How To Create A Fairer Tax Environment
Can lawmakers who don't have the courage or intelligence to outlaw texting while driving really be expected to create a saner tax structure? Hmmm.
Developing a fairer tax environment is much less an economics problem than it is a political dilemma and, as many of you observed, it is unlikely that anything "tax" will be improved upon until there is some serious facial (and cultural) change in Washington.
Politicians focus on one issue at a time, and pretend to have problems dealing with inter-related programs. Tenured politicians have a vested interest in resisting any change that involves their spheres of influence. Both parties are embarrassingly mired in twentieth century class warfare that stifles all forms of productive debate.
Tax cuts don't just benefit the rich. In fact, they provide the opportunity for everyone to attain greater wealth. Demand directs resources far better than punitive taxation. Money in consumer hands will fuel social and environmentally friendly change.
"You cannot eliminate revenue from one program without replacing it from another, equally complicated, one", career politicians will say philosophically. They have little to gain from simplifying the tax collection system --- yet it is obvious that a whole new approach would solve most of the economic woes plaguing us today, domestic and international.
So what would become of all the CPAs, tax attorneys, and offshore laundries--- new jobs as consultants, auditors, and regulators perhaps?
Survey responses outlined constructive and manageable solutions to our multiple tax problems. If they could only be dealt with as a whole "New Deal" (catchy phrase), a fairer tax structure would be in reach.
Several basic concepts need to be accepted: (a) don't tax the job creators, (b) tax consumption instead of income, and (c) regulate shareholder abuse in the form of obscene executive pay. Then, enforce compliance with the intent of a simplified tax code.
A smarter tax system would allow more people to become wealthy honestly; smarter regulation of thieves in high places would improve the image of big business (and big government) significantly.
There are 44,000 pages in the Internal Revenue Code (IRC) alone, 5.5 million words, incomprehensible at best. Obviously, there is a lot more to be said about each of the ideas that follow. Here are the top survey ideas; the first two were discussed in previous results articles as consumer spending enhancers and job creators, respectively.
One: Social Security. Replace it with a plain vanilla, individually, and flexibly funded fixed pension program. Every person has his or her own personal pension plan for both mandatory and limited voluntary contributions --- limited to a maximum percent of income.
Two: Corporate Taxes. Eliminate income and Social Security taxes and all other nuisance fees and charges that increase corporate expenses and lead to higher prices--- a "Free Trade Zone" only policy. Monitor employers to assure that their savings are translated into new job opportunities and/or lower prices.
Cap total compensation (all "perks" included) at mid seven figures. Allow one year-end bonus split among all employees and shareholders. Invade every boardroom with well-paid and expert compensation auditors.
Three: The Fair Tax. Adopt the plan that has been negligently ignored by congress for decades. It replaces the entire IRC with a Federal Sales Tax, and without Social Security, a number between 10% and 12% would probably work.
It's easy to understand, eliminates the lobbyist gifts and bonuses that current IRC loopholes produce, taxes the underground economy, and gives back (with necessity only debit cards) to lowest tier wage earners. All businesses would be audited to assure collection compliance, and a cap would be set on the total take for all levels of government.
There would be no sales tax on food, healthcare, and educational expenses.
Four: The Flat Tax. Institute a 10% Federal income tax, with no exclusions, exceptions, deductions, credits etc. All income, regardless of source, is taxed at the same level, and the total from all levels of government capped at 15%.
A combined Flat Tax and Fair Tax environment would increase jobs and spending, while reducing tax fraud and credit abuse. Any number of approaches could be used to assist the lowest wage earners, and Social Security benefit payments would be tax-free forever.
Compensation creativity such as stock options, country club dues, and first class airfare, need to be dealt with to protect shareholders and employees from their leaders--- new jobs for those displaced professionals.
Total annual employment compensation above $5,000,000 would be subject to a flat tax of 55%. This would apply only to employees of publicly traded companies and elected public officials. Entrepreneurs, celebrities, lottery winners, etc, must not be penalized for their creativity and good fortune.
It is likely that both new taxes will produce returnable surpluses quickly.
Five: Death&Gift Taxes. Give them death; they deserve it.
Six: Property Taxes. Reduce them each year for all persons receiving Social Security benefits. Retirees would pay no property taxes after ten years.
Seven: Tolls, Licenses, & Fees. Eliminate all collections and charges for government provided public transportation (roads, bridges, tunnels) and recreational facilities (parks, museums).
Eight: Value Added Tax (VAT). Several of the suggestions above should reduce the prices of American exports. But if our trading partners assess a VAT on those exports, lets negotiate elimination or return the favor.
Healthcare reform is next, with tons of ideas not being considered by Congress.
Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy"