I’m no economist and I’m struggling right now to improve my knowledge of how the economy works. The following tax reform suggestions, however, are making a lot of sense to me:
Right-of-center, tax reform is inescapable. All households other than the truly poor will be required to pay more in federal taxes. The key issue is that of incentives and excess burdens. A flat tax devoid of all exemptions save for the very poor, is the best solution. No personal exemptions, no child allowances, no mortgage relief, no charitable donations relief, no tax-subsidies to business enterprise of any kind. Almost every tub would be expected to stand on its own bottom.
The same flat tax would apply to all dividends and capital gains. Only households would be taxed, at the point of receipt. The corporation tax and the payroll tax would be eliminated (as would the entirely fictitious Social Security Trust Fund). The flat tax rate would have to be slightly above 20 percent across all income for all non-poor households to reach the tax revenue target. The flat tax ensures that all households – other than the poor – pay exactly the same proportion of their income to the federal government. Of course, the rich pay far more in absolute taxes than do their less rich compatriots.
I especially dig the part that I bold-typed. I don’t really know how the payroll tax works, so I can’t have an opinion about that part of the suggestion, but the rest of it seems eminently reasonable to me. My father, who is a small business owner, has been dreaming of just this kind of a tax system for decades. He says that this would do wonders for his capacity to manage his tiny company. When he comes back from Cuba (he’s on vacation there right now), I’m sure he will be happy to find out that this system is not a figment of his imagination.
Now some questions:
1) What do you, folks, think about this proposal?
2) The quote is from a blog by a Conservative economist who states from the outset that this is a right-of-center tax reform. But the tax reform seems very fair to me. Is this a generally accepted approach to taxes among Conservatives?
3) Can anybody suggest a website or a blog where I can see a Liberal alternative to this tax reform proposal? Or can anybody briefly tell me how it would differ? If I could at least figure out if I’m closer to the Conservative or the Liberal camp on this subject, that would already help me a lot in getting my bearings.
Yes, my questions might sound silly but I have already confessed my lack of knowledge in this area. I’m just trying to understand how things work.