This is the 3rd in a series of 17, to be published every 3 days.
I am adding a Bibliography that will be updated as more installments are published.
Some people might argue I don’t have the right to speak to tax policy. Because of my circumstances of low income, mostly from Social Security, I haven’t paid taxes in several years. I have paid my share and in the years I was paying a lot, I didn’t think about it much because I was left with enough to live a good life. I’ve seen both ends and know how they feel.
Tax reform is an emotionally charged issue, but it shouldn’t be. There are many good avenues to be explored. Make no mistake about it, tax policy is about social policy and trying to elicit certain types of behavior. The following list is some of the items that need to be addressed along with some potential solutions. The growing national debt will be addressed in a later installment.
The top marginal tax rate needs to be increased to 70% for income over $10M per year. The current top rate is 37% for income over $600K for a joint return. This should increase to 45% at $1M, 50% at $2M, 55% at $5M, 60% at $7M, 65% at $9M, and 70% at $10M. Raising the marginal tax rate will increase the amount of charitable giving because it won’t “cost” the giver as much. The 10M threshold for the 70% marginal tax rate is 300 times earnings if the minimum wage was raised to $15 per hour. The incentive to produce is still there and society is benefited.
Medicare tax should be extended to the value of stock options granted and other non-cash compensation for service, including company cars and residences, memberships, etc.
The maximum limit for IRA’s should be increased to $20K per year and not limited to just earned income. They should not be used as an estate planning tool. Except in a transfer to a spouse, their value should be included in the estate of the deceased.
Student loans have been a drag on our economy and stressful to those paying them. A tax credit of up to $500 per year should be granted for tuition paid in the last ten years to a public post-secondary school until it has been recovered.
There should be a wealth tax on net worth in excess of $20M. This should start out as 0.5% in the first year in effect and increase by 0.5% each year until it reaches 2.5%. It should include offshore holdings.
We must close the door on aggressive tax loopholes. The value of options should be added to net worth to calculate wealth tax.
The estate tax should be eliminated. Instead the estate should be added to the income of the recipients, with a per person exemption of $50K to shield small estates.
Stock buyback programs are merely a disguised dividend to the shareholders who don’t sell their shares and should be taxed to the beneficiary as such.
Corporate tax rates: For the years 1951 through 1986, the corporate marginal tax rate was above 45%. The current marginal corporate tax rate is 21%. To get things back on course, we need to go back to a 45% marginal tax rate on corporate income. The rate should be graduated in the fashion of the personal tax rates with the top rate kicking in at $5,000,000.
Our legislators need to understand they are representing people not money. A plan like this, with rates set to eventually ease the national debt situation, will benefit the vast majority of the people of the United States.
There should be no differentiation between full and part time workers for any tax or benefit. Everything should at the minimum be proportionate, so as not to create a sea of part-time workers who have to work two jobs to make a living.