Thursday, September 4, 2008

Taxes - A whole new way!

Once I am elected reforming, no revolutionizing, the Federal Government system will be a high priority. Right after dismantling the spupidly named 'Department of Homeland Security' That alone will save a few billion. 

More fundamentally, however, here are my tax proposals.

  • The first principle is that the budget must balance. No more deficit spending. Within each budget there will be a subtantive contingency fund. This fund to be used for those times when fiscal stimulus by the government is needed to help the economy along. (No, I'm not a Kensyian economist, but that doesn't mean I can't use a good idea when I see one.) If over a few years the contingency fund gets larger than realistic need part of it would be used to pay off the national debt.
  • Income Tax. Firstly I would abolish all deductions. No mortgage interest, no dependant allowances, none of the fancy depreciation/ depletion allowances. None period. Thus each individuals income in total would be taxable. Doing this alone would allow me to reduce the % of tax very considerably.
    There would be only 4 tax bands. I'd need more data to compute the bands accurately, but roughly they would start at $25,000 to $100,000 then $100,000 to $3000,000 then $3000,000 to $1,000,000 and finally a supertax on incomes over $5,000,000.
    All income would count. Regular earned income, bonuses both monetary and in marketable stocks, realized capital gains & so forth.
  • A National Sales Tax. I'd use the VAT system widely used and successful in Europe. Just about everything except food gets this tax applied. The tax is easily adjusted to 'make ends meet".
  • Gasoline tax. I would announce that the tax on gasoline, diesel, heating oil and all other petroleum products will go up by 10% per year each year for the foreseeable future. Three reasons. First, we have to quit using fossile fuels at the current rate. Secondly, America needs to reduce our dependence upon foreign  sourced oil. (drill though we may we won't become independent without reducing consumption.) Finally, it will raise a lot of money every penny of which I will use to reduce the rate of income tax.

    Look what's happened recently as the price of gas went above $4.00 a gallon; people started driving less & buying more fuel efficient cars. A gas tax will continue that trend and prevent back sliding as the price of oil goes down due to smaller demand. We moan at $4, but don't foreget that European already pay over $7 and survive.

    An added advantage of this tax is that it would make alternate energy sources more & more competitive over time. The current system of subsidies is a very inefficient way to encourage alternate energy. We have stop using wishful thinking and pandering to noisy activists as a basis for energy policy. Economics and the market are the best means of making things happen. For example, we currently subisidize US produced ethanol to the point of disrupting world commodity markets when it is clear that its not cost competitive with what the Brazilians can produce using sugar cane. Why not end the subsidy, allow Brazilian ethanol in with not duty then encourage the domestic growing of sugar cane in those areas where soil & climate are right. These just happen to be some of our poorest farming regions where a new cash crop would be a boon.
  • Corporate taxes would also get simplified and be based upon real profits as reckoned using International accountancy standards. Small, priviatly owned business would have a lower rate, but at the same time I would really tighten up on "allowable business expenses" many of which are simply disguised forms of family income.
This tax package would mark a major shift from direct to indirect taxation. Let everyone keep more of what they earn, but tax them on what they spend. Seems a lot more democratic to me. It would also eliminate much of the tax evasion industry with saving to both the government and individuals.

THis package coupled with my program of cost savings should lower the burdon on taxation for almost all Americans and allow us to save and invest for our and our children's futures.

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