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And just as lacking in substance. Still, candidates dish out the idea freely.
If you wanted to open a business and the rules were - 1) all money that you take in goes into a business bank account, daily (weekly if under $100), and 2)all business bank accounts get 17% taken out of every deposit and sent to the various governments to divvy up, and 3) the only tax form you had to fill out was a one page form at the end of the year where you swore under penalty of jail that you put all the money you made into the account - and no individual income tax on earnings under $50,000, government pension, and universal health care (everybody was in the army 16-60)- - would you trade it for what we have now?.. That was what I had to do when I went to Taiwan in 1984 to set up a joint venture. A one page form for a $20 million annual business. And you wonder whey we all went overseas, paid higher wages than here yet had lower labor cost, paid more for materials, and had lower quality with more scrap, and had higher profits? In a country that paid more per capita on defense than the US citizen.. They now have individual income tax, but at the time, the Asian rim government's business was getting out of the way of the citizens making money and market sahre. It can be done. (Few accountants or insurance salesmen there, though)
If we reformed the tax code, what would politicians have left to promise us?
There is no doubt that politics plays a part in all of the talk about tax reform. However, that does not mean that all, or even most, of the ideas are empty promises waiting to be rejected. Eliminating even very popular deductions would not hurt most of us. The mortgage deduction is one of the most popular - but most people would be better off with lower rates and no deduction. In fact, well over 70% of Federal income tax filings claim the Standard deduction. Those who itemize tend to already have higher incomes. The postcard idea for filing income taxes would be celebrated by the majority of people - and simplifying the code for businesses would save many companies millions of dollars. Combined, these simplifications would also save our government huge sums of money. The only losers would be those politicians who want to keep using a complex tax code to buy votes.
Another perspective on the tax situation (a subject studied when we chose overseas operations, and very real anchor on our economy) - if we only get money from 47% of personal income tax filers anyway, and every company passes on their tax bill to their customers (Yes, Virginia, they don't cut profit to pay taxes), and business collects the individual income taxes by withholding anyway, let's just cut out the middleman... We have a smaller and more efficient nexus of the economy available to us, and we are presently wasting tax money on, and the time of, half the filers, time and money that could be better used... Picking some numbers for illustration - if we only tax companies on revenue (who charge users), tax financial institutions as a percentage of deposits (who will charge depositors), flat tax investment gains over $10,000, and only flat tax tax wages paid over $70,000 - doing the numbers right, we get the same tax revenue we have now -( i.e., you are paying it anyway). And, we significantly reduce overhead in the companies. (last check, roughly a third of the overhead we had was for tax reporting and tax recording, compared to under 5% overseas)...
Ok, the present business tax forms are used to monitor and arrange the economy - we can require a single form quarterly, staggered monthly (i.e., a third are to report in a given month) from businesses that will do the same thing... The present system is arranged to employ a lot of people who will then be out of work if we streamline the system - but many of those jobs today do what? Shuffle tax related paper? Most of those workers don't want make work jobs -they are the first to complain about too much worthless paper. And just because some politicians created this system to make extra jobs counting our taxes does not mean we can ask our businesses and workers to compete in the world while carrying the US tax system baggage forever. If we don't compete with other nations, we will lose market and jobs and suffer accordingly. And the implementation can be done slowly to move the excess workers to other endeavors.. Our greatest opportunity to improve business efficiency is the tax code. Remove most personal income tax, retain FICA because it isn't the taxpayers money anyway and a check on cheating, and tax on revenue. Few if any will personally make more or less or pay more or less, we will just be honest about who is now collecting and paying anyway, and cut out the middlemen and the paper.
Obama appointed the Simpson-Bowles Commission, it did its work and reported their recommendations - Obama dissed their report and it was over. After that, Obama never put forth one idea, plan or budget to deal with "the most predictable economic crisis in history" as Bowles, a Democrat calls it. Obama has been "missing in action" on all areas of fiscal responsibility - he is totally irresponsible in the financial arena as our country comes to the edge of the fiscal cliff. Obama is only good at 2 things - campaigning and fundraising. His job after November 6 should be raising money for a college.
broaden the base? Does that mean more people will help pull the wagon?
I don't know if I fully understand Romney's proposal. He wants to reform the tax code to a position where everyone basically pays the same. If that's the case, what's the purpose? The tax forms a majority of Americans fill out isn't all that complicated. Those of us that have to fill out specialized schedules and forms do it mostly because government has created an incentive to reduce taxes usually in areas of large investments. If all this goes away, it seems obvious that those that qualified for deductions will end up paying more in taxes, and those that never took any of these fancy deductions will likely pay more in taxes. Only those in the middle that took a few deductions would likely end up paying less in taxes.
And if you want to talk about 'uncertainty', nothing is going to spark more uncertainty than just talking about getting rid of tax deductions. Is a new homeowner going to be eager to buy a house if the mortgage interest deduction is on the table? Is a farmer going to invest in a half a million dollar combine worried that a big change could happen to his Schedule F? Is an investor going to dump property knowing that he can get a greater write off under current tax code, or even postpone profitable transactions knowing that taxes could be lower in the future. Probably one of the biggest uncertainties in the past 18 months has been a candidate talking of lowering tax rates 20%. I wonder where the economy would be now if people weren't so distracted by this kind of noise. What we need are gradual changes to the tax code that come about in an unpoliticized manner. The world relies on our stability, and the last thing we need is a huge tax change to shock our financial system.
The author of this article seems to be very skeptical of tax reform. Does Mr. Chapman realize how much time and money is wasted on the IRS, on accountants and individual time attempting to follow all the different tax laws? The key is to eliminate all the special interest deductions/credits and get more people paying federal income taxes at lower rates. First we need to eliminate all deductions and credits...next we need to protect the poor/lower income people and make up for the elimination of all the credits/deductions...so let's allow everyone to make $20k/year tax free (the one and only deduction) and tax all income after that point at 20%. That way you can increase the capital gains tax rates to 20% as well and if you make more money then you will be paying more in taxes no matter what. Finally, you can lower the corporate tax rate to 20% as well...this will create growth and allow businesses to expand. Yes, you can get everything you want from reforming the tax code, more revenue, private business growth and a more efficient/fair tax system.
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