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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.


C - Corp
4% VAT
8% Income

Wall Street Journal, Jan. 31, 2012

"Why Gingrich's Tax Plan Beats Romney's" by Arthur Laffer

Mr. Laffer, chairman of Laffer Associates, is co-author with Stephen Moore of "Return to Prosperity: How America Can Regain Its Economic Superpower Status" (Threshold, 2010).

In the article Mr. Laffer uses the economic proposals of the presidential contenders to expound upon his support for a low-rate flat income tax.

... Mr. Gingrich's optional 15% flat tax for individuals and his 12.5% flat tax for business. Each of these taxes has been tried and tested and found to be enormously successful.

... Fairness in taxation means that people and businesses in like circumstances have similar tax burdens. A flat tax, whether on business or individuals, achieves fairness in spades. A person who makes 10 times as much as another person should pay 10 times more in taxes.

... It is also patently obvious that it is unfair to tax some people's income twice, three times or more after it has been earned, as is the case with the death tax.


2-4-8 Response

Mr. Laffer contends that it “is also patently obvious that it is unfair to tax some people's income twice, three times or more after it has been earned, as is the case with the death tax” [and presumably the gift tax]. Mr. Laffer seems blinded by wealth and does not realize that you can’t take it with you. When you die you are not taxed. The estate pays and the dead don’t feel the pinch at all. Nevertheless, it might be better to encourage a system whereby wealth might be given more freely and taxed more gradually.

Laffer seems to be among those that believe wealth, once accumulated, should be beyond the taxing powers of the government. I feel that a primary task of the federal government is to defend the wealth of the country and that the amount of one’s net wealth is a fairer measure of who should pay for this service (and for maintaining the infrastructure that makes wealth grow).

Tax Law professors view income as the sum of consumption and any change in net worth. The government may tax wealth, consumption and/or income to produce the needed revenue. At the risk of oversimplification, one may contrast an income tax rate of 28% with a combined income tax rate of 8% and a 2% net wealth tax for each of the next 10 years. The latter enables a person to keep 20% more when it is earned and taxes only 2% of the amount not consumed in later years. The combined tax structure encourages the early accumulation of wealth and the payment of a bit more in taxes only after wealth has been accumulated.

The 2-4-8 Tax Plan is a simple mix of three flat rate taxes: 2% on individual net wealth, 4% on retail sales and 8% on individual and corporate income. The exact same rates apply to the rich and poor. There are no different tax brackets, deductions or credits, and no favoritism. The three taxes would yield about $2.6 trillion per year (slightly more than the current combination of Income, Social Security, gasoline and other federal taxes and fees).

It is hard to imagine anyone that wouldn’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 Bill O’Reilly (a/k/a the “Factor”) supports a national sales tax (of 3%) as part of much needed tax reform. The concurrent elimination of social security, capital gains and estate taxes and a significant reduction of the corporate income tax rate to 8% should guarantee near universal support for the 2-4-8 Tax Plan from liberals and conservatives alike.

Eugene Patrick Devany JD, MPA



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Copyright 1985 to 2015 by Eugene Patrick Devany