Redstate

I like what you are proposing here and I do think that it would be a great way to go.

I have a couple of questions:

1) It seems like the 30% is past the top of the Laffer curve whereas 27 or 28 might be more accurate. Of course, I understand that it's easier to throw out round numbers?

2) Has there been any work done to see what we would need to do to be revenue neutral on a flat tax?

No doubt this stems from having a portfolio of stocks and bonds worth of over $5 million.

Still thinking about that blind trust?

a top issue. However rather than wait for "next year". Our nominee John McCain should immediately come out with a detailed plan for implementing fundamental reform.

Taxation is an issue that speaks quickly across demographic lines. Most people in this country innately “get” that the tax system should be less complex and transparent. A radical change in the tax structure that is not only fair in the eyes of economists but more importantly is simple enough to be understood as fair by the average wage earner. could become a cornerstone the new Republican basket of ideas.

is in presenting this great reform without your opponents mugging the proposal by downing it in a heap of examples where some deserving family would pay more compared to the current case and comparing it to savings by a billionaire (the sort without any accountants, somehow).

The fact that [pick unloved mogul of your choice]'s tax bill is probably smaller than his accountant's bill will be ignored and that it won't make any difference to your finances is glossed over.

However if you dodge the barrage and get over the message if could do more for the economy that almost anything else. It is so dangerous to the left that in Britain the Treasury censored all mention of it from internal papers.

Granted, a flat tax would be an improvement over the current system, but it needs to be done in conjunction with a decrease in spending by the government. According to some sources, my tax dollars do nothing but pay interest on the national debt. I am not interested in spending 10%, 15% or 30% of my labor just to pay interest. If you want honest feedback - CUT SPENDING! Then I would be happy to go with a flat tax.

Secondly, I do not believe it should be tiered. The people that make the most money should not be penalized for being successful. The fact is they are the ones that create the jobs in this country. If there is fear that the liberals would have a problem with this, then work to educate the people on how the economy works.

Finally, exempting the first $30 - $40K would be acceptable if the exemption rate were somehow tied to inflation so that it increased yearly.

It's hardly "flat".

Why not pick a rate and a standard exemption which would provide the same amount of revenue to the government and leave it at that? No more home mortgage deduction, no more charity deductions -- just a flat percentage of everything over the cost of living in your ZIP code.

Now, no power in Heaven or on Earth could keep members of Congress from tweaking those ZIP code adjustments, but at least it would inhibit the unholy trade in tax code and campaign contributions.

--
Gone 2500 years, still not PC.

...that flat tax is the right call.

A simpler, fairer, flatter system, yes. But a flat tax seems unfair.

I like Mitt Romney's tax idea's, he has a tax plan to make rates lower for all Americans, and make the tax on savings, particularly on middle-income Americans, disappear.

He would have ensured federal spending on programs other than defense grew less than inflation, and would have vetoed any spending packages congress submitted that exceeded that cap.

Sounds right down the center of the conservative isle.

"Back in the thirties we were told we must collectivize the nation because the people were so poor. Now we are told we must collectivize the nation because the people are so rich." ~ William F. Buckley, Jr.

Why was the sunset built into them? It seems odd.

Gar

Don't three tiers make it a non-flat tax? But having lower rates is a good idea if the income break points aren't lowered at the same time. Everybody would pay a lower percentage of income, and even if revenues went down, there might be an incentive spend less.

If the "very limited deductions" don't include home mortgage interest, I'll have to move out of my house.

As always, the devil's in the details.

The "Third Worst Person in the World" and aiming higher.

We need to start laying out what principles we should have behind our tax policy. Moving to a 3 tiered rate is better, but is not very radical.

How about this for a radical idea: Abolish the income tax for everyone making under $100,000 and have a simple 15% flat tax for everyone above that. Impossible? No, very possible.

The flat tax is a good idea. The FAIR tax is a good idea. But both ideas are getting picked apart because the current complex web of taxes is hidden and obscure enough, and the proposals, ironically, dont attack the core issues: It's both the complexity and the cost of taxes (ie quantity) that drags us down.

So let us start with 5 principles for fundamental tax reform:
1. The Federal Government Costs too much, spends too much and taxes too much. Tax reform should include tax reductions.
2. We need a simpler, flatter, lower rate tax system.
3. We need to shift taxes to tax production less and consumption more
4. We need to fix entitlements through choice
5. We need legislative and constitutional protections for taxpayers to limit tax hikes, spending hikes and runaway deficits.

Fundamental tax reform

#1) The Federal Government Costs too much
We can implement this by limiting Government Spending to 15% of GDP as long-term goal. Until then, keep spending at inflation rate, including entitlements.

#2) We need a simpler, flatter, lower rate tax system.
The tax system needs to go in the direction of BROADER BASE and LOWER RATES. tax system with lower rates mean less tax avoidance and economic
distortion; maximizes economic efficiency. An economist puts it:
"the theoretical case remains valid for a tax system with a broad and clean base which minimizes the reward to tax-driven economic activity." A BROAD tax base with the lowest rates possible is the least economically harmful tax system.

The solution? Abolish the income tax for all but 15/20% of Americans.
85% of americans should pay NO income tax. have the same simple flat rate for corporate taxes, cap gains, income: 15%
- l-t gains over 4 years are indexed to inflation

3. We need to tax production less and consumption more
Why: We need to fix the trade deficit over the long term; this is due to tax policy; shift taxation to include imports.
Solution: As we Lower the corporate and personal income tax rates to 15% max, have imports and energy (oil,gas, coal) taxed at 15% flat rate. That is 20% of the economy. Then add a 5% Federal BTT/VAT, akin to the FAIR Tax NRST, but at a much lower rate. All goods bought and sold are subject to 5% Federal sales/value-added tax.
The FAIR tax shifts the tax code 100% to consumption, and in doing so creates its own issues (such as need for a rebate, a high tax rate on goods, etc.). This proposal is more balanced; it shifts us about 1/3rd to 40% in the consumption tax direction.

Objection to flat taxes and the FAIR tax has been equity. This proposal keeps the good ideas of the FAIR and flat tax, but provides it in a more balanced way.

THE NEW TAX SYSTEM
15% - personal income ($100,000 exemption so only rich pay), corporate income, cap gains
- personal rate hits only top 15-20%
15% - import, excise taxes
5% - BTT/VAT/Federal sales tax
10% - soc insurance tax; all visible to wage payer,

4. We need to fix entitlements through choice
- social security tax rate is too high and too regressive
=> lower to 10%, increase limit to $1 million or even more so this is a real flat wage tax. This would be a dramatic tax reduction for working class and middle class, but will beg the question: How to keep social security afloat? The answer is simple. Get people to opt out.
Have Choice in social insurance - #1 opt-out options for all programs
- Reduce from 10% to 7.5% for those who choose to opt-out
of social security. require a 401(k) plan for those who do. With no cap on social security tax, there will be a big incentive for high income people to opt out, and thereby have zero reliance on the govt for their retirement security. we can evolve social security to be a safety net program.
- Have Choice in social insurance - #2 medicare choice
By letting people opt out, we encourage less Government dependency

A low flat tax plus a regressive social security tax equates to a regressive scheme, and has been opposed by liberals on those grounds.
The tax proposals I outline above are NOT regressive, while at the same time providing lower tax rates at all income levels.

One objection to a proposal that adds one more tax but does
not abolish another is that both taxes can become greater,
getting raised by tax-hikers. This is one reason why we cannot do the above scheme without taxpayer protections ...

5. We need constitutional protections for taxpayers
We need a Taxpayer Bill of Rights
- repeal and replace 16th amendment with a constitutional limit on
income tax rates of 15-25%. Similar limit of 7.5-10% on BTT/VAT could
be put into the amendment
- 2/3rds vote in both Houses of Congress required for tax increases
- spending limitation, tax limitation and balanced budget amendment
- line-item veto
- balanced budget amendment

If these items cannot be made into constitutional amendments, they can be made into law in such a way that Congress will be constrained in spending and in new taxes.

In summary, tax reform is vital for America and it needs to start by agreeing to the basic principles for tax reform: Less taxation overall; simpler, flatter tax code; tax production less; address entitlements; put in taxpayer protections. These principles are satisfied with a balanced "15% solution" that brings the best of the Flat Tax and FAIR Tax ideas and puts it together in a package that would be harder for liberals to demagogue, since it lowers taxes for the working class.

This is the part I have problems with - "those 2003 tax cuts deserve significant credit for creating over 8 million new jobs after the 2001 recession and producing record tax revenue that cut the budget deficit." Tell me when there has been a tax cut that wasn't accompanied by an even greater amount of borrowing. For instance, Pres. Bush cust taxes $1.2T over ten years, transferring existing $ from the public to the private sector but borrowed $3.4T in seven years of new $ that was pumped into the economy, having a far greater stimulative effect. The same is true under Pres. Reagan. Even Reagan finally understood this since he raised taxes at least three times after he saw the deficits created by his initial tax cuts, including a tax cut larger than Pres. Clinton (despite what Republicans say). This is the Republican economic policy - borrow money to pump into the economy so things look good now and ask our kids to pay for it later. And, by the way, 8 million new jobs will be about a third of the jobs created when Pres. Clinton was in office.

I'm sorry, I meant to say Reagan signed a tax INCREASE larger than Clinton's. Could Reagan even be a Republican now? Bush I is chastized for his tax increase but Reagan's increases were larger and more frequent.

Not sure what you meant about the whole hour but...the Democrats controlled the House at the time and the Republicans controlled the Senate and Reagan had veto power.

A final comment: Reagan was a believer in cooperative government. He believed in working with the Democrats. He took them at their word, signed the bill, and then they reneged on fulfilling their end of the bargain.

Did you really not know that?

The "Third Worst Person in the World" and aiming higher.

See also:

http://travismonitor.blogspot.com/2008/03/fundamental-tax-reform-15-solu...

Please add your comment on it.

Jeb,

With all due respect, the FairTax bill (HR25) already has 70 cosponsors - more than the number of cosponsors of all the various Flat Tax bills before Congress COMBINED.

Why not pledge to cosponsor FairTax that clearly has the most momentum right now instead of continuing to support the Income Tax?

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Eliminate the IRS and all payroll taxes! http://www.fairtax.org

You're talking about a low-rate flat tax with minimal deductions.

But we already have one of those. It's called the AMT.

Instead you propose something that I really can't distinguish from the existing income tax. Your plan has three rates, a low-income cutoff, and deductions for mortgage interest and charitable giving (but not, evidently, for state and local tax payments).

Why not just reform the AMT? We probably can't scrap the progressive income tax, but why not invert their respective roles?

Reform the AMT so that it has an inflation-adjusted low-income cutoff level. Below that level, no tax applies. Above it, you pay a flat rate with exemptions for mortgage-interest, charitable contributions, and state and local taxes. Nothing else.

And then steeply increase the rate on the progressive income tax. This would invert them. Unlike now, most people would pay the AMT. The progressive tax would only be for the people at the top end of the income range.

My idea isn't ideal from a conservative point of view, but there are Democrats in the world after all, and we have to compromise with them.

You've presented your "flat tax" ideas as a solution primarily to the inefficiency problem that comes from tax planning and preparation. Let's say, ballpark, that's a $500 billion problem. Not small, but not big either. My proposal solves that problem just as well as yours and will be easier to enact.

Now if you were really interested in conservative priorities, we'd be talking about reducing our commitment to Social Security and Medicare.

Flagstaff,

Let me see if I understand what I didn't know.
You're saying that Reagan signed the largest tax increase in the past 30 years (and other increases) because he was promised spending cuts by the Democrats in the House but they failed to deliver them.

That means that the House passed spending increases that would have had to be passed by the Republican Senate in order to get it to the President's desk and then Reagan signed it rather than veto it like he had done with so many other bills. He was duped but had to go along - in '83, '84 as well as '86.