New York Times, June 5, 2012
Rich Nontaxpayers
by Bruce Bartlett
Mr. Bartlett is a columnist for The Fiscal Times and Tax Notes. His
writing often focuses on the intersection between politics and economics.
His latest book, “The Benefit and the Burden†(Simon & Schuster, 2012), is a
history and review of issues related to tax reform.
... Last year,
Senator Orrin Hatch of Utah, the ranking Republican on the tax-writing
Senate Finance Committee, declared that taxes on the rich should not be
raised until the poor are taxed. “I think many taxpayers are skeptical that
the answer to our fiscal problems is for them to sacrifice more, when almost
half of all households are not paying any income taxes,â€
... In April, Representative Eric Cantor of Virginia, the House majority
leader,said it
was “unfair†that 45 percent of people don’t pay any federal income taxes.
...
This is ironic, because two of the measures most responsible for the rise in
the number of nontaxpayers are the earned income tax credit and the child
credit — both Republican initiatives. Together they account for 30 percent
of the nontaxpaying population ...
... Ronald
Reagan defended his tax reform proposal on the grounds that it would reduce
the number of nontaxpaying rich people. In a June 6, 1985, speech, he said:
We’re going to close the unproductive tax loopholes that have allowed some
of the truly wealthy to avoid paying their fair share. In theory, some of
those loopholes were understandable, but in practice they sometimes made it
possible for millionaires to pay nothing, ...
2-4-8 Response
Tax fairness
relates to the ability to pay. The only fair measure of taxation is the
percentage of net wealth paid in taxes each year. More than half the country
pays more in taxes than their entire net worth and most of the well-to-do
pay less than 1% of their net worth. This disparity in wealth and tax
payments is also why the economy has not recovered.
Economic
recovery requires a net wealth tax - the nuclear option in tax reform
(efficient, fair, powerful [i.e. $55 trillion base] and controversial). 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.
The 2-4-8 Tax
Blend has the lowest rates and will produce about $500 billion more than
current federal revenue [around 18.5% of GDP] with no need for payroll,
estate, and capital gains taxes or deferral of foreign income. An individual
earning $61,500 would bring home more than $1,000 additional each month. The
economy would recover quickly and the rich would earn their money the old
fashion way - by keeping 92% of their profit.
Eugene Patrick
Devany, JD, MPA
Read more at
www.TaxNetWealth.com
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