This week, Congress has been sparring over the best way to fix the economy. It looks like, one way or the other, we’re going to have some tax cuts. The specifics have yet to be worked out. Many are pushing for individual tax rate cuts while others believe that cutting corporate tax rates (something Speaker Pelosi just indicated she might consider) would kick start the economy much faster. Statistically, however, the federal estate tax remains the least popular tax in the country.
Let’s pretend for a second that Congress could only pick one set of cuts to make. And let’s make it today’s Fix the Tax Code Friday question:
Honestly, my one and only wish regarding the tax code is to scrap it and start over.
I would eliminate estate tax and corp tax.
I would create a single income tax rate with a sliding exemption based on the federally defined poverty level. That single income tax rate would apply to all income (including capital gains and dividends) above the exempted income with zero deductions. Ensure everyone pays their “fair share” (dang, I hate those words). Set the rate so revenue needs are covered and the transparency that ensues would ensure every American fully appreciates what is paid into the system from your household. If that triggered some common sense reform of spending, all the better.
This plan provides for a graduated “real tax rate” while ensuring the poor pay no tax. It would also eliminate the redistributionist policies and welfare-type payments that are hidden inside the current system. Call welfare and other poverty programs what they are – not “tax credits”.
As you can probably tell, I’ve thought a lot about this. Naturally, there are a million reasons such a plan would never work, and another million or two why it would never get implemented. My biggest concern would be how much of the economy becomes driven underground and into other black or gray markets, etc…
I strongly believe we should not be using the tax code the “drive behavior” social or otherwise. (see home ownership as an examaple)
Regards,
Sean McGinnis
I don’t know why so many people consider the estate tax so negatively. It really affects very few people – probably less than 5% of those that pay income taxes.
Income tax cuts for individuals I believe would help the economy more, especially if they continue a deduction for sales taxes if higher than income taxes. Consumers spending money helps the economy.
Corporate income tax rates didn’t go down in 2001 like individual rates and are not scheduled to increase in 2011. I don’t think a reduction in corporate rates will affect the economy as quickly.
I’m for cutting the estate tax.
Since it’s for fun, I’m going to be completely selfish on this one. My husband and I both have S-Corp’s so let’s reduce the personal income tax!
None of the above. Raise ’em. For individuals, keep the lower band taxes for individuals at 2010 rates, and add an upper band of 45% on incomes over $1,000,000. For corporations, use the same rates as personal tax returns, with the same graduated levels as a single person’s. For estates, we should exempt a primary home entirely, and exempt another $500,000 of other assets and another $6,000,000 of a closely held family business.
Why?
Individuals don’t need more than $600,000 to live on. The extra’s gravy; that gravy should be partly shared with the country that provided the maker of the money the opportunties to make that money.
Companies should reinvest their profits back into the market and the economy. They shouldn’t be accumulating massive piles of cash; they shouldn’t be used as tax-incentived bank account by their owners. Having a high tax rate on higher corporate incomes is an inducement for them to grow their company.
People who’ve accumulated too much cash in thier lifetime without giving portions of it away philanthropicly are not contributing to the economy or to the greatness of the country that gave them the opportunities to amass thier fortunes. An estate tax encourages them to gift early and often to worthy causes.