Monday, October 29, 2012

A Flat Tax for a more prosperous country

The Right Point Too!

While I appreciate what this author has to say I think he misses the main point. What Romney did or did not pay in taxes is not relevant. So long as he did not break the law it is completely irrelevant if he is or is not suitable to President.

What we should be discussing is tax policy. The purpose of a tax is to gain revenue for a government to function. I would suggest it should not be used to purchase votes, reward lobbyists, or manipulate behaviors. Quite the opposite taxes should be structured in such a manner as to have the least impact on the private sector possible.
With our current tax system of loopholes, incentives and outright payoffs you really have no idea if you are paying more or less taxes than Romney or Obama.
Our current tax system is a burden on businesses to comply, as well as pay. Billions perhaps, trillions are spent simply in tax preparation between business and personal filings. This money is wasted as it produces no valuable product or service. That cost is multiplied as businesses make business decisions based on tax avoidance instead of deploying capital in the most valuable manner to obtain a real return. Business taxes make our products less competitive abroad, costing jobs. Business taxes make America less attractive to foreign capital, costing jobs. Business taxes provide a disincentive for bringing home foreign profits made by American companies, costing jobs. Noticing a pattern here? Business taxes are an added expense to a business which makes us less competitive in a global market.

In addition, for all of this effort, and job loss, business income taxes are a rather small part of Federal government revenues, accounting for only 8% of the total.

The reason it is argued taxing capital gains or dividends are taxed at a lower rate, which is what happens with Buffet and Romney, is that income has already been taxed once. Why should we get to tax it again?

I believe eliminating the business income tax and simplifying the personal tax code would more than make up the lost 8% in increased economic activity more exports, and foreign investment in our country. If you are a company where would you like to put your HQ? In the US with a great infrastructure and zero taxes or in China where you give a up a quarter of your profits, or perhaps a European country with tax rates between 13 and 35%.

A simplified tax code would not be used for social welfare. As an example, 3 years ago my brother paid in $8 in Federal income tax. His rebate? $3599. How is that a revenue generator for the government? Under a simplified tax code all income is treated equally since dividends and capital gains are no longer being taxed at the business level. Questions about Romney’s tax rate become irrelevant. There is no longer that “tax break” for the “rich” or anyone which has investments.

No longer do you have to drop $50 for tax software every year or a couple of hundred to an accountant.

Under this plan everyone pays the same, everyone gets the same deduction. That deduction is set to remove
all of those in poverty from the tax rolls. Let’s say that number was set at $35,000. Let’s further assume the tax rate is 20% in order to collect adequate revenues. That would mean a person earning $40,000 pays taxes on only $5000, a pretty good deduction, and pay $1000 in tax. While a person earning $1,000,000 would find the deduction to be pretty insignificant, and pay $193,000 in tax. For those under $35,000 in income I propose they pay a symbolic $1 minimum tax to demonstrate we are all in this together. Any increases in the tax rate would also be added to the $1 so an increase of 10% in the tax rate from 20% to 22% as an example would raise the $1 to $1.10.

Now here is the kicker. As you may have noticed there are no longer any rewards or punishments for choices you make. Get married or not, have kids or not, buy a house or rent, go to school, invest, no longer will you be rewarded or punished for those choices. No longer can politicians buy votes by manipulating the tax code. A dramatically smaller and less intrusive IRS is the result.

There you have it. More jobs. More prosperity. And, an assurance of no more tax breaks for the rich. No longer will Buffet’s secretary pay less than he does. Now what’s not fair?

There you have it, my opinion and the Right Point Too!

No comments:

Post a Comment