Friday, October 21, 2011

Time For A Flat Personal Income Tax

While Socialists in government are busy trying to raise taxes on the "rich" defined by President Obama as singles earning $200,000 or more and married couples earning $250,000 or more, Republicans are beginning discussions to make our tax code flatter, simpler and fairer.   Herman Cain's 9 - 9 - 9 plan will never make it into law because the 9% sales taxes is too regressive and would impact the poor and middle class worst.   If Cain had raised it a bit to 11 - 11 - 11 assuming it pencils and excluded food, clothing and medicine, it would have eliminated the regressive nature of the sale tax since the poor and middle class spend a good percentage of their income on these items.  

In any case, for a system that is supposed to be simple, it is too complicated and will never become the law of the land.  Besides, the notion of giving the federal government a new tax authority, a national sales tax, is a non-starter for many Conservatives since history is our teacher.   The national sales tax might start at 9% and end up at 20% or more some time in the future.  So forgettabouit. 

It could be possible to enact a 17% flat personal income tax by eliminating tax on the first $50,000 of income and all deductions, except charitable contributions and personal exemptions of $5,000 per family member.  Yes, this would get rid of the mortgage deduction, which in the short term will have a negative impact on home values, but in the end, home values will adjust allowing more young families to buy homes, in exchange for a 17% flat rate.  Eliminating any tax on the first $50,000 of income would protect the poor and lower income Americans.   Allowing a $5,000 exemption per family member would take care of families as well. 

Obviously, in real terms the "rich" would pay more in real money based on what they earn.   So the reality is that the top 10% of income earners would still end up paying 70% of the federal income tax; only without all the games that people play to get there.  And, the effective rate for someone earning $75,000 would not really be 17% anyway if the first $50,000 is excluded from income tax. So this plan would still be progressive and fair for everyone; particularly when family exemptions are included.  

The tax on capital gains and dividends should be no more than 10% since income taxes have already been paid on monies invested in our economy.  The current $5 million tax free gift exemption should remain in place to protect the gifting of family farms and small businesses.  To do otherwise often forces family members to sell the family companies they are inheriting to pay the inheritance tax, which is just plain wrong.   Remember, income taxes have already been paid over the years on these businesses, so inheritance taxes are double taxation.   The 10% tax on capital gains would apply on amounts above $5 million so a pound of flesh would still be on the table for very large estates. 

We must bring down the corporate income tax from the current 35%, about the highest in the world, to no more than 20 or 25% on pre tax profit to keep more jobs in the US.  Right now, it makes more sense to move jobs to China, or just about anywhere else in the world than to keep jobs in the US because not only are labor costs lower,  the corporate income tax rates in most countries overseas are much lower than the US.  To get there, various subsidies and loop holes should be eliminated.  

This will save billions of dollars a year in accounting and legal fees that companies must pay just to navigate the current tax code.  In addition, for the next two years, to help get our economy growing, corporations should be able to repatriate overseas corporate profits, tax free.   After that time period, perhaps a 5% tax should be sufficient since income taxes have already been paid on these profits overseas. 

Of course, even though this tax plan would restore economic growth, create millions of jobs in our country and actually result in more tax revenues going to the federal government, President Obama and the majority of his Socialists pals in Congress would be opposed.   These characters just don't understand Economics 101 or free market capitalism.  As a global business owner, I can say without any qualification that all of our business decisions include a tax analysis.  And, while taxation is not the only factor impacting our investment decisions, it is a key factor in our determination as to where we create jobs.  

The fact is that American companies can hire talented people in many countries.   The Socialist creep we have experienced for the last 100 years has actually made it more advantageous to hire employees overseas than within the United States.   The only way to restore economic growth and create jobs in the US is to roll back 100 years of Socialist creep that is destroying jobs. 

To make it happen, we must sweep Socialists, including President Obama, out of office in 2012 and 2014.  These characters along with their environmental wacko supporters, Socialists and Communists appointed by Obama at the National Labor Relations Board, public employee unions and trial lawyers making billions pursuing frivolous lawsuits are destroying jobs and our economy. 

It has to stop; but it will not stop unless we elect Conservatives that support free market capitalism, limited government, lower taxes and less regulation, a balanced budget, term limits, real education, energy, health care and entitlement reform, a strong national defense, including securing our border and fighting Terrorism, the right to bear arms, the sanctity of life and family values that are the foundation of our nation.   This is the platform supported by the majority of the American people and the only way to restore economic growth and job creation again in our country.  

We have to take back our country in 2012 and 2014, which includes reforming our tax code to make it flatter and fairer for all.   We can do it.   We must do it to preserve our freedom, our nation and way of life for the sake of our children and grandchildren.   None of this will happen as long as Socialists are in government.   So, we have to clean out the barn in 2012 and 2014 and send these characters packing.   

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