Taxation: The tax code needs to be revamped urgently. The only ones who win in the current over complicated system are the tax accountants/attorneys hired to help shield income and the extremely wealthy. Changes.
Myth: 45% of American's don't pay tax
-These people may not pay FEDERAL income tax, but they pay state income tax, FICA (security/medicare/employment) of 7.65% (a little less in recent years), their employers pay 7.65% which means the total is about 15% tax going to social security/medicare, they may pay property tax, they pay sales tax, they pay vehicle tax. Lots of little taxes that add up to at least 20% of income and yet all these payments apparently vanish into thin air whenever the subject of taxes is brought up. I'm not advocating for no taxes. I'm saying hidden taxes must be publicized and made clear because we need to know what kind of services we're getting for our dollar. Where's the value?
Justifying tax increases by class warfare or because revenue is insufficient
Apparently this government feels it is perfectly alright to ask for increases in their revenue (but only from the "rich" because
1) The "rich" deserve to be taxed more because that's *fair*.
First of all, the definition of "rich" as *households* earning 250K/year is ludicrous. These politicians are talking out of their asses. 250K for a couple with 2 kids living/commuting to work at the coasts is pretty much the medium class salary needed. Even 250K in the midwest/southern states is comfortable, but since many of these "high income earners" may not be working exclusively for big brother, they also need to save for retirement, pay more for health and all other benefits (few in private enterprise has your cushy benefits Mr Federal Employee). Arbitrarily naming a figure without taking into account cost of living and general wealth is bullshit.
And these discussions always conveniently omit the value of benefits. Why shouldn't the value of pensions be factored in? Is it because the biggest voting blocs (ie, federal/state/many unions) receive big benefits via pensions?
These discussions also always conveniently forget to omit the value of welfare benefits.
EITC , foodstamps, section 8, medicaid, the big 4. If you are just below the income guidelines, you receive windfalls, yet go a little above and all of a sudden there's a sudden drop in aid. This is okay?
And to address the issue of "fairness":
Those with more assets to protect may have more to lose. But if taxes are 10%, someone earning 1million pays 100K, someone earning 50K pays 5K. Isn't that fair?
On the other hand, those with less are more likely to be provided with welfare and consume many public services more. That is a fact. More lower income people are incarcerated, more kids receive financial aid for school, many towns have decreased taxes for the elderly impoverished, etc. This already effectively decreases the same tax rate.
What Obama (or any government) means when he calls for "taxing the rich more because it's fair" is really tax them unfairly. Here's another name for it. Pandering.
2) They need the money, so they *have* to have it.
Here's an idea - learn to manage your existing budget like everyone else not in government. You receive an amount, you allocate it appropriately and you don't go over your budget unless there's justification, and then overages are paid off ASAP.
Personal federal income tax solution:
1) A flat income tax across ALL personal income (dividends, capital gains, salaries.)
This is a flat 20% income tax across ALL taxable income.
2) Deductions will be:
-A fixed deduction that's a little adjustable based on the main location of the person. (Live in Manhattan, receive a larger deduction than if you live in Alabama.) This deduction is based on the poverty guideline, idea being it will be the minimum amount to live a no frills existence. However, the current federal poverty guideline makes few distinctions between location within the 48 contiguous states, so this also needs a little tweaking.
| Persons in family/household | Poverty guideline |
|---|---|
| 1 | $11,170 |
| 2 | 15,130 |
| 3 | 19,090 |
| 4 | 23,050 |
| 5 | 27,010 |
| 6 | 30,970 |
| 7 | 34,930 |
| 8 | 38,890 |
| For families/households with more than 8 persons, add $3,960 for each additional person. | |
$11,170 is nowhere near enough for anyone living in NYC in a shoebox, but could be just enough for another person with a large plot of land in the country where he can grow some food. But let's use this number just for illustration. The fixed deduction will therefore be $11,170 for a 1 person household, $15,130 for a 2 people household, and so on. This is a big deduction that takes care of low income earners by sheltering most of their income from taxes.
-A deduction of up to $50,000/person in this individual's retirement savings account, which will be allowed to grow tax-deferred. (Or Roth option if desired). Similar as current 401K plans, but not tied to any company. Why should employers be the ones to decide on whether someone should have a 401K? A high income earner will be allowed to help contribute on behalf of his spouse even if spouse has no income, but these accounts are individual, meaning the spouse is the one with the rights to the account.
-A deduction of up to $20,000/person for a health savings account from which ALL health related expenses can be paid. Health insurance deductibles or "long term care insurance policies" and imo, even "disability" policies are thus tax advantaged for the *individual*, not employers.
-A deduction of up to $20,000/person for an education savings account from which ALL education related expenses can be paid. Kindergarten/college tuition, even on-campus housing and meal plans.
-A deduction of $10,000/person for any severely disabled dependent.
These are the only deductions under my proposed new tax policy. The higher earners do get to shelter more via the maxing of retirement/health care savings, but nowhere near the levels the superwealthy currently enjoy today. Everyone pays the same rate after basic living expenses have been taken into account, and some care is taken to ensure those who need more (ie, taxpayers with disabled dependents to look after) won't hurt as much.
Re what looks like very generous tax deduction for each category:
I also propose ending SS, resulting in the need for some increased saving level. And currently some with the right business structures can already defer a lot more than 50K/person, up to something like 135K/person/year. Those who have done well enough in their careers to earn more do deserve a little extra tax breaks, even if this is only in the form of an increased saving allowance.
This is fair.
3) Credits:
-If there was ever a year with a SURPLUS, the government can channel part of it back to the poor via the form of a health/education/retirement savings account for them. I would match the education savings account for all <18 Americans in times of surplus, up to $500/year, and match the retirement savings account of anyone with <=150% poverty income ($16755 for 1 person household in 2012 in Alabama) up to $500/year, match the retirement savings account for 150-250% poverty income ($27925 for 1 person household in 2012) up to $250/year. Maybe even something for health savings account too.
But these are optional and only during years with surpluses. The citizens have contributed, they deserve to reap the reward of good years.
4) Worldwide income taxation:
Err, no. Income that is not generated in this country is not taxable by this country.
5) Social Security/Medicare tax:
Medicare is a separate topic we need to address as it concerns healthcare. Why are 65+ the only group taken care of? Anyway under my proposed plan, SS is phased out for everyone.
Current recipients receive an immediate 75% cut in benefits, and don't try to BS them. A cut is a cut.
The country has no money, it cannot afford to pay out generous benefits. Future retirees will rely on their new retirement saving account to retire.
All reaching full retirement age in the next 20 years will receive some sort of benefit - the new 75% cut level, and there will no longer be any adjustment for COL.
SS tax is immediately abolished for all except those retiring in the next 20 years. 3% of all federal revenue received under the new tax policy will be channeled towards SS. For those retiring in the next 20 years - the employer portion of SS contribution is removed. Instead, employee pays 5% per year extra (in addition to whatever they choose to personally sock away in their individual retirement accounts) until they choose to retire.
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I will be expressing my views on immigration, healthcare, education, welfare, criminal justice and a few other issues in the coming days as well.
