playing field with labor protections. Whenever one side has a preponderance of power it over-reaches… and we now have class warfare by the uber-rich against everyone else.

    But the reduction of brackets is a blatant giveaway to the rich. We need to INCREASE the number of brackets with the top on being at least 50% perhaps kicking in at $20 million or so.

    (*free limited liability protections plus free intellectual property monopolies such as patents, copyrights, and trademarks.)

    1. If you look at the actual numbers the lowering of the tax bracket rate while limiting deductions is essentially a wash…since capital gains will be taxed at the same rate as earned income the overall net effect would actually be a tax increase. If you take a look at the statistics the top 1% only pay about 23% in federal income taxes, limiting deductions to $20,000 would and setting their tax rate to 25% would actually mean the rich would see a very small tax increase. Take a look at the statistics:

      https://www.washingtonpost.com/news/wonk/wp/2015/06/04/as-the-rich-become-super-rich-they-pay-lower-taxes-for-real/

      1. You can make up any scenario you want but it’s pretty difficult to say that if all deductions are a wash, the rich will pay more with fewer brackets… the top one being 25% than if there are higher brackets, say one at 50%… especially if capital gains is taxed as ordinary income. There’s simply no reason there should even be capital gains breaks unless we as a nation want to encourage investments to meet some social need… energy and medical research come to mind. Capital gains now receives two tax breaks… a lower rate than ordinary income and it’s exempt from payroll taxes. The CBO calculates that 70% of the capital gains tax break goes to the top 1%. https://www.cbo.gov/publication/43768

        1. Perhaps you missed this line in the article above: “By lowering regular income tax rates we can set the capital gains tax rates to the same as those regular income rates”. So there is no “capital gains break” if the system above was implemented.

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