The Governing Institute advances better government by focusing on improved
outcomes through research, decision support, and executive education to help
public sector leaders govern more effectively. Girard Miller the Public
Money columnist for GOVERNING and a senior strategist at the PFM Group. Mr.
First, Romney should propose a basic flat tax rate of somewhere in the 15 to
19 percent range,
almost all itemized deductions must go, except for mortgage interest and
the lowest one-third of tax returns should be free from federal income taxes
altogether by exempting the first $20,000 of income
At the upper end, the top 2 percent of taxpayers in their respective
household categories should then pay a 28.4 percent rate on all their
income above those levels ... Deductions and exemptions would be phased out
for taxpayers in the top 3 percent, which is also roughly $200,000 per
household for all sources.
Reagan also agreed to equalize the tax rates on investment and ordinary
income, just as I have suggested.
I realize that many readers have diverging views of tax policy, and that
most readers of the Governing e-letters are state and local officials
who don't themselves set federal tax policy. But it's worth thinking more
deeply about how federal tax reform could work, and how it would impact
state and local finances.
The 2-4-8 Tax Blend eliminates capital gains. At the risk of
oversimplification, try to contrast a 30% income tax (the Buffet Rule rate)
with an 8% income tax combined with a 2% wealth tax. The combined income &
wealth tax would permit an individual to keep 22% more salary each year. It
would be like saving a yearâ€™s take home pay every three years compared to a
30% payroll/income tax rate (conservatively assuming the 2% wealth tax was
offset by 4% investment interest).
If we tax net wealth at 2%, sales at 4% and income at 8% the three taxes
would yield about $2.6 trillion per year (slightly [$400 billion] more than
the current combination of Income, Social Security, gasoline and other
federal taxes and fees). There would no different tax brackets, credits, and
It is hard to imagine anyone that wouldnâ€™t welcome a 2% tax on net wealth
and a small 4% sales tax, in exchange for drastically reduced 8% individual
income tax rate. Even the "fair and balanced" Bill O'Reilly (a/k/a the
Factor) supports a national sales tax (of 3%) as a necessary component of
tax reform. 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.
The 2-4-8 Tax Blend expands the tax base to achieve the lowest possible
rates (while yielding about the same government revenue). Upward mobility is
encouraged by lowering the tax burden on earned income. A corporate tax rate
of 8% should be a very big plus for job creation and the economy. The broad
base and low rates also minimize the impact on the varied state tax
Eugene Patrick Devany, JD, MPA