So Rick Perry is rolling out his new platform which he calls “Cut, Balance ad Grow”.
In the proposal is a plan to institute a 20% flat tax rate for individuals, although he says they could keep their current rate if they want (not sure how that’s supposed to work). The plan calls for some deductions, tho, so it’s not really as flat as all that. He also says he would stop taxing Social Security benefits.
The plan would cut the corporate tax rate to 20% and eliminate taxes on qualified dividends and capitol gains.
As far as I know, the whole “the wealthy create jobs” meme has been pretty much debunked by now; this all sounds like another win-win plan for business and the wealthy to me. Will he get much traction with this? Or will it soon be ridiculed like Cain’s 999 plan?
So, does Perry believe all problems with the current tax system can be summed up as, “it’s too hard to look up my tax on the table.” That is what I hear whenever anyone calls for a flat tax. At least Cain is proposing changing something other than the tax table.
Seriously, when will they get the idea that the capital gains exclusion is part of the problem. Carve that baby up and tax the hell out of it.
Otternell’s capital gains tax plan: if 50% or more of your taxable income is from capital gains, then it is taxed as income. if 25-49% of your income is from capital gains, it is taxed at 15% (current rate), if less than 25% of your income is from capital gains, then it can be tax free.
This is basically how the hedge fund managers and Warren Buffet’s of the US get taxed, not as income, but as capital gains. If you eliminate that loophole (while still leaving some breaks for the middle class capital gains) then some of the tax inequality would be eased.
I don’t know why I get so fed up, since they clearly are trying to protect that loophole, but its clearly a big part of the problem and closing it would win a lot of support.
I think the conservative fantasy land would have a flat tax, by dollar amount and not %. That definitely sounds the most fair on the surface, but I think even mindless conservatives understand that a flat dollar amount isn’t workable. Instead, they latch onto the flat % as a not-quite-as-fair, but still-fair-enough alternative.
My standard response is to point out that poor people, or even the bottom 50%, don’t actually make all that much money, and so you either soak them with taxes or you end up collecting a tiny fraction of what you’re collecting now. The standard response to that is that we should collect a tiny fraction of what we’re collecting now and then eviscerate the government until we’ve brought the budget down to match our now pathetically small tax revenues.
Which basically means they believe in magic and make-believe. In other words, I suspect Perry’s flat tax proposal will be wildly popular.
The challenge of creating a new tax system is that the tax revenue should be at least equal to the system that it is replacing. If this is the case, and the top marginal rate drops for ~36% to 20%, where do people think the rest of the revenue is going to be made up? At first glance, this seems like a large tax increase on the middle class.
Not to mention, a conservative talking point is that half the people don’t pay taxes now. I know that is misleading, but according to Perry’s plan, the first $50k income of a family of 4 will not be taxed. I think the median income is around that, so how does this plan broaden the tax base that conservatives complain about?
I think my favorite part of Perry’s plan is how it “simplifies” things by now requiring every tax-paying entity to calculate their liability under both schemes and choose the one that benefits them the most. He even keeps a good number of deductions under the new scheme, so it’s not like the additional work is trivial.
If I didn’t know better I’d think this was a scheme to make 9-9-9 look reasonable by comparison.
That’s exactly what it is, particularly for retired people and those at the bottom of the middle class income bracket. If anything is class warfare, it’s this flat-tax harebrained notion.
Flat taxes are giveaways to the rich. They pretend it is about simplifying the tax code to make it fairer. It is never that. The code is complicated because the congressmen made it that way.
I think the Pubbies should rally around Homer Simpson’s flat tax plan. Once they discover that it proves the non-existence of God, there will be a bunch of heads exploding.
The survivors can then see about forming a political party that isn’t batshit insane.
A “head tax.” In the U.S., head taxes have a nasty history, in that they’ve almost always been implemented as poll taxes to keep poor (read: black) people from voting.
I don’t get it. You buy… something. Then, at a later date you sell it to someone else, for more money. Why does it matter if you’re selling a baseball card or a share of stock. It’s a business transaction, and if it’s a large enough dollar amount (given the total number you buy and sell), you declare it on your taxes as income.
The only item I can legitimately see as being (in part) exempt is your primary home. Since you generally have to live somewhere, taking a large chunk of your “profit” makes it unreasonably difficult to find a new home to buy.
BTW, Gov. Perry, once someone cashes out their stock holdings, to earn their capital gains, they are no longer business owners and job creators, they’re just regular joes with a big wad of cash in a bank account.
Inflation, for one. If you buy a stock at $100 and sell it at $200, and we’ve experienced a 100% jump in general prices since then, you haven’t really made any real “gains” at all.
I hate to shill for the ultrarich but once you index for inflation, their low long term capital gains taxes are most likely higher than income tax.
It would be fair if all capital gains were counted as income – if it’s indexed for inflation first. But the problem would that is that it would incentivize political messing with the measurement of the inflation rate.
At a minimum it should be indexed for inflation. If I buy a stock at 20 and then sell it at 22 after holding it for 10 years, there probably are no actual gains.
I could be persuaded of that. I do wonder, though, whether inflation adjustment should apply to other investment type earnings. Let’s say I have a CD or savings account that earns 3% and inflation is 2%, should I be paying taxes on my interest income based on 3% or 1%?
This is effexctively an Alernative Maximum Tax which happens to be about 8% lower than the Alternative Minimum Tax that we already have in place. This will gut our tax base.
If taxes are not low enough to encourage economic activity then I don’t know how we explain every year since the Greate depression other than two years during Reagan. We don’t need lower taxes for more economic activity.
Why do taht when you already have tax advantaged investment vehickles like your 401K, IRA, ROTH IRA. If you max those out and you still have enough to invest money in a taxable account then I’m not sure we need to shelter that income from taxation.
What about the taxes I pay on interest? Some of that interest reflects inflation. Why don’t I get a break on my tax for interest?
The other reason for the capital gains rate was taht our tax rates were so progressive that it was unfair to tax a person all in one year for gains that had accumulated over perhaps a decade or more because they would be subject to a much higher tax rate if the income was recognized all at once but with todays incredibly flat tax rates there is not much of a disavantage and if it makes people happier to average the tax burden over the entire life of the investment then I would be OK with some tax averaging but the arguments for a special capital gains rate is pretty weak.
You can argue for getting rid of it altogether and just argue for a consumption tax but its a bad argument