David Cay Johnston,
a Pulitzer Prize–winner and Reuters columnist, teaches the tax, property,
and regulatory law of the ancient world at Syracuse University College of
Law. His new book, The Fine Print (Portfolio
Hardcover), will be published in September. He opines:
... Yet concerning taxes, which finance our
civilization and distribute the cost, three great lies permeate society, all
of which delay our doing what needs to be done. The first lie, with a nod to
comedic candidate Jimmy McMillan, is that the tax is just too damn high. The
second lie is that if you cut the rates, revenues will increase. The third
lie is that taxes have become too complex for even an Einstein to
understand.
... Despite all the political rhetoric about
excessive taxes, federal tax revenues are at their lowest point since Harry
S. Truman’s presidency. In Barack Obama’s first three years, federal taxes
slipped from a little less than 15 percent of the economy to 14.4 percent,
far below the 17.6 percent to 20.6 percent range from Ronald Reagan through
George W. Bush.
... the individual income tax brought in a third less revenue in 2011
than it did in 2001, when the Bush tax cuts began. ... nonfinancial
corporations at the end of 2009 were hoarding more than $3 trillion in cash,
.... That’s $10,000 of idle cash per American, a vast reserve army of
capital as much in need of employment as the 24 million or so Americans who
can’t find a job or as much work as they want.
2-4-8 Response
The article touches upon a few hot button issues (i.e.
size of government, tweaking the tax brackets and tax complexity) but
overlooks the twin elephants in the room – national debt and accumulated
wealth. You correctly identify the misguided and successful political war to
“starve the beast†of government without seeing that the resultant $15
trillion in national debt has miraculously morphed into more surplus
accumulated wealth of a few.
If we expand the tax base we can we can lower the
income tax rate, maintain progressivity and have the same brackets for the
rich and poor. The solution is the 2-4-8 Tax Blend which broadens the tax
base by taxing net wealth at 2% (above a $15,000 exemption), retail sales at
4% and income at 8%. It would yield $2.6 trillion – ($400 billion more than
FY 2011 federal revenue). The tax blend is progressive even though rich and
poor would pay the same rates. The concurrent elimination of social
security, capital gains, estate and gift taxes; and a significant reduction
of the corporate income tax rate to 8%, should guarantee near universal
support from social liberals and business conservatives alike.
Please think outside the box before you react. Try to
contrast a 30% income tax (the Buffet Rule rate or the rate paid by the
middle class when the payroll tax is included) with an 8% income tax joined
with a 2% wealth tax for each of the next 11 years. The latter combined
income-wealth tax would permit an individual to keep 22% more salary each
year. If one saved just the 22% extra take home for 11 years it would amount
to several years’ salary in the bank - a very nice retirement fund,
(conservatively assuming the 2% wealth tax was offset by 4% investment
interest). Now that’s real economic mobility!
How would an 8% corporate income tax affect jobs and
the economy? Those answers may be better left to your talent and
imagination.
Eugene Patrick Devany, JD. MPA
www.TaxNetWealth.com
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