I agree with everything you write here. I've been consistently disappointed by the Republicans' hypocritical (selective) focus on spending and tax cuts (and their propensity to run deficits during times of economic growth), and I've been even more disappointed by the Democrats' embrace of a vast client network of grants and sinecures, and their tendency to push weird countercultural ideas.
Great post - amazing how much of it with which I totally agree - especially on the real status of corp. taxes and unwisely cutting taxes during our current bankrupt debt situation. As per your remarks on "income tax cuts stimulate the short-term economy, but they have to be paid for in the future via interest payments on the national debt (which undermines long-term economic growth)." This was an aspect I had failed to explicitly recognize.
I would prefer a flat, personal income tax, in combination with a consumption tax. Let me deduct my personal healthcare costs, as well. Also, social security taxes would be better in my control via personal tax-free growth account such as an IRA. I otherwise support your corporate tax proposal.
In this article, I am deliberately not trying to redesign the tax system to make it optimal. That would be far beyond what can be accomplished in the next 15 months. I am trying to focus on what I think would be the "biggest bang for the buck" in stimulating long-term economic growth.
I agree payroll taxes should be (should have been from the beginning) rolled into an IRA/ 401K type account that grows tax deferred until needed later in life. Add parallel accounts for HSA and educational costs presented later in life (for self or children), in addition to the savings for retirement aspect.
Minor disgreement on healthcare costs: given our state of modern medicine, we should treat many normal medical and healthcare costs as a part of normal life: annual physicals, vaccinations, mammogram and bone mineral density (DEXA scan) and PSA and colonoscopies and other periodic (age appropriate) "let's see what is going on" type tests. I expect with proper marketing for direct first party paying (rather than 3rd party paying), these costs would be typically less than $2K per family member per year (varying with age, etc.). [i.e., follow the Lasik model.] Then perhaps allow deductions for healthcare insurance or direct pay of major costs for cancer, accidents, etc. - the not normal and unexpected costs that may still occur in modern life.
A lot of "health insurance" costs are really pass through for those otherwise normal costs, even if people don't fully appreciate that - which is sad in itself.
Given the flaws in the pay-as-you-go Ponzi scheme and "insurance" status of SS, I would also [now] not have a problem with making the alternative of payroll taxes a mandatory savings action: either pay the government the equivalent in taxes or save it for your self and your children. I think that providing an alternative option would pass legal muster while a straight mandate to save X% of your income might not.
I'm a bit more radical, just go to a Gross Receipts Business Tax. Pay 3-5% of Business income. Dividends and Owner Withdrawals taxed at personal rates.
Question on: "Enable corporations to deduct the entire amount of capital investments in the first year" and the related text "Tax distributed earnings to shareholders only, which allows corporations to reinvent [typo for reinvest?] their profits tax-free. This will give corporations more capital to invest and treats debt-financed investments the same as investments financed by retained earnings."
From the first comment, I was going to ask if the deduction would be for the entire cost of the capital investment [presuming it all came from retained earnings], or just the prorated yearly payment amount for borrowed money to buy said capital?
Some people want to treat debt-financed capital as "bad"somehow compared to being paid from savings. I think the argument is related to building up too high a debt position. Your thoughts?
I also wonder why you would lower the corp. rate to only 10%, and not 0%? Or maybe keep a level of 2 or 3% to cover federal judiciary costs for contract disagreements, etc. ? Of course anything greater than 0% introduces the costs to the business of figuring it out and getting it sent out, etc.
One other aspect of taxation that I think we should consider is "tax simplification" via fewer tax brackets [assuming progressive rates are still accepted as "just" if not desired]. I think that is backwards, especially with modern computing capability. We ought to have tax rates determined on a curve* (or a 100 bracket equivalent?) such that at any income level, the marginal rate increase from an increase in income does not disincentiviize the pursuit of that additional income.
I find it amazing from the 2017 tax rates for married filing jointly that we have 22 and 24%, and then a big jump to 32 and 35%.
*enter the taxable income amount into an IRS web based calculator and get your tax amount back. Does not matter how complex the curve algorithm as long as it is openly known and agreed to. You might save a few dollars over using the 100 bracket table?
I agree with everything you write here. I've been consistently disappointed by the Republicans' hypocritical (selective) focus on spending and tax cuts (and their propensity to run deficits during times of economic growth), and I've been even more disappointed by the Democrats' embrace of a vast client network of grants and sinecures, and their tendency to push weird countercultural ideas.
Great post - amazing how much of it with which I totally agree - especially on the real status of corp. taxes and unwisely cutting taxes during our current bankrupt debt situation. As per your remarks on "income tax cuts stimulate the short-term economy, but they have to be paid for in the future via interest payments on the national debt (which undermines long-term economic growth)." This was an aspect I had failed to explicitly recognize.
Excellent suggestions.
I would prefer a flat, personal income tax, in combination with a consumption tax. Let me deduct my personal healthcare costs, as well. Also, social security taxes would be better in my control via personal tax-free growth account such as an IRA. I otherwise support your corporate tax proposal.
Thanks for the comment.
In this article, I am deliberately not trying to redesign the tax system to make it optimal. That would be far beyond what can be accomplished in the next 15 months. I am trying to focus on what I think would be the "biggest bang for the buck" in stimulating long-term economic growth.
I agree payroll taxes should be (should have been from the beginning) rolled into an IRA/ 401K type account that grows tax deferred until needed later in life. Add parallel accounts for HSA and educational costs presented later in life (for self or children), in addition to the savings for retirement aspect.
Minor disgreement on healthcare costs: given our state of modern medicine, we should treat many normal medical and healthcare costs as a part of normal life: annual physicals, vaccinations, mammogram and bone mineral density (DEXA scan) and PSA and colonoscopies and other periodic (age appropriate) "let's see what is going on" type tests. I expect with proper marketing for direct first party paying (rather than 3rd party paying), these costs would be typically less than $2K per family member per year (varying with age, etc.). [i.e., follow the Lasik model.] Then perhaps allow deductions for healthcare insurance or direct pay of major costs for cancer, accidents, etc. - the not normal and unexpected costs that may still occur in modern life.
A lot of "health insurance" costs are really pass through for those otherwise normal costs, even if people don't fully appreciate that - which is sad in itself.
Given the flaws in the pay-as-you-go Ponzi scheme and "insurance" status of SS, I would also [now] not have a problem with making the alternative of payroll taxes a mandatory savings action: either pay the government the equivalent in taxes or save it for your self and your children. I think that providing an alternative option would pass legal muster while a straight mandate to save X% of your income might not.
I'm a bit more radical, just go to a Gross Receipts Business Tax. Pay 3-5% of Business income. Dividends and Owner Withdrawals taxed at personal rates.
Question on: "Enable corporations to deduct the entire amount of capital investments in the first year" and the related text "Tax distributed earnings to shareholders only, which allows corporations to reinvent [typo for reinvest?] their profits tax-free. This will give corporations more capital to invest and treats debt-financed investments the same as investments financed by retained earnings."
From the first comment, I was going to ask if the deduction would be for the entire cost of the capital investment [presuming it all came from retained earnings], or just the prorated yearly payment amount for borrowed money to buy said capital?
Some people want to treat debt-financed capital as "bad"somehow compared to being paid from savings. I think the argument is related to building up too high a debt position. Your thoughts?
I also wonder why you would lower the corp. rate to only 10%, and not 0%? Or maybe keep a level of 2 or 3% to cover federal judiciary costs for contract disagreements, etc. ? Of course anything greater than 0% introduces the costs to the business of figuring it out and getting it sent out, etc.
One other aspect of taxation that I think we should consider is "tax simplification" via fewer tax brackets [assuming progressive rates are still accepted as "just" if not desired]. I think that is backwards, especially with modern computing capability. We ought to have tax rates determined on a curve* (or a 100 bracket equivalent?) such that at any income level, the marginal rate increase from an increase in income does not disincentiviize the pursuit of that additional income.
I find it amazing from the 2017 tax rates for married filing jointly that we have 22 and 24%, and then a big jump to 32 and 35%.
*enter the taxable income amount into an IRS web based calculator and get your tax amount back. Does not matter how complex the curve algorithm as long as it is openly known and agreed to. You might save a few dollars over using the 100 bracket table?