We have tax plans from the major USA Presidential candidates. I don’t like any of them, though I actually like Ted Cruz’s plan more than the others, but it has a huge problem. His plan doesn’t fund the government he wants, not even just as poorly as we have been doing. He would increase the debt substantially.
My plan would have 3 parts. I like a flat tax, I doubt it will ever happen, but if we could get one I would be happy. Cruz proposes that (at 10%). I am fine with his proposal to eliminate all deductions but mortgage interest and charity. I would definitely tweak that some – no more than $50,000 in mortgage interest deduction a year and the same for charity. Basically subsidizing it a bit for the non-rich is fine. Subsidizing these for the rich seems silly so I would cap the deductions in some way. I also wouldn’t mind an almost flat tax, say 12% up to $200,000 and 15% after that (or some such rates).
Cruz’s rate is far too low given the government he wants. The government budget is largely: Social Security, Medicare and Military. Then you also have debt payment which have to be paid. Those 4 things are over 80% of the spending. All the other things are just in the last 20%, you can cut some of that but realistically you can’t cut much (in percentage terms – you can cut hundreds of billions theoretically but it is unlikely and even if you did it isn’t a huge change).
We are piling on more debt than we should. Therefore we should increase revenue, not reduce it. But if we can’t increase it (for political reasons) we definitely should not reduce it until we have shown that we have cut spending below revenue for 2 full years. After that, great, then decrease rates.
The VAT tax on businesses replacing the corporate tax system is in Cruz’s plan and this is the best option for corporate taxes in my opinion. Another decent option is just to pass through all the earnings to the owners (I first heard this proposal from my Economics professor in College) and tax them on the earnings.
Increasing the giveaways to trust-fund baby as Cruz and Trump propose is the single worst tax policy change that can be made. I have explained previously how bad an idea this is: The estate tax is the most capitalist tax that exists. The trust-fund-baby favors should be reduced not increased. I would roll back to the Reagan Administration policy on estate tax rates.
I would raise the federal tax on gasoline by 50 cents a gallon. Use it to fund mass transit improvements and to cut the deficit and to reduce greenhouse gas emissions. I would want have the whole rest of the taxes revenue neutral (and use this as extra income) but if that wasn’t possible, then make the whole thing together revenue neutral.
Social Security taxes are nearly equal to other income taxes. They are highly regressive. I would eliminate the current elimination of the tax on high income earners. I would just have the tax due on all earned income (no cap). If that let me reduce the rate, great, if not fine it would just make the fund solvent for longer. I would not increase the benefits due for high earners beyond what it is now.
I would also prefer to raise the retirement age on which benefits are paid (this isn’t really something that seems likely but I would support it strongly if there was any interest). I would do this in a similar way to the last time this was done. Last time they only raised it by 2 years. I would aim for at least 3 more, but would take whatever we can get. Those increased ages would not take full affect until 20-30 years from now.
I would also strongly support Bernie Sander’s desire to increase all tax revenue and create a single payer health care system. The economic cost of the current USA health care system is an enormous burden we all suffer from every year. A single payer solution isn’t nirvana but the current system is horrible, a single payer system would be a huge improvement.
I would prefer to change unearned income taxes to be more favorable for long term investing (if such income didn’t get swept up into a flat tax). Including it in a flat tax would be my preference, I am just saying if we didn’t get that and had something more like our current system I would want a change in tax on unearned income. Dividends shouldn’t get special treatment. Capital gains should be indexed to inflation – so selling a stock 20 years later would be not calculated on just the purchase price and sales price. The post inflation gain or loss would be calculated and then I would give favorable treatment to long term investments (over 2 years).
So I would gladly take a VAT from Cruz but at a more reasonable rate (perhaps 15%) and the flat tax from Cruz but again at a more reasonable rate (perhaps 15%) and the other adjustments mentioned above. I have no idea but just based on my wild guess it seems like 15% for both might fund a single payer health care system. But if a better health care system wasn’t possible due to special interests then just set those percentages at whatever makes it revenue neutral with the other factors (reasonable estate taxes instead of trust fund baby subsidies, increase gas tax).
I would be much more willing to cut spending than either the Democrats or Republicans. There are only 3 places to cut real money and neither party wants to cut Social Security or Medicare. I don’t want to cut Medicare. I don’t want to cut Social Security benefits but I would move back the age (cutting benefits for people retiring 20+ years from now) I would also be fine cutting payments to the rich, but this is not politically feasible so I am fine not doing it.
Many Republicans want to increase military spending, few are willing to cut it; a few Democrats are willing to cut it but not many. I would be willing to cut military spending to the tune of hundreds of billions a year. We just shouldn’t try to do as much as we do militarily. It is too costly. We need to spend less. Again this isn’t so likely but unless you do this thinking you can cut taxes is foolish. If you want to cut taxes you have to cut spending. I would be willing to cut military spending to cut taxes but it is unlikely there is political will do that in the USA.
Related: Taxes per Person by Country (2010) – USA State Governments Have $1,000,000,000,000 in Unfunded Retirement Obligations (2010) – USA Federal Debt Now $516,348 Per Household (2007) – Lavishing Tax Cuts on Ourselves That Our Grandkids Have to Pay For is Bad Policy (2013)