ii iv viii	Merry Christmas and Happy New Year NEW - In 2016 the 2-4-8 Tax Blend will become 2-4-8 Tax Choice The "choice" would allow all taxpayers to choose an income tax rate between 8% and 28% paired with a net wealth tax rate of 2% going down to zero. Wealth taxes paid would reduce Estate and Gift taxes (also set at 28%). This would encourage wealthy individuals to pay some net wealth taxes as a form of inexpensive life insurance.	Wealth 0% 0.5% 1% 1.5% 2%	Income 28% 23% 18% 13% 8%
		Business C - Corp	4% VAT 8% Income

The Fiscal Times, May 2, 2012

Why Reagan's Tax Reform Road Map Won't Work Now

 by Eric Pianin and Michelle Hirsch

... The Tax Reform Act of 1986   achieved many of the goals now being espoused by Republicans and Democrats. ... all sides agree a major rewriting of the tax code will call for painful tradeoffs, and likely will require heavy lifting well beyond what the Reagan White House and a politically divided Congress did 26 years ago. ... far different and more complex overseas tax picture today than in the late 1980s, a sharp rise in the number of pass through corporations, a fragile economy, and far more partisanship and political gridlock than existed when Ronald Reagan ...

... Ed Kleinbard, a tax law professor at the University of Southern California ... "We need more revenues than the 2012 tax rules would generate if extended.” ... It nearly halved the top marginal personal income tax rate, moved 5 million low-income Americans off federal income tax rolls, and cut the top corporate tax rate from 46 percent to 34 percent.

... Equally unclear is how lawmakers intend to address the more than 90 percent of U.S. businesses organized as pass-through entities, partnerships, and sole proprietorships. ... the percentage of U.S. corporations organized as pass-through entities grew from about 24 percent in 1986 up to about 69 percent in 2008. ... “If you’re going to take away a bunch of business tax incentives, you have to figure out a way to make it tolerable for the people who operate in pass-through form or sole proprietorship.  That’s a real sticking point,” said Clint Stretch, a managing principal at Deloitte Tax LLP.

2-4-8 Response: For the Common Good

The article correctly notes the interrelationship of corporate tax, pass-through business tax and individual taxes. When congress enacts a loophole (a/k/a tax expenditure) for one it always harms the others. Please consider the 2-4-8 Tax Blend - a comprehensive tax reform for both individuals and business that can be defined in one sentence:

Tax individual and corporate income at a flat 8% rate (with no deductions, credits or loopholes), tax individual net wealth at 2% (excluding $15,000 cash and retirement funds) and impose a 4% Value Added Sales Tax (VAT) on business.

For business the combined 8% income rates and 4% VAT would be the lowest and most competitive business taxes of all the developed countries. [The U.S. is the only developed country without a VAT]. The 8% income tax rate also resolves the significant problem in the deferral of taxes on foreign profits caused by imposing a 35% tax (less credit for foreign taxes paid) when the money is brought back into the U.S.

For investors, the net wealth tax might seem revolutionary by U.S. standards, but most high earners would willingly pay a 2% net wealth tax in exchange for eliminating the capital gains and estate taxes and keeping 92% of taxable earnings. The ability to buy and sell assets without being taxed on the gains would spur a new era of investment freedom. The increased after tax income would also create wealth much faster than a 2% net wealth tax could diminish it.

For workers, the elimination of the payroll tax and reduction of the income tax rate creates an immediate boost in take home pay. For example, a young family earning $70,000 currently pays combined federal taxes of 19% but would take home $7,700 more with an 8% income tax (assuming net wealth of under $30,000). This additional $641 per month represents an enormous opportunity for both savings and consumption. The $15,000 per person cash wealth tax exemption also encourages a responsible level of liquidity. The retention of tax exempt retirement savings programs recognizes the need for the elderly to have sufficient assets to supplement social security. Current interest tax deductions for mortgages and student loans are replaced by the ability to deduct the loan principal in computing net wealth. This is the equivalent of a 2% reduction in the interest rate and is arguably a better incentive for both home ownership and higher education.

Eugene Patrick Devany, JD, MPA

www.TaxNetWealth.com

 

 

	Spread the word: Please let Congress know you want them to consider the 2-4-8 Tax Blend by simply tweeting "TaxNetWealth.com" or by copying any basic description and sending, faxing, or emailing it to at least one representative from each political party. Many representatives will only accept email through their individual websites.

Copyright 1985 to 2015 by Eugene Patrick Devany