Read. Argue. Listen. Act.
MoreThe formula makes sense: Cut out almost every income tax loophole, tax all income - including capital gains on investments - using the same simple model, lower rates across the board (especially for lower and middle income earners where the money will mostly go to boosting demand, where the economy is weakest right now) and put at least half of the savings towards cutting the deficit.
Common sense ideas like this, on how we can in one fell swoop, make the tax system more fair, cut deficit spending and stimulate the economy where it needs the stimulation are exactly the kinds of ideas we need right now.
Fellow Omaha resident Warren Buffet talked at length about part of this equation in a op-ed in the New York Times on Sunday, saying that we need to "stop coddling the super-rich". I would have gone farther, saying we need to stop giving special deals to anyone.
For example, why should investment income be treated any differently than regular income? Why should someone who brings home $100,000 from an investment get to pay significantly less on that than someone who is pulling a paycheck for the same amount? It's absurd. Buffet has long used the example of how he actually pays the least percentage of his income than anyone else in his office, about half as much as the office average, while making far more than anyone else. Again - absurd.
Loopholes are an even easier thing to expose. Why should a business in this industry get lower taxes than this other one? It's really just because they've greased the right hands in Congress. Get rid of almost all of them, except ones that could apply to everyone, like the child tax credit.
The great thing about this is you not only bring in more revenue from cutting out looholes, but you can save people time and hassle. The only ones who lose here are tax preparation and tax attourneys. Imagine how much we'd all save if our tax return was so simple that it could fit onto a large postcard? In fact polls show people actually want taxes simplefied more than anything else.
The right's kneejerk reaction to this is to say that it would stop people from investing. But again, this is obviously ridiculous, as Buffet says in this part of his op-ed:
Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.
I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off.
It really is quite telling that the defenders of unfair tax policies use such a flimsy response. Just as absurd as the above arguments, this idea that people will just stick their money in an account making far less than even a mediocre investment would, because taxes on any profit they make will go up a bit.
A radically more simple tax system, lower taxes across the board, cutting the deficit, stimulus without adding to the debt, savings in tax compliance and a much more fair system... this is precisely what our country needs right now.
Solomon Kleinsmith is a former nonprofit worker, serial social entrepreneur and strident centrist independent blogger from Omaha, Nebraska. His website, Rise of the Center, is the fastest growing blog targeting centrist independents and moderates.
Solomon Kleinsmith is a former nonprofit worker, serial social entrepreneur and strident centrist independent blogger from Omaha, Nebraska. His website, Rise of the Center, is the fastest growing blog targeting centrist independents and moderates.
Comments [9]
A flat tax is unlikely to ever pass, and I don't think it ever should. It would require significantly raising tax rates for lower and middle income earners so rates for the wealthy can come down to the same as the rest. That's both ridiculous, and totally impossible to pass.
Harrison,
2 thoughts on you disagreeing with calling them the Bush tax cuts...
Bush proposed and pushed for them and thus I would even assume he has liked them being named after him. That is unless he has learned something about capitalism/economics since leaving office...
Passing a law is a 50/50 deal...both congress and the President have to pass/sign or it doesn't become a law. And one thing Bush jr was much better at than Obama is...is that he would take a position on an issue and make clear proposals of what he wanted congress to pass as a law instead of abdicating to them...
On a 'fair' flat* tax:
Interestingly, proposed flat taxes on income have been touted as 'fair' but almost always include an exemption below a specific income level.
In the interest of fairness, would it not be worth while to consider a flat tax, with no exemptions, on wealth instead of on income?
If we accept the position that the US is a meritocracy in which some are better than others in accumulating wealth, it must also be true that those same folks will be better at using their wealth to offset the steady loss through taxation. They will, in fact, be inspired to use their talents to earn more, rather than just sitting on what they have.**
[For those who retreat to the 'But determining 'wealth' will be complicated!' response, I humbly suggest they take a look at the complexity of our present tax code.]
* Identical rate of taxation for every adult citizen.
** This argument maps nicely onto the one which states that in a period of inflation one's money is better invested in the stock market than in bank deposits and treasuries. In one, inflation is the driver. In the other, taxation.
To Mark from St Martin:
" ... the foolish Bush Tax Cuts ... "
The legislative branch of government makes laws including tax laws. The executive branch does not have that power.
I've long been in favor of a fixed percentage income tax for everyone -- with some relief at the bottom end of the income scale.
If it's 30% the government needs: then everyone pays 30%. The $100K guy pays $30K, the $1.000K guy pays $300K, etc.. Again -- with some relief at the bottom end for people who are really struggling.
Also, why allow tax advantages that drive spending in particular ways, for example home mortgage interest?
@ J.D.
I wonder what would be more effective... tossing out the expense deduction and lowering rates with most of the revenue, or keeping it. You'd think there would have to be some kind of work done on how much less companies would spend on capital investments if that specific tax break was taken out...
How about also eliminating one of the biggest government subsidies to the rich and their corporations, the business-expense deduction? Workers sell a product to employers--their ability to work--but they don't get to deduct the cost of producing that product, i.e., their cost of living. Businesses, on the other hand, get to deduct their entire cost of "living" from their taxable income. That's a discriminatory subsidy that should be abolished.
Someone's gotta lead and I appreciate that Warren Buffet is offering a reality check and putting his vote in for change.
Next I'd like to see wealthy babyboomers (the richest generation EVER) speak out and offer to rollback Medicare at least. for a few years till they are in their 70s.
It is good to see someone like Buffet speak out like this. A couple of years ago there were a group of wealthy people saying speaking out saying about the same thing.
Our country needs this kind of leadership badly. Over the last 10-15 years the economic statistics show how the gap between the wealthy and middle is getting larger. There is significant truth to the ole adage that it takes money to make money...it just how a capitalistic system works. But we have just gone too far with our tax policy support those who already have money.
Personally, I believe much of the current problem is due to the arrogance of those wealthy folks who believe that they somehow are "owed" the low tax rates due to "all that they do for society" AND they then pay off our politicians to support them. The whole situation is pathetic.
My wife and I have significantly benefited from the foolish Bush Tax Cuts...thus I guess I owe a big big thanks to all the Tea Party "lemmings" who watch Fox News and vote for the foolish politicians that have subsidized our early retirement!
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