Changing the tax code to something that makes sense?

Question

It is critical to a responsive and robust economy that the USA maintain the current system of tax incentives balanced by tax rates. How else can the government provide economic stimuli when called for?

However, it is high time for some radical changes. Here a few ideas for your comments.

1. Increase the corporate rates by 25% (there has not been in increase in these rates for many years), and eliminate the current double-taxation of corporate profits by making dividends either tax exempt or subject to credit offset for taxes paid at the corporate level.

2. End all estate taxes--another flagrant example of double taxation and a Marxist concept to be sure.

3. Reinstate "Income Averaging" (remember good ol' Schedule G?). People who are working hard to advance themselves should not be penalized by having to pay taxes at the same rates as people who have been at given income level for many years. 5-year income averaging used to be the law and it is needed again.

4. To qualify for the Earned Income Credit one must be either a citizen of the United States or legal resident and all qualifing dependants must be as well. This will end the drain on our system by people who send their earnings to foreign countries.

5. Bring back the Investment Tax Credit and expand it to cover energy-saving appliances and vehicles (with higher than average fuel economies, not just hybrids), not restricted to business use only.

6. Remove the 7.5 % floor on deductions for heath care costs and allow all people who pay for health insurance to take these costs as an adjustment to income on the face of the 1040, as is the case for self-employed people now, but at 100%.

7. Create a special Veteran's tax credit to be used to offset 50% of all taxes on income, never to expire. Government won't be too quick to send people off to war if it means loss of tax revenues over their remaining lives.

The Alternative Minimum Tax is the spawn of Satan and it must be eliminated in it's entirety as it is patently devious (the IRS's way of sneeking up on people in a rising economy) unfair and cowardly, to say nothing of the fact that it can double the cost of having your tax returns prepared. Down with the AMT once and for all! Let the politicians cut the tax preferences that gave rise to this ridiculous and massively oppressive idea in the first place.

Answer 1

All of your ideas have merit, but you have one misconception about the Earned Income Credit. It is not available to nonresident aliens unless they file a joint return with a resident alien or citizen spouse and treat all their income as US income.

The tax system is constantly being tinkered with, many times for political reasons. I am especially in favor of eliminating the floor for medical deductions, as medical care is such a burden on taxpayers.

Answer 2

1. This sounds like a nice idea, but when corporate costs increase they have to be made up somewhere. That means higher prices. The consumer pays corporate taxes ultimately so this would just be shifting the load with little real benefit.

1. Sorry, but since they're levied only on the wealthiest estates I can't agree with you. Farmers and small business owners can take measures to limit the estate tax burden and if they fail to do so they have only themselves to blame.

3. OK, I'll go along with that one. But my agreement there may be skewed by the fact that it would have helped me last year and may this year as well.

4. Actually, the vast majority if EITC fraud involves US citizens, not illegal aliens. Few illegals even file tax returns, let alone claim the EITC.

5. This is a good idea. I'll go along with you on that one.

6. Health Savings Accounts already give us this. If you don't have an HSA, open one now! Additionally, HSAs allow expenditures for many medical care that is not otherwise deductible so there's an additional benefit from them.

7. There's a LOT we can and should do for our veterans and citizen-soldiers (Guardsmen & State Militias) but this isn't it. As a 21-year veteran of military service I'd benefit massively from this but I don't feel that I'm entitled to that level of largesse. I made it through the 1st Gulf War unscathed and don't feel the country owes me a lifetime 50% tax credit. They could give me back the 50% of my retirement that my ex-wife got but did nothing to earn. And we can do MUCH for our war-wounded returnees that would be far more valuable to them than a 50% tax cut.

8. The AMT simply needs to be indexed to inflation, ideally based upon the cost of living when it was implemented nearly 40 years ago. But it still is needed to ensure that the wealthiest of the wealthy at least pay something.

Answer 3

Not sure about the whole corporate rate thing- maybe a move up each year for several years. All the rest sounds good to me. Just so long as we do not increase taxes.

Absolutely and wholeheartedly agree about the AMT. This is a perfect reason for line item veto.

So when did you say you would run for President? Can I be your campaign manager?

Dude I love 4 all the way to the bottom. Two thumbs up for EIC and your proposal. It is one of the many drains on our system. Plug the holes.

Giving health credit on taxes, what a wonderful way to give healthcare to all people. And that is without incorporating our government and allowing them to screw it up.

Investment credit- cool, as it should be.

50% lifetime for someone who is ent to war! What an ingenius idea. I believe it would make them think about when and how often to send them out.

Again, when are you running?

What is your full name, I think I will write it on the ballot.

Answer 4

Rule number One: never increase tax rates. It always results in a net loss in tax revenues. You should have learned that from the Reagan and the Bush tax cuts. Rates were lowered and total tax revenues increased dramatically. Taxing corporations benefits no one. The taxes get passed on as an expense of doing business. The costs of doing business are passed onto the customers, as a part of the sales price.

I agree that estate taxes should be ended.

Item number 3 is not an earth shattering idea. It only affects those who have had a dramatic increase in earnings from one year to the next. With the streamlining of tax rates, averaging may make less of an impact. Further, people who would qualify (those who had a sudden increase in earnings) would not get sympathy from the Dems, who see it as the taxpayer having a greater ability to pay taxes.

Answer 5

it'll never work.

How about replacing income tax altogether by excise taxes on expeditures for non-essentials? It automatically penalizes high income earners for excessive spending, provides fairness for the middle class, and encourages savings. Increased savings, in turn creates a larger domestic money supply, lowers the cost of borrowing, and could go a long way to reducing foreign ownership of debt.

The beauty of a pure excise tax system is that it is fair. People who earn more and spend more pay more taxes, those who earn less (and as a consequence spend less) pay less taxes. Every taxpayer can self-regulate their taxation.

Of course elimination of tax breaks might piss off a few people, but as the majority of the middle class transitions into AMT over the next few years, many of those are moot anyhow.

A credit could be offered for very low income taxpayers to provide some measure of social support, to mollify the bleeding hearts among us. It would not make a substatntial dent in revenues, because the overall amount of tax paid in by the lower income earners would not amount to much anyhow.

Answer 6

-Flat tax, everyone pays the same percentage regardless of the amount of income they earn or how they earn it.

-No deduction, this means for anybody.

-Simplicity, this will virtually eliminate a whole bureaucratic beast, the IRS!

Across the board flat tax is the only fair tax!!

Answer 7

Something that makes sense is not a CHANGE to the tax code. It would be a REPLACEMENT of the tax code. Check into the FairTax. It makes more sense than ANY income tax.

Answer 8

I totally agree with your ideas!