I’ve noticed all the presidential candidates have a new tax
plan they are offering. I am not a candidate (and if nominated I will not run;
if elected I will serve – so be careful), but thought I would propose my plan
for simplified taxes.
Personal Income Taxes:
1. All income, regardless how earned will be treated equally
under the Jim Jackson plan. A dollar earned by wages, dividend, interest,
capital gains or pass-through from some corporate-like entity are all taxed the
same. The fact is, someone paid you the dollar and government needs some portion
of that dollar to operate public services and provide public goods.
2. Every person is taxed individually. If a couple owns a
joint account, each is taxed on 50% of the income. If one spouse works and the
other stays home to take care of the children, pets, sick relatives or lays on
the beach, only the income earner is taxed.
3. How you spend your money, if legal, is no matter to me.
Therefore, net income equals gross income. Yes, I am eliminating the mortgage
deduction, medical deduction, child credit, personal exemption, and everything
else. They are all gone. No extra deductions for being older than someone else,
or blind or having children.
4. I propose graduated rates. Four brackets seems fine to me,
but if tax experts prefer four or five, I’m not going to argue. The first
bracket should be 5%. Everyone who earns income should contribute to the
Federal government. (And yes, I know some will need more support than their
income is taxed. That’s fine; provide them the service or give them a direct
payment to cover the need. Do it directly, don’t try to cram it into an income
TAX system.) The top rate should be 45%. I don’t know why 45% rather than
65%--but that way the earner gets more than the government even if they don’t
really deserve it. Make the other two rates 15% and 30%.
I do not know what income levels each tax should kick in
since I don’t have the data, time nor requisite skills to determine the
revenues from my proposal. Given the current budget deficits, we clearly need
more income than we are getting.
5. We need a transition. I propose five years. In the first
year, everyone can choose to pay either on the new tax plan or 20% new and 80%
old. The next year, the same choice, but with 40% new and 60% old. After five
years, we are totally under the new plan. If in any year a person chooses 100%
new plan, they can’t go back to the transition.
I know (unlike apparently Newt Gingrich who also has a
transition in his plan) that my proposed transition will initially bring in fewer
taxes than a plan without transition because everyone will choose the
alternative that works best for them. To rectify this somewhat, I propose
immediate repeal of the “Bush” tax reductions in current marginal rates.
Another reason for the transition is because a lot of smart
people who earn their living off an overly complex tax system will need to
retrain for productive work. My proposed transition provides a planned obsolescence
of their skills. Just think how the economy can grow if these bright people
apply their minds to productive activity.
Corporate Income Taxes
1. Eliminate all corporate income taxes. End of plan. No
transition. No deductions for anything.
2. This plan eliminates all loopholes. If Congress wants to “encourage”
some business activity they must cut checks, not hide the largess within “tax
breaks.”
3. Eliminating the corporate income tax means the US should
become a tax-haven for corporations, bringing back some jobs from overseas. Let
the other governments figure out how they want to respond.
4. It also means corporations will be making more money,
which they will eventually have to pass through to shareholders in the way of
dividends, which (see above) are fully taxed.
5. Since corporations get no deductions for charitable,
political or other contributions, they might wonder why they should make them—or
at least shareholders should be asking that question since the money is coming
directly from their future dividends.
6. Personal income tax rates will need to be higher to
reflect the elimination of corporate income taxes—which is fine in the long run
but might cause some larger deficits in the short term. Unlike other budget
deficits, this one is self-correcting since it is only a temporary imbalance until
the increase in corporate net income is passed through to investors.
Estate Taxes
1. A hereditary oligarchy is an anathema to a broadly
representative government. Therefore if someone didn’t manage to spend or give
away their money before death, the government shall help them do it through the
estate tax.
2. This item more properly belongs under the income tax
section, but it occurs after death and Republicans have labeled the estate tax
a death tax anyway, so I’m including it here. What am I including? At death,
the difference between market value and book value of all assets is income in
the year of death. The individual could have sold the asset, realized the gains
and paid taxes. They chose not to make the sale while they were living, but now
they are dead and income taxes are owed.
It does not matter whether we are talking about shares in
Apple or the family farm that has increased in value or a small private
business. Income has been earned and it shall be taxed. Life insurance agents
will be happy that they still have a role in estate planning for small
businesses.
3. After paying any income taxes, estates over $1 million
dollars (adjusted for inflation from the date the limit was first $1 million)
are taxed at a 50% rate. The very rich will still be incredibly rich, but less
so than with no estate tax.
4. The estate tax planners still have a modicum of work to
do since planned giving/ gift taxes etc. will still exist. However, note that
under the proposed plan, the Government gets its 50% off the top before any
distributions to heirs, charities or created foundations.
Summary:
I estimate (based on nothing concrete) that the Jim Jackson
tax plan eliminates 99+% of the current tax code and regulations. By
eliminating all deductions, it allows each individual to decide for themselves
without government incentive how to spend their income. It forces government to
make explicit expenditures to corporations or individuals rather than hide them
in the tax code, which will allow the public to better understand where we are
spending our money and whether the government is effectively addressing the needs
of the people.
Does the Jim Jackson tax plan need to be fleshed out? Of course,
but I suspect I already included more than sufficient detail to attract plenty
of attacks from the entrenched corporations and wealthy, not to mention the
anti-corporation liberals.
~ Jim
