Category: Tax Reform
Real Income Tax Reform Is Not About Inventing a Better Mouse Trap
The Border Adjustment Tax (BAT) proposed by Congress is intended to change how business income is taxed giving it features of a Value-Added-Tax (VAT), a cash-flow tax, and a consumption tax. The idea is to make the corporate income tax function as a quasi-VAT and less as an income tax on the earnings of U.S. producers. Clearly, violative of free trade principles affecting the U.S., the practice should be made the subject for U.S. trade re-negotiation, a challenge fully backed by the new Administration. This is a fair trade problem, not a problem about income taxation. The BAT “solution” makes for new problems. On several fronts, a BAT for the U.S. is likely to make matters worse. The driving force behind the BAT is the expectation that it will generate considerable tax revenue… Continue reading
Person Taxation: The Root of the Income Tax Mess
Taxing all income the same opens the door to a far-reaching revolutionary reform. Under the single-rate FreedomTax, the tax will be levied, collected, and paid at the source of payment in the case of many forms of income – dividends, … Continue reading
Death to the “Death Tax”
The Death Tax is a product of the politics of envy and notions of wealth redistribution. As a killer of economic and job growth, the Death Tax deserves a speedy execution. Its confiscatory nature amounts to a government grab of … Continue reading
Are Capital Gains Income?
The history of taxing capital gains as income stems from a dubious, and at the time much criticized, Supreme Court decision that reversed prior Supreme Court decisions holding capital gains not to be income. Job changes are not “income” transactions. Nor, are changes in capital. Income is what “comes in” from having the job, just as it’s what “comes in” from having the investment of capital; e.g., dividends, interest, rents, and including business income. Indeed, capital gains are not considered to be income by economists, who exclude them from their computations of GDP. The exclusion is because capital gains are not income in the economic sense. Continue reading
An Enemy of Income Tax Reform: The “Business Transfer Tax” (a/k/a “Business Activity Tax” and “Business Flat Tax”)
The “Business-Transfer Tax” in all its forms is a proposal for a dual-tax system, to have a value-added tax built upon a rejiggered income tax. This second tax comes disguised as income-tax reform with the VAT label avoided. Sad to say this ill-conceived proposal amounts to a cover-up and remedy for the failure of U.S. trade negotiators to insist that VAT nations abide by the principles of free trade. But, two wrongs don’t make a right. As an enemy of real income-tax reform, it would make the income tax even more disjointed and difficult to unscramble into a simple, tax-neutral, low-rate income tax. Continue reading
Don’t Be Fooled by the “Flat-Tax” Reform Plans and their Promise of a Postcard-Tax Return
The FreedomTax would have a design structure freeing most Americans from ever having to file a tax return again, not even a postcard. In most cases, the income tax would be collected at the source of payment. It would substantially reduce income-tax compliance burdens. It would end the present tax system’s drag on the economy and on job and wage growth. It would save the Treasury billions in tax administration costs, and the IRS would be massively downsized into a little-noticed ministerial tax-collection agency. Continue reading
Finding the Road to Real Income Tax Reform
As a tax reform proposal, the FreedomTax is revolutionary. It’s more than just a proposal to clean up a tax mess. It would overturn and junk the two pillars of the establishment’s system of taxation, replacing that system in its entirety with a true income tax. This new tax would be a 10% flat tax on all income, taxing all income the same so that all income would bear its fair share of the income tax burden. The FreedomTax would dethrone the IRS, transforming it into a mere ministerial agency charged with the benign task of administering a greatly simplified income tax and tax-neutral much like the motor-vehicle fuel tax. Continue reading
The Lee-Rubio Tax Plan: Can We Find the Road to Real Tax Reform?
Even though the Plan proposes many significant changes to the income tax, these changes are not such to make the Plan a serious income-tax reform proposal. The Plan’s retention and addition of new tax breaks would leave the tax base too narrow to permit a simple, efficient, and low-rate income tax. The Plan even seems oblivious to the corrosive effect which embedded tax breaks have upon the integrity of an income tax system. Like graffiti, they beacon the addition of more tax breaks, fueled by high tax rates giving them value. Continue reading
