“The power to tax involves the power to destroy.”
John Marshall
It has become almost axiomatic for politicians harvesting votes from lower and middle class constituencies to preach a “tax the rich” message. It plays on the frustrations of individuals who have seen their tax rates balloon during the past decade while the nation’s richest one percent have actually experienced 5% drop in their tax rates … and it’s a guaranteed sound-bite on the evening’s news!
Unfortunately, rather than bringing about tax fairness, this short-sighted policy has been little more than a poorly veiled technique to redistribute the country’s wealth. It has become an implement of social divisiveness, pitting economic class against economic class, and runs contrary to one of our most fundamental and cherished values … that of equal protection (for all Americans) under the law.
More disturbing, it has provided fertile ground for massive abuses, whereby politicians’ votes on tax rules have been be bought and sold to provide safe havens for the sponsors of special interest groups … and in many cases influential individuals. Loopholes through which people can often shelter millions in earnings are commonplace.
What’s really needed, in addition to politicians with the courage to bring about change, is a dramatic restructuring of the tax code … making it simple, fair, understandable and easy to adjust in order to ensure a responsible and balanced federal budget.
Personal Income Taxes:
- Eliminate all deductions … phasing out those “emotional” preferential items such as the home interest deduction.
- Tax all individuals at a flat rate on their gross incomes.
- Those individuals whose gross income falls below an annually adjusted “poverty-level” base would receive a direct payment to bring their income up to that base income level … while concurrently exorcising the plethora of inefficient and costly welfare programs and their bloated bureaucracies.
- Research suggests such a tax policy would see tax rates in the 12% to 15% range … far below today’s rates!
This system can provide fairness, compassion, enable taxpayers to complete their own tax returns and provide opportunities for enormous savings within the IRS. It will ensure all individuals will pay “their fair share”, while not discriminating against some individuals simply because they earn more than someone else.
Corporate Income Taxes:
- Businesses must still be allowed to deduct true operating costs from their gross revenues.
- After which, each business should be permitted to retain the first $50,000 in net profits, tax free.
- Tax the net profits of all businesses above the $50,000 floor at a flat rate.
With clearly defined limits for business deductions (eliminating all special exceptions for specific industries and, in some cases individual businesses), small and marginally profitable firms can retain necessary working capital to continue operations, while ensuring all businesses pay “their fair share” of taxes in direct proportion to their relative profits.
Capital Gains Taxes:
- Set the rate at the greater of 15% percent or the individual flat tax rate.
- For each year monies remain in a single long-term investment, the tax on any gain will be reduced by 1% … so that a truly long-term (fifteen year) investment would not be taxed.
Such a sane policy will incentivize investors to provide the type of longer term investments desperately needed by American businesses if they are to remain competitive in increasingly contested domestic and world markets.
Flat rate taxes can also make budget balancing infinitely easier and, if they fluctuate to compensate for changes in government spending, they will graphically demonstrate to taxpayers the true costs of the programs their elected representatives have enacted!
While not a panacea, a “Keep It Simple Stupid” (KISS) tax policy can (a) raise the monies the government needs to operate, (b) provide for the less fortunate in our society, (c) significantly reduce the size and cost of the federal bureaucracy and (d) eliminate the current unequal protection and treatment progressive tax rate system necessarily entails … while concurrently eradicating the special favors and huge tax breaks now enjoyed by countless special interest groups and politically-connected, influential individuals.
It’s time for the public to demand Congress and the Administration stop ducking hard decisions and either live with the “heat” and take care of the nation’s reeling economy or “get out of the kitchen” and resign! We can no longer afford either their inactions or their incompetence.
