After expressing serious reservations about the policy discussions of the current election campaign, it seems to me useful to remember that the country’s principal problems can be addressed fairly straightforwardly.
Tax policies are available that would stimulate rational economic growth while reducing the deficit. Income taxes should be lowered on all incomes below $250,000, and taxes should be raised on elective spending, such as gasoline not consumed to earn the taxpayer’s living, as with taxis or delivery vehicles. Restaurant meals, luxury goods, and financial transactions other than simple equity or bond-market buying and selling could be lightly taxed, but very profitably for the Treasury. Taxes on capital-gains and dividend and interest income should all be reduced, and former Senator Santorum’s proposal for an extended and increasedfamily tax credit and a reduced tax rate for manufacturing should be enacted, if not exactly as he proposes.
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Some variant of the tax plans of the Republican candidates should be adopted, possibly Newt Gingrich’s proposal of a reduced tax rate or a 15 percent flat-tax alternative. More investment and savings, and less consumption of non-durable goods and products for swift and transitory gratification, should be encouraged.
Instead, the barricades have gone up between Republicans frenzied at the thought of any tax increases and the determination of the Democrats to mobilize the 97 percent of Americans who earn less than $250,000 per family per year against those above that threshold. Republicans should settle for a blend of income-tax reductions and sales-tax increases that raises taxes for discretionary consumers and stimulates the economy while shrinking the deficit. Shrieking the mantra of no new taxes is just sterile dogmatism, though the motive for it is commendable.
And if Democrats are determined to assault “the millionaires and billionaires” (as if they were in the same condition), a self-eliminating tax on very large fortunes, and not on incomes as such, could be acceptable if designed carefully. Those with a net worth of $50 million or more could pledge 1 percent of their net worth to a project they could design and supervise themselves under liberal criteria, for the reduction of poverty, as defined. As poverty declined in the country, the tax would decline, and would be eliminated when poverty was eliminated. Those who fell below the $50 million net-worth figure would have this tax already paid credited back to them. This would put the country’s most agile financial minds behind the goal of reducing poverty, and give them a vested interest in its elimination. The current Democratic crusade to take money from those who have made it and give it to those who haven’t, greasing the state administrative apparatus on the way through, in the name of a fable of social justice while really just crudely buying votes, is unjust in itself, poor economics, and indifferent politics. This tax would also at least slightly and relatively painlessly address the widespread concern about wealth disparity.
In the locked horns of the parties now, entitlement reform has been trampled in the dust, though all serious analyses of deficit reduction, including such bipartisan efforts as Simpson-Bowles, acknowledge that it will be necessary. The sooner we start, the more lead time contributors to Social Security and other schemes will have. Raising the Social Security kick-in age to 67 starting in 15 years would be a start. But the whole subject is so complicated and treacherous that, once one launches on it, it is best to make a comprehensive reform. The sacred cow of universality can be gently eased into eternity through discreet means-testing through tax data without the ancient bugbear of a pauper’s oath.
Obviously, health care is a terrible challenge to the system. Seventy percent of people have first-class health care that they don’t pay for, and 30 percent have various levels of inferior care that they generally do pay for, until they have run out of resources; and, in the case of the majority, the providers (if corporations) and the recipients both enjoy favorable tax treatment. The tyranny of the satisfied majority is therefore understandable and intractable. Health care costs $7,000 per capita per annum in the United States, against about $3,000 in Australia, Canada, France, Germany, Japan, and the United Kingdom, countries whose standards of living and medical care are roughly comparable.
It is too complicated an issue to take very far here. But we could start with the Republican platform of four years ago and give a $2,500 tax credit to everyone to use at the individual’s choice, open insurance competition completely, tax as income the health benefits above a reasonable average level, insure the financially disadvantaged and those threatened with that condition by catastrophic health problems, cap malpractice awards, and oblige the pharmaceutical companies to charge American customers for drugs at price scales similar to those enjoyed by the other nations mentioned above.
Conrad! The current tax code needs to be scrapped completely. It's 80,000 pages for crying out loud. Why do you people insist on tinkering and trying to maintain the monolith that is the U.S. Federal Government. I mean really? Tax credits!!!! Give me a break.
"More investment and savings, and less consumption of non-durable goods and products for swift and transitory gratification, should be encouraged."
I stopped reading right here. We need a tax code that is less intrusive and stops the social engineering goals of those who believe that know better. I'm sure you are very well educated and read, but I'll pass on having you or others determine through more taxation what private actions by citizens should be encouraged or are simply for gratification.
You're also introducing new revenue streams through things that could be "lightly taxed" but "very profitable for the Treasury". How you can type those words in any serious conservative economic discussion is beyond any comprehension I have. I read two paragraphs and not one word about spending reductions. You may get to them later in the article, but again, this prevents your ideas from being serious, conservative solutions.
With ideas like this coming from our side, it's no wonder we're in the abyss.
This article, it seems to me, is symptomatic of all that is wrong with the current tax code. The purpose of a tax system is to generate revenue to fund the proper responsibilities and operations of the government. It is not supposed to be used to modify the people's behavior in accordance with the wishes of the political class. Yet, Mr. Black has one proposal after another to encourage us to act in certain ways to accomplish some vaguely defined goals.
Please: let's get to a flat tax, eliminate the credits and deductions that force one segment of society to subsidize another, and take the government and IRS out of the decisions made by businesses and individuals.
We have created the Gordian knot, and tinker with it as you may - we are still left with.....a Gordian knot.
Look at healthcare. That law's tentacles have twisted and grabbed for a year and a half. The judiciary (to date) has refused to vacate the law or to even place a hold on it's implementation until it's Constitutionality is ruled on by the SCOTUS. This willingness to allow it to proceed, even from the Court that declared it's mandate unconstitutional, highlights the Nation's inability to resolve our dilemma. Bureaucracy for bureaucracy's sake, or the ultimate in government self-preservation. Too many programs depend upon too many programs.
If we are unwilling to cut the healthcare knot out of our government's bureaucracy (and ObamaCare is supposedly vastly unpopular), we certainly lack the willingness to cut out the knot containing more popular programs.
We Americans.....with our heads in the hangman's noose, we fiddle with the knot instead of cutting the rope. Not much longer until we stop kicking.
No! The nations problems can not be solved. Harry Reid and Nancy Pelosi are measuring drapes for their new offices. We can't fix the nation. Face it and deal with it.
We are adults living in a Republic. As adults we live with the fact that 50% of all marrages end in divorce.
Sorry, but many posters who read National Review have little in common with posters from magazines like "Atlantic" or "Mother Jones".
There were less than 35 million Americans in 1860. Now we live in a nation with over 300 million residents. By 2020 we may well be at nearly a third of a billion souls.
How can the enviormental policy of California put into Alaska work? How can the economic policy of New York City work in Michigan? How can the faith values of San Francisco work in Texas? It's pure insantity to have the water regulations of California applied to the Great Lakes States where in a normal year they have flooding and swamps. This is the present condition of the USA and it is killing the whole of the nation.
Why can't the states seperate into regions? We are talking about adults sitting down, having an honest discussion about their differences, and leaving as friends.
The idea of divorce is now out there for serious discussion. California always says they are the world's 8th largest economy. Let's see if it's true with out a subsidity from the rest of the 49 states. Michigan might actually be better if it could ask the Canada to join their confederacy. Texas and the South would not miss the "left coasts" a bit. New York liberals would celebrate the exit of the majority of Christians which hail from the fly over country.
There are over 300 million people in the USA. There is no logic to think they can agree. We should part as friends, wish them well, and look forward to the future.
Mr. Black, I look forward to your articles. I find your personal story compelling and I enjoy your writing. I rarely disagree with you; however, taxing discretionary spending is a mistake.
Marginal workers, striving to get ahead, have no bigger dream than to be able to spend on discretionary purchases. Taxing this behavior will reduce not only the purchases, but also the desire.
Desire is the key component that makes capitalism work.
Aside from the obvious flaw of penalizing success, do we really want to tell people that they should work to make their lives better, but if they succeed, they will have to pay?
The GOP would be foolish to agree to create a national sales tax or value-added-tax as part of a deal that lowered income taxes. The income taxes would go back up after a few years and we would then have both the income taxes that we pay now plus a national consumption tax. Forty-six states and the District of Columbia already impose sales & use taxes and they have been inching up consistently over the last 40 years. Most of the states began their sales & use taxes in the 1930's in response to budget deficits caused by the economic downturn we were suffering through at that time and these new taxes added significantly to the deepening of the Great Depression. As a historian of the Great Depression, I would expect Mr. Black to know this. We do not want to repeat the unfortunate history of the 1930's.
You are exactly right. Contrary to what democrats, and apparently National Review offer us is an even faster slippery slope into slavery. I am for a flat tax, but only after we have reestablished the Founding Fathers' limits on the Federal Government, and for me that would include repealing the 16th Amendment as well as the 17th.
The thought of giving the Federal Gov't ANOTHER way to tax us without eliminating the income tax, as well as limiting the scope and breadth of the bureaucratic regulators' ability to increase spending through unconstitutional regulations terrifies me.
Personally I think demanding reforms such as One Bill, One Topic, with no more than three amendments germane to the Topic which is germane to the body of the bill will help. I also believe that any bill that is longer than the US Constitution is an attempt to obfuscate the issues at hand.
I'd also like to see the Federal legislature meet every other year. If they only dealt with their constitutionally enumerated powers and areas of interest, they could spend more time working in their communities and less time bonding with Washington "elites."
I appreciate creative thinking about our nation's problems, but the wealth tax idea seems like a stinker. Do we really want to open that door? The income tax was originally only supposed to apply to a few ultra-rich individuals too, and we see where that has gone. And do we really want the IRS looking over not only our incomes but also our assets? Enforcing the wealth tax would require a whole new layer of complex and intrusive bureacracy -- not to mention a new field of avoidance-planning -- which is not good for our society.
The premise is completely wrong. Carving out exceptions to the tax code to favor one group over another does not lead to prosperity.
Prosperity comes when people with the means to do so invest and receive a return on that investment. The current problems with our economy come from over regulation. Taxes are essentially the same as they were under George Bush. I would love to see the income tax scrapped altogether or a low flat tax. That would definitely free up capital for investment.
One other thing, that fact that we tax corporate earnings at a higher rate than other countries means that capital earned abroad stays there and is reinvested there. Why on earth would any sane politician punish companies for bringing home profits it earns over seas?
This job destruction is either willful or the product of extreme stupidity.
I agree with the above commenters. A VAT or Nat'l Sales Tax just opens the door for more big government. If we repealed the Income Tax Amendment, maybe, but otherwise, no.
Imposing on Pharmaceutical's is dangerous unless done correctly - but I would support both re-importation and reviewing prices at comparable states, and denying Pharma companies the US market if they do note stay within some margin of that average. Then Pharma can decide whether or not the US market is worth it, and/or not bow down so much to certain foreign countries.
But let me put out an alternate vision:
On Taxes:
Personal: Adopt a modified version of the Perry 20% flat tax plan, with a high standard deductions on both Wages and Capital Gains (seperately), a reduction in the number of other deductions (only 5 - retirement savings, health care, mortgage of primary home/CG on sale of primary home, state & local tax, some per child deduction - $2000? up to, say, 5) and limiting them to $20,000 or 20% of a person's total post standard deduciton annual income (whichever is greater). This would include changing the treatment of health insurance provided by an employer to taxable income. Maybe add a continuation of the current student loan scheme just to not make sure all the kids get in a tizzy. Oh, and no marriage penalty at all.
The one negative here would be that I would advocate raising the CG tax to 20% (with the 20,000 standard deduction), to make things simple, not favor one sort of income over another, and also in light of the corporate and business tax reductions I would advocate.
Business & Corporate: To avoid gaming, have a standard 5% tax on all revenues (gross, not net; not profits), with only a standard deduction except for payment of salaries/compensation. This would cause a need for more up front financing for invesement, but IMO that would just mean that people would need to make better choices on what to invest in - high cost ventures would need to be justified by high potential revenue streams. Then you save tons of money on dealing with the IRS (which could then be gutten for savings purposes) - a business takes in $100 - $5 go to the government. Plain and simple. For individuals, you would take your business revenue taxed at the 5% on rate, and deduct from that the salary/dividends/CG you pay yourself - which would be taxed at the 20% rate but with the 5 deductions.
On Health Care: Keep the exchanges, openned up to everyone; then gut pretty much everything else.
Set up a marketplace where individuals can, across state lines, buy into pooled plans. But no mandates to get into the exchange other than the business proving it has the assets to provide what it promises. Instead, the key would be transparency - the insurer would have to show in a transparent matter how big their network is, what is and is not covered and how much, how much co-pay, co-insurance, and deductable, and how much money they spend on actual HC costs. Then let people make their own choice.
On the exchanges you would have to have some level of community rating (allow a deviation of up to, say, the most expensive person paying twice what the least expensive person on the same plan pays) and guaranteed issue (no coverage for fraud, obviously). With regard to pre-existing conditions - an insurer would only be required to provide what the person's last insurer provided (and that plan would have had to be active within 30 days of new plan purchase) or what they provide, whichever is LESSER coverage - for one year (after which under current law the pre-existing condition is no longer treated as such). No hop-on, hop-off insurance gaming, and with a big enough range and big enough, cross-state pools, mitigated damage from high cost individuals.
Oh, and this would also be key - on the exchanges allow (obviously cheaper, given that hospitals would charge less to give these people procedures) LIMITED TORT plans - plans where, if you sign up, you are agreeing to cap non economic damages and to hold doctors to a different standard of review - gross negligence proven by clear and convincing evidence; not regular negligence by 50.1 likelihood% (which is too easy for attorneys to manipulate).
Then do the Ryan/Wyden plan for medicare, and the various suggested reforms for social security.
ON WELFARE/FOODSTAMPS/EXTENDED UNEMPLOYMENT
For extended unemployment (beyond the usual 26 weeks), add a requirement to volunteer for 24 hours per week at a non-political agency/terms - failure or fraud which will lead to loss of any future benefits and potential debt for prior benefits. Make it the same for welfare. For foodstamps - end the card program, and limit the types of goods and locations that they can be spent on to a very narrow range. Frankly, I'd prefer to get rid of Food Stamps entirely and move to a system of Emergency Food Dispensers - wait on line for bread, pasta, rice, etc. - they need to reintroduce some level of shame back in so that only people who really need them use them.
PUBLIC SECTOR PENSIONS
Encourage States to cap input and benefit (so you only pay into a pension for say, the first 100K of salary, but your pension can max be based on that), like Social Security, and use a 2nd, 3rd, 4th highest year to further avoid gaming. And then create a Public Safety Pension insurance and liquidation program for states that enact this, similar to private sector pensions, which, if the State/City Pension fund goes effectively bankrupt, gets dumped onto this pot with, from the proceeds it takes from these funds (the insurance premiums) pays at some fraction up to a certain max.
ON ENERGY
Drill, baby, drill. And then it's ok to spend smaller amounts on properly bid contracts and grants for alternative energy research for national security purposes. Also, put modular nuclear reactors (like what we have in our big aircraft carriers) on each military base so that they have independent power (and can provide more). And upgrade our grids durability to EMP, etc.
ON the MILITARY
Forget Obama's cuts. Just have a giant independent IG go through and get the waste (of which there is tons of) out. Also, don't cut our troops, USE OUR TROOPS at home. We shouldn't be paying anyone to do pretty much nothing. Have our troops provide subsidized paramedic/clinical services in nearby communities (most can easily get appropraite training within the military). Heck, we could even open satalite stations in bad communities to provide the very poor with some level of health care, but also with the knowledge that they have troops stationed in town so some of these effective internal warzones get some actual adult supervision (with guns).
I forgot the deduction for Charitable Giving (non-political) - which would be subject to the same $20,000 per year or %20 of combined (Wages, CG) income cap. Also, some of the other deductions might have to be limited to the more stringent $20,000 cap - most likely state and local taxes, followed by health care spending (but maybe with a refundable credit in there like the $2500 in one of the Republican plans).
We need to transition from a consuming to a producing nation. 1st step is tariffs to price Chinese imports that makes American made products an attractive alternative. The money we borrow from China was generated by sales of Chinese imports at the discount stores. Very difficult to find a product stamped Made in America. Next step is to curb the wage negotiating power of the unions so that the cost is not passed to the consumer. Fair market tagging of wages and labor. Tie Federal salaries to the Fair Market value of careers in the private sector. Big ticket items have large profit margins. Reducing the margin makes the products more sellible. A temporary 1 percent tax for 5 years shoud be levied on incomes over $ million that is earmarked exclusively to reduce the deficit. The funds collected cannot be used for "investments".
And for each dollar collected expenditures cannot be increased. After 5 years the Congress will be held accountable for the results to the budget. Special "Wartime" bonds could be sold like in World War 2 to provide money for military expenditures. Also I like the idea of a Constitutional amendment to rewrite the Bill of rights to read "Congress nor the executive branch"
Mr. Black should be commended for writing an article that considers both a national wealth tax (or “a self-eliminating tax on very large fortunes“, or 1% pledge) and a sales tax as part of tax reform. I tend to oppose a wealth tax on the rich unless it also applies to the working class. Mr. Black is not alone in considering some type of wealth tax (Warren Buffett will), a sales tax (Bill O’Reilly and Herman Cane will) and eliminate tax expenditures (Simpson and Bowles will). Put the three tax ideas together and you have the 2-4-8 Tax Blend which taxes individual and foreign-owned net wealth at 2% (above a $15,000 exemption), retail sales (or VAT) at 4% and income at 8%. The low rates yield $2.6 trillion – ($400 billion more than FY 2010 federal revenue).
• Rich and poor would pay the same “2-4-8” rates - making it the fairest tax system on the planet.
• Social Security and Medicare payroll taxes are eliminated - guaranteeing future unrestricted benefits paid out of the general fund for all.
• Big and small earners keep about 20% to 30% more income each year – creating economic mobility and consumer power.
• Taxes on capital gains, estates and gifts would not be necessary - restoring economic freedom to the investment class.
• Reduce the corporate income tax to 8% for all types of business - enhancing international competition.
Only a tax blend that includes wealth, sales and income can create very low tax rates and maximize economic mobility. Be bold Mr. Obama (or Mr. Romney, or whomever)!
End all corporate and personal income tax. Instead fund smart government (meaning eliminate a percentage of current government programs) with a tax on imports.
Conrad – I am sure you are a great guy, but you are throwing small stones at a giant monster.
Will the beltway elites (like Mr. Black here) never learn. The people of this country reject amnesty for illegals by a wide margin. Unless we get serious about enforcement our days as a constitutional republic are numbered. Legalize illegals and they will vote in a socialist government. The only way the Republicans will win elections is to promise them more social services than the democrats. Immigrants (even legal ones) use more services than their tax payments cover. Businesses profit short term by the depression of wages but the costs of educating, incarcerating and providing health and welfare services fall on the public. We need an immigration moratorium and attrition through enforcement.
