The present federal income tax is much too complicated. Much labor of IRS employees and tax preparers goes into figuring out how much tax each person should pay to the federal government. Some simpler systems are possible and they could perhaps be fairer. I believe the tax rates since the Reagan tax cuts are too easy on the very rich.
Mike Huckabee proposed a "Fair Tax" which I believe was primarily a national sales tax or value-added tax. I believe it is also too easy on the wealthy, but it would promote savings and stifle unnecessary consumption, both of which seem good to me. I believe Huckabee proposed no tax on dividends or interest or corporate profits.
Others have proposed a "Flat Tax", the same % of income for everyone. This is clearly a boon for the wealthy and goes against U S practice for nearly 100 years of having the wealthier citizens pay not only more tax because of more income, but a higher % of income as the annual income goes up.
A plan I like: A graduated income tax with no deductions, no exemptions and no off-shore gimmicks to dodge taxes. The minimum rate would be 5% of earnings from all sources and the maximum would be 35%. I think even a minimum wage worker needs to pay 5% so he knows he is contributing to the cost of government and has a stake in not seeing his taxes wasted. The 35% rate would apply to persons making as much as the President, currently $400,000 per year. Payroll deductions would collect the tax from employed persons (as now). The taxpayer would pay a fine for insufficient deduction, as for instance if he had two jobs and did not inform either employer that his payroll deductions should be higher related to the sum of the wages from his two jobs. Eliminating all deductions and exemptions would greatly simplify tax reporting. Some current exemptions are intended to promote a certain behavior like doing research, having children, giving to charity, etc. I think that if the government wants to promote a certain behavior, it should make grants unrelated to the tax system.
I believe it would be good to eliminate all corporate taxes, but instead require that each corporation pay half of its profits in dividends to its shareholders each year. The dividends would be taxable income to the shareholders at a flat 20% rate. This 20% would be withheld by the corporate dividend payer and sent straight to the government, so it would not be involved in annual income tax reporting by the individual taxpayer.
Capital gains would be taxed at the same rate as wages and other income, but the taxpayer could adjust the cost of what he sold upward to reflect inflation based on the consumer price index. Assume a person buys 10 acres of undeveloped land and holds it for 30 years, making no improvements, then sells it for twice what he paid. He should not be paying any capital gains tax if the value of the dollar fell below 50% of what it was when he bought the land 30 years earlier.
Inheritance Tax: I have a novel view regarding taxes on estates. In general I agree that parents should be able to pass about 1 million dollars in cash or other assets to each child tax free either as a gift while the parents are alive, or at death. I believe it would be good to tax anything over this tax-free amount as ordinary income in the year the assents are received. I think it is best to apply no tax to the estate, but apply the tax to the recipient. Along this line, I think it would be good to allow a wealthy person to give up to $500,000 to any number of individuals, as gifts or bequests. In other words, I would allow a person who dies leaving a billion dollars in assets to give it all away tax free if it were divided among 2000 or more persons, each receiving no more than $500,000. To agree with me on this proposal, you must agree that there is some benefit in redistributing wealth from the very wealthy to the less wealthy. I said above that ordinary income should be taxed with no deductions or exemptions, meaning that the deduction for charitable giving during one's lifetime would be terminated. On the other hand, I believe it would be good to allow an estate to go to qualified charities tax free as at present.
Inheritance tax on family businesses, farms, ranches and large tracts of undeveloped land has always presented a problem for property owners who would like to keep these assets in the family without prohibitive taxes. I think it is especially bad for a ranch or private nature preserve to be broken up and partly sold to pay inheritance taxes I believe that a farm which was acquired as a legacy should be able to be passed along to children with minimal taxes. If a 600 acre farm was acquired by Mr. Smith from his parents as an inheritance and he continued to farm it with help from one or more children for at least the last 10 years of his life, he should be able to pass it on to these children tax free. The rule would have to be that the children would not sell any part of what they inherited tax free, or if they did they would pay ordinary income tax on the full price they obtained. The concept of a legacy property is one where the property would pass from parents to children to grandchildren to great grandchildren, etc. If, on the other hand, parents left property to their children which they had not obtained by inheritance but rather they had bought the property, then the property is not legacy property and no tax relief on the property would apply. Why grant tax relief on legacy property? The reason is that we want to encourage preservation of farms, ranches and the like and avoid having them be divided up into housing developments or the like. Tax relief on legacy property should apply only to the value of the land and land improvements, but not on the value of buildings, farm equipment and similar assets acquired during the lifetime of the parents. Improvements like buildings would be taxed as ordinary income to the children, though we could consider allowing 5 or 10 years to pay the inheritance taxes and reasonable interest. It might be appropriate to require that the property be deed restricted to its traditional use in order to qualify for forgiveness of inheritance taxes.
All of the above applies to federal or state income taxes, but I am not proposing any alteration to traditional state sales taxes or ad valorem taxes on real estate.
Born 1932, Meriden, CT, 3/4 Irish ancestry.
1937 to 1950 Meriden public schools
1954 graduated from Worcester Polytechnic Institute, B.S. ChE
1954 to 1969, worked at Monsanto nylon yarn plant and research center in Pensacola, FL. 1969 to 1971 (more...