Wednesday, July 18, 2012

Taxes, government spending and jobs. A 3 part special.

Part 1 Taxes

     Lately, taxes and the tax code seems to be talked about by both almost everyone in Washington. Whether it's Obama, who wants to extend the Bush tax cuts for couples making under $250,000 a year, or Romney, who wants to extend the tax cuts for everybody, both parties have focused much of their time focusing on this issue.

     The problem is, both parties are focusing on ideology and not workable solutions.  Obama is right about focusing on raising revenue. He wants to raise taxes on those people making over $250,000 per year, but those people would still be taxed at a lower rate than the rates of the Clinton, Carter, Nixon, and Kennedy administrations. However, by focusing on such a small percentage of the population, his ideas are more politics than policy. He should also take into account the 51% of people who payed no federal income taxes last year. This is a significant amount of lost revenue. A flatter income tax rate combined with a alternative minimum tax should solve this problem. 

    The problem with Romney's plan is that he assumes that lower taxes will lead to more spending. However, with low consumer confidence, and a drop in retail consumer spending in June it seems unlikely that tax cuts will cause consumers to spend more money. It is  more likely that people would save this money and put it in the bank. Tax cuts would only grow the deficit, and increase the United States physical problems. 

     Under my solution, some one making less than $24,999 would pay a 15% tax rate and a 7.5% alternative minimum tax (ATM). A alternative minimum tax is the minimum percentage of a persons income they would pay to the federal government each year on tax day. A person making for $25,000 to $49,999 would pay a 20% tax rate with a 10% ATM. A person making from $50,000 to $99,999 would pay a 23% tax rate with a 12% ATM. A person making $100,000 to 199,999 would pay a 26% tax rate and a 13% ATM. Anyone making over $200,000 a year would pay a 30% tax rate with a 15% ATM. For Couples, add 20% of the income in order to find your tax rate. Like before, people would only pay the amount of money in the tax bracket at that rate. ex. if John makes $75,000 a year, he would pay the first $24,999 at a 15% rate, the next $24,999 dollars at a 20% rate, and the last $25,000 at a 23% rate. However, the ATM would apply to all of the money, a person in the tax bracket makes. Each year, the income levels in the tax bracket will very based upon how much the average income in this bracket grew.

     I would also include a 4% national sales tax, and eliminate the inheritance tax. There would be a 25% corporate tax rate with all deductions eliminated. Lastly investments given to a person as income would have a 25% capital gains tax. 

     These changes in the tax code should raise federal revenue by a significant amount.  However, it is unlikely that any of these changes will make a significant dent in the unemployment rate. Only this plan, combined with the changes I will propose in later posts, will clear uncertainty in the market, and reduce unemployment. 



No comments:

Post a Comment