What are YOUR ideas on Tax Reform?

[parochial boy]

If a company moves it's accounts to a tax haven, then ping it. There are too many corporations taking the piss out of the US tax system.

Consumption tax like a GST is a very effective way to gather taxes. It basically captures taxes from people who would not normally pay tax.

Corporate taxes like payroll taxes need to be minimized.

GST is an amazing idea, I have looked into the GST system in a few countries, Canada is such a great example.

It's ridiculously good.

If someone starts with 100$, and starts spending, the government gets 10%. $10.

Then you are left with $90.

When that gets spent, the government gets $9 and so on.

If it keeps getting spent, the government takes the lot, so you need to reimburse GST expense against GST income on your business accounts.

But that is OK, the country gets 10% of every dollar spent and your business owners collect the tax for you and send it to you electronically.

The most effective taxation system in the world.

yeah, but also horrendously regressive and an effective way of discincetivising people from spending.

[#gravelgang #lessiglad]

Individual Income Taxes

Rates / FTI brackets (all amounts indexed to CPI, unless indicated otherwise)

Tax Bracket
Single ("S")
Married, filing separately (“MFS”)
Married, filing joint (“MFJ”)
Head of Household (“HoH”)

8.75%
0 - 10.000 S
0 - 10.000 MFS
0 - 20.000 MFJ
0 - 15.000 HOH

13.5%
10.000 - 40.000 S
10.000 - 40.000 MFS
20.000 - 80.000 MFJ
15.000 - 60.000 HOH

23%
40.000 - 100.000 S
40.000 - 80.000 MFS
80.000 - 180.000 MFJ
60.000 - 135.000 HOH

27%
100.000 - 200.000 S
80.000 - 140.000 MFS
180.000 - 350.000 MFJ
135.000 - 262.500 HOH

35%
200.000 - 450.000 S
140.000 - 290.000 MFS
350.000 - 800.000 MFJ
262.500 - 600.000 HOH

40%
450.000+ S
290.000+ MFS
800.000+ MFJ
600.000+ HOH

Miscellaneous income items

Interest: Same as ordinary rates. Payments on U.S. / State obligations are taxed at the 8.75% rate regardless of income level.
Dividends / Capital Gains (Long term, defined as a holding period of one year or greater): First 10,000 in capital gains / dividends income is excluded from income. Remainder (i.e., 10,001+) taxed at 20%.
Dividends / Capital Gains (Short term, defined as a holding period of less than one year): First 10,000 in capital gains / dividends income is excluded from income. Remainder (i.e., 10,001+) taxed at 40%. Dividend / capital gain income exclusion applicable to both short & long term (i.e., all of an individual’s capital gains income is excluded if (s)he earns 5,000 in short term and 5,000 in long term capital gains.

Taxability of Refunds of State & Local Taxes: no change.
Unemployment compensation: no change.
SSDI: Excluded from taxation up to income limits associated with 13.5% tax bracket. Otherwise, 75% of SSDI includible in income (i.e., 25% of SSDI excluded).

Exclusions / Deductions / Credits
All above-the-line deductions eliminated, except student loan interest, educator expenses and DPAD.
All miscellaneous (i.e., subject to 2% AGI limitation) below-the-line deductions eliminated. This retains the following popular deductions: mortgage interest (first home only), medical & dental expenses (excluding elective procedures), state & local taxes paid, charitable contributions, casualty / theft losses and job expense deductions.
All credits eliminated, except: foreign tax credit, residential energy credit, EITC and American Opportunity credit. Continue EV tax credit and eliminate manufacturer phase-out.
Standard Deduction: eliminated, wrapped up in exemptions now. All deductions that were retained (see above) are now itemized. Deductions limited to 30% of taxable income.
Exemption: 1st 2 exemption: $20,000 Per Person ("PP"), next 3 exemptions: $10,000 PP, additional exemptions: $5,000 PP.

AMT: no change.

Miscellaneous individual tax issues
Dividends and capital gain income on closely held corporations and personal holding companies are taxed at the individual’s marginal tax rate. This helps harmonize the individual and business taxing regime.
Elimination of carried interest income treatment. Carried interest taxable as ordinary (i.e., wage) income.

Business taxes (corporate)

Single, 20% tax bracket. Retain worldwide taxation regime. The following deductions will be allowed. All else eliminated: Depreciation / amortization / depletion, employee benefit programs, insurance, office expenses, pension and profit-sharing plans, repairs and maintenance, taxes and licenses, meals & entertainment, wages. Wages deductible only for employees located in the US. The following credits are retained, all others eliminated: R&D tax credit, foreign tax credit. Executive comp deductible only if the executive’s compensation is less than 10x the median employee’s pre-tax salary.

15% surcharge on Subpart F income (foreign personal holding company income - rents, royalties, interest, foreign base company sales & services income).


Business taxes (sole proprietorship / partnership)

Continues to be reported on schedule C. The following deductions will be allowed. All else eliminated: Depreciation / amortization / depletion, employee benefit programs, insurance, office expenses, pension and profit-sharing plans, repairs and maintenance, taxes and licenses, meals & entertainment, wages. Wages deductible only for employees located in the US. Executive comp deductible only if the executive’s compensation is less than 10x the median employee’s pre-tax salary.

Miscellaneous taxes

15% capital exit tax (see India for an example of an exit tax). Reduced to 5% for capital exiting to tax treaty countries (most countries - see IRS for list of tax treaty countries).

2% import tariff on all imports.

5% national GST/VAT (HST for harmonization with state sales taxes available as an opt-in. Ideally, would be mandatory, but mandating opt-in would be politically impossible, moreso than the implementation of a GST). See the defunct Michigan single business tax for an example. Goods excluded: food/drinks (non-alcoholic), healthcare services, school tuition, public transit fares.

Gas tax: double the existing gas tax, constitutional amendment that the gas tax can only be used on public, toll-free infrastructure programs (Illinois did this recently), index to CPI. Alcohol/tobacco taxes indexed to CPI

Estate tax: two estate brackets: estates > 3M, but up to 10M subject to 35% estate tax. Estates > 10M subject to 45% estate tax on marginal amounts above 10M.

Payroll tax: remove the cap, levy payroll taxes on 80% of a taxpayer’s wage income. Implement a pseudo-AMT for payroll taxes (i.e., at least 7% (5.9% for Social security and 1.1% for medicare) of a taxpayer’s AGI must be contributed to the respective payroll tax funds. This helps to ensure that taxpayers earning a sizeable portion of their income from passive sources contribute to SSDI and medicare. Applicable to taxpayers under the age of 65 only.

Constitutional amendment / SCOTUS decision overruling Quill v. North Dakota. Would allow for sales tax on goods purchased online.

[Blue3]

Does anyone have new ideas for how they'd do tax reform?