All Things in Moderation

I don’t believe in moral arguments about taxation, except at the fringes.

This is a governmental function, burden, and necessity which we can choose or scrap, and the principles should be transparency and honesty, while raising only the revenue necessary to the functions we choose our government to perform. At the fringes, where I think an element of morality can be injected, we cannot have a tax system that destroys or seriously injures anyone, or that treats similarly situated taxpayers quite differently. No one likes taxes, but we all should be able to live with them, and the power to tax, abused, is the power to destroy.

Were I the God of Tax, I would scrap personal and corporate income taxes for a system that relied on:

1] V.A.T. – competitive rate with Canada
2] automated transfer payment tax – agreed rate by treaty among North America, EU, Japan, Australia and New Zealand, at a fraction of 1% on every single transfer in and out of a reporting institution
3] tariffs and excise taxes subject to change from time to time, as policy trade and commerce tools
4] leasing public land for private use at realistic economically viable rents
5] a carbon tax, but only if set by agreement among our trading partners and ourselves

I would scrap the Gift and Estate Tax.

I would keep the payroll tax and attempt to preserve the [partial] insurance nature of SS/Medicare.
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The above will not occur in my lifetime. So I would tweak the current system as follows, in the interim.
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Corporate tax: flat rate 30% on net taxable income. I would allow the deduction of dividends in the calculation of net taxable income.

Personal income tax: No itemized personal deductions, but a standard deduction for all roughly equivalent to the minimum wage: say, $15K single, $30K married. Then a flat 30% rate above that. Dividends and interest would be taxed as ordinary income. CG holding period would be extended to 5 years as a prerequisite to get the benefit of 15% rate. Less than five year hold = short term CG, and taxed as ordinary income. No carried interest exception, and hedge fund managers would be treated like real estate investors.

Retain the current Gift and Estate tax scheme with $5M exclusion.

Tweak the payroll tax to produce more revenue for SS/Medicare AND raise the retirement age, but keep early retirement option, at reduced bennies, at 62.

No AMT. No EITC. No CTC.

I have tried here for minimal tweaks that lead to simplification and ease of computation and collection. It seems to me that almost everyone would be paying more tax than we do now under my interim proposal. If that is a function of the arbitrary rate I assigned, and if a lower rate would balance the budget at 7% unemployment and produce surplus below that number, I would be all for the lower rate.

Enjoy!

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