TAX RE­FORM & UNI­CORNS

We love to chase them but no one has seen ei­ther yet

Ripon Bulletin - - Front Page - ► DEN­NIS WYATT,

Uni­corns. Big Foot. The Loch Ness Mon­ster. Tax Re­form. All four are pure fan­tasies yet we are ob­sessed about find­ing all four. I do not claim to know much of any­thing, but I do know this — since I first opened my first pay­check as a 13-year-old some 48 years ago politi­cians have been jab­ber­ing about tax re­form.

I’m not talk­ing tax cuts that are al­ways fleet­ing or the “free money” that the cho­sen few got for be­ing in the right place at the right time to get $7,500 from Un­cle Sam to buy a home or get be­tween $2,500 and $4,500 for their clunkers. I’m talk­ing real tax re­form. I get that one of Amer­i­can’s great na­tional pas­times is belly­ach­ing about taxes. I also un­der­stand we wouldn’t have a lot of things if it weren’t for taxes — roads, wa­ter sys­tems, po­lice and fire pro­tec­tion, na­tional parks, the mil­i­tary, food for the needy and sec­re­taries for mem­bers of Con­gress so they don’t for­get an ap­point­ment with their tax­payer sub­si­dized Lamborghini class health­care provider. I also be­lieve there is waste and in­ef­fi­ciency as well as grow­ing de­pen­dence on wealth trans­fers via govern­ment hand­outs. Thanks to Con­gress, no artist no mat­ter how mar­ginal or re­pul­sive their work is won’t have to starve if they can land a grant from the Na­tional En­dow­ment for the Arts.

Real re­form would as­sure the need­i­est work­ing full­time would be free of in­come tax bur­dens as part of a con­certed ef­fort to dial back wealth trans­fer pro­grams such as food stamps and other govern­ment as­sis­tance pro­grams. Why take money in the form of taxes from peo­ple who the fed­eral govern­ment then has to give money back to in the form of as­sis­tance after si­phon­ing off their cut for over­see­ing the trans­fer?

Real re­form would use in­come in­dexed to ba­sic cost of liv­ing based on re­gions to de­ter­mine in­come tax li­a­bil­ity. Based on Rent Jun­gle sta­tis­tics, the av­er­age two bed­room apart­ment is now rent­ing in Man­teca for $1,377 a month as op­posed to $787 in St. Joseph, Mis­souri, that hap­pens to be about the same size of Man­teca in terms of pop­u­la­tion. That means a per­son mak­ing $15 an hour work­ing full-time would pay less than a third of their yearly salary for housing in St. Joseph as op­posed to more than half of the same salary for housing in Man­teca.

The ex­cuse not to in­dex in­come by re­gion, of course, is that it would be too dif­fi­cult. Not only are there these things called com­put­ers but if Con­gress can har­ness the mas­sive fed­eral bu­reau­cracy to come up with humdingers such as the oil de­ple­tion tax in terms of com­plex­ity to save spe­cial in­ter­ests money, they can do the same to bring fair­ness to wage earn­ers.

Real re­form would grad­u­ally phase out all de­duc­tions and tax cred­its re­vert­ing back to the first 1040 form in 1913 that re­quired you to fill out in­for­ma­tion on just three pages and noth­ing else. De­duc­tions in­cluded all in­ter­est on debts, all state and lo­cal taxes paid, and worth­less debt, losses from fires et al. Busi­nesses were al­lowed those plus only two other de­duc­tions — nec­es­sary ex­penses to carry on busi­ness and de­pre­ci­a­tion. Net in­come was taxed at 1 per­cent from $20,000 to $50,000, 2 per­cent from $50,000 to $75,000, 3 per­cent from $75,000 to $100,000, 4 per­cent from $100,000 to $250,000, 5 per­cent from $250,000 to $500,000 and 6 per­cent over $500,000. So if a per­son made $80,000 they weren’t taxed on the first $19,999, paid a 1 per­cent tax on the next $30,000, 2 per­cent on the next $25,000 and 3 per­cent on the last $5,000.

The only thing you’d need to mon­key with be­sides in­dex­ing for cost of liv­ing is al­low­ing de­duc­tions for de­pen­dents to re­duce the re­liance on govern­ment aid for ba­sic liv­ing ex­penses via wel­fare, housing as­sis­tance, and food stamps. That doesn’t mean all as­sis­tance would be elim­i­nated. What it means is the start of the pay­ment of in­come taxes would be set high enough to try and avoid any de­pen­dency on wealth trans­fer pro­grams. The in­come tax would ap­ply to all wealth gen­er­ated on Amer­i­can soil by all firms and in­di­vid­u­als re­gard­less of their pri­mary na­tion of res­i­dence or com­pany head­quar­ters.

Tax rates would be sig­nif­i­cantly higher than in 1913 while tax shel­ters for avoid­ing or de­fer­ring taxes would be elim­i­nated. That means busi­ness strate­gies to in­crease profit which re­sults in more eco­nomic stim­u­la­tion would not be side­tracked by strate­gies to max­i­mize prof­its by re­duc­ing tax li­a­bil­ity.

The rates could be de­rived by run­ning a com­puter model that re­duces the over­all an­nual net from fed­eral in­come taxes by 10 per­cent on the as­sump­tion the re­duc­tion and more will be made up by money be­ing freed to re-in­vest and re­duc­ing the skim­ming off tax dol­lars to a man­age wealth trans­fer pro­grams.

The same tax rates would ap­ply on in­come Amer­i­can cit­i­zens earned in other na­tions but not the profit of Amer­i­can com­pa­nies that sell prod­ucts over­seas. In­stead such busi­ness prof­its would be taxed at a re­duced rate — per­haps 50 per­cent — to dis­cour­age firms such as Ap­ple from hoard­ing $216 bil­lion to avoid USA taxes and to ac­knowl­edge that the best way for Amer­i­can workers to com­pete with those over­seas or south of the bor­der is to lower cor­po­rate tax rates on prof­its earned with over­seas sales of Amer­i­can pro­duced goods and ser­vices and not by slash­ing the salaries of Amer­i­can workers.

Nearly dou­bling the stan­dard de­duc­tion and re­duc­ing cor­po­rate and un­in­cor­po­rated busi­ness tax rates, bump­ing up the child care credit and re­duc­ing the tax rate over­seas prof­its of multi­na­tional firms as is be­ing pro­posed may help but it is akin to treat­ing can­cer with an as­pirin regimen.

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