I pose that corporate tax rates should be made rational and competitive, and I think the 28-29% area is both, provided we close most yawning gaps.
See
http://www.smbiz.com/sbrl001.html#ci
and note that the rate table is irrational: the top rate, 39%, falls on entities making between $100K and $335K and then drops off! I pick the 28-29% level for a top corporate tax for competitiveness.
See:http://en.wikipedia.org/wiki/Tax_rates_around_the_world
You will point out that competitor nations have other taxes, and I will respond that due to our federal system we do too.
I would abolish CG preferential treatment if we had a flat tax rate with a high standard deduction, but if we retain a progressive structure then sales of appreciated assets place a punishing high tax on income, which spread over the life of the asset, would have been taxed at a conceivably much lower lower rate. Take your sale of non-homestead real property, owned for 30 years. It has appreciated five times over. If you are normally in a 15% bracket this appreciation would put you in the 35% bracket for the current year, thus punishing you for having kept the property, because if you could have sold it off piecemeal over the years you would have been taxed at the lower rate. However, I favor a method that would allow us to abolish CG preference because I favor a flatter structure.
I would toy with a very high standard deduction and no itemization as a starting place. That allows for much flatter rates and simpler personal returns. For example:The last time I ran the numbers, a standard deduction of $20K for a single person, $40K for a couple, plus $10K for the first dependent, coupled with a 33 1/3% flat tax above that, and a 40% rate on incomes over $250K for an individual, $500K for a married couple, plus $10K for the first dependent produces more revenue, but hits higher on the income scale than our current system. CG rates could be the lower of the only two brackets, 33 1/3%. I would consider stretching the CG holding period to three years.
Without itemization, personal tax issues are simplified. I would treat dividends and interest the same as earned income and I would ignore the ruckus about double taxation of corporations. I would call double taxation a cost of obtaining the liability shield for the investors.
However, I would gradually move away from reliance upon the personal income tax toward a small transaction tax on the widest base of transactions, like the automated payment transaction tax for which great claims have been made.
See:
http://www.apttax.com/execsummary.php
Less radical, but working along the same principal of lower tax on a broader base, we see Simon Johnson’s proposals. Jonson is both a brilliant economist and an expert in banking and finance.
http://economix.blogs.nytimes.com/2011/07/21/could-tax-reform-make-the-financial-system-safer/
and download from this link:http://www.iie.com/publications/interviews/pp20110727johnson.pdf
I would add in high “sin” taxes, like those on tobacco and alcohol, but also upon carbon based fuels and decriminalized MJ. I would rank order the carbon tax based on the dirtiness of the fuel – coal would be much more heavily taxed than NG. In fact, I might not tax NG at all if it would hasten the end of coal.
As to the expenditure side: For me, the goal is broadly Keynesian but narrowly Friedmanesque, and decidedly Smithian. We should aim to balance the budget over the business cycle in a way that we are in surplus during most times and deficit only during bad times, automatically – rather than in deficit all the time, which is the unfortunate political reality. Monetarily we should not be flooding the world with created funds and low interest when there is an excess of accumulated capital, but only when there is a shortage of accumulated capital. Our Fed does have the unique dual legal and formal obligation to fight both inflation and unemployment, so my desired outcome cannot be, in this respect.
As to production and trade:I would also like to see an industrial policy that fostered innovation and rewarded it. For example, that Silicon Valley outfit that invented the most recent advance in led bulbs should be getting encouraged to keep the new jobs to be created in the USA. If Austin can lure a Samsung factory, someone can lure a light bulb factory. I am not suggesting a federal policy on the front end, but I would listen to suggestions along that line. This would also lead to tariff protections for fledgling industries, the exceptional circumstance in which Adam Smith supported restrictions on free trade.
Beyond Smith, however, I would attempt to make the UN’s International Labor Organization rules applicable to the World Trade Organization. As it stands, only the “no slavery” rule applies at WTO.ILO insists that nations have minimum wage and maximum hours laws enforced, child labor laws enforced, and freedom of association for the purpose of collective bargaining. WTO ignores these rules and thus can sanction all western nations for placing tariffs against nations like China where there is no collective bargaining. There is reason to believe that all the western nations plus some others, like Japan, could force this upon WTO, or failing that, dissolve WTO. There is no way we can talk about fair trade without this kind of change, because WTO does not recognize these basic principles.
I have posted piecemeal some of these ideas at PL, but I thought doing it here with some links would be a nice kickoff to conversation.
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