Tax Reform: Two Places to Start
by Thomas L. Knapp…….
An anonymous announcement of a forthcoming public announcement: On April 26, an anonymous White House source says, the Trump administration “will outline our broad principles and priorities …. We are moving forward on comprehensive tax reform that cuts tax rates for individuals, simplifies our overly-complicated system and creates jobs by making American businesses competitive.”
That sounds very nice. But given the administration’s previously revealed “principles and priorities,” it’s reasonable to expect a heaping helping of economically dumb protectionist tinkering floating atop a billowing cloud of hot air.
If Trump, his administration, and congressional Republicans were serious about real tax reform (they aren’t, but if they were), I’d expect to see two major initial proposals: A measure increasing the “personal exemption” to the federal income tax once a year, every year, automatically, and a “FICA floor” that likewise increases each year.
The personal exemption is part of the amount an individual can earn each year before being taxed on income at all (the other part is either taking the “standard deduction” or itemizing and adding up specific spending that’s deductible). For income earned in 2016, the personal exemption is $4,050 (with a “phaseout” starting at $150k; that “phaseout” should be eliminated as well).
Automatically increasing the personal exemption each year and eliminating the phaseout would have two effects: It would cut taxes for everyone who pays them, and it would take the lowest income Americans off the income tax rolls altogether.
Since the Reagan era, tax cut proposals have been aimed at cutting top rates on the basis of a “supply side” theory — that rich entrepreneurs who get tax cuts will invest their retained wealth in new businesses that create jobs. But there are two sides to an economy, supply and demand. Cutting taxes for everyone, starting at the bottom with increased personal exemptions, would spur economic demand. That demand would be just as good for those entrepreneurs, and better for everyone else, than “supply side” cuts.
FICA taxes are used to finance Social Security and Medicare. They are regressive taxes which, due to collection ceilings and life expectancy differentials, force lower-income black males to subsidize retirement and healthcare for higher-income white females.
Yes, retirement income and post-retirement healthcare expenses are important. But so is making a living. A FICA floor — a “personal exemption” income amount below which FICA taxes aren’t collected — would let low-income Americans keep and use more of their money now instead of hoping to live long enough to claw some of it back later.
As a libertarian, I would prefer to see the income and FICA taxes eliminated altogether. Failing that, we should at least do what we can to get the government spending monkey off the backs of the poorest among us.
Yes, there is a grass roots organization pushing these two common-sense tax reforms. Disclosure: I am a member of that organization and sit on its steering committee. It’s called the Mobilization for Incremental Tax Exemption (catchy acronym: The MITE). You can find it on the web at TheMite.org.
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Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.
What are your thoughts on a guaranteed income that would provide for all?
I’ve written a little bit about the idea — for example, here.
read the article. 2 quick responses. the moral argument you make has zero credibility. predicating the quality of life on one’s “productivity” has little merit when the construct of societies everywhere predetermines one’s caste, and upward socio/economic mobility is a fictional carrot dangled in front of the masses to keep them in line. your moral argument seems to indicate that life has a value, and that value is determined by ones job. that’s a pretty harsh indictment of what the human condition should be, and of the quality of life a person is entitled to, especially when the game is rigged.
you seem to have an aversion to the “State” redistributing wealth, with a special reservation toward downward redistribution. but yet you fail to address the fact that the State redistributes wealth upward at a rate that would make any third world banana republic dictator recoil in embarrassed incompetence.
more than 3 billion people in this world live on less than $2.50 a day. what’s moral about that?
400 people have as much wealth as half the worlds population. but you’re worried about the “wealth creators”?
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you seem to have an aversion to the “State” redistributing wealth, with a special reservation toward downward redistribution
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Actually, the reservation is quite the opposite. I oppose forcible redistribution in general, but especially upward. That’s why I favor cutting taxes from the bottom up and welfare from the top down.
If the state is permitted to redistribute wealth, that redistribution will ALWAYS be, on net, upward. As Marx put it, the state is the executive committee of the ruling class. Therefore, the state is always going to act in the ruling class’s interest.
with that in mind, i do not understand why you dismiss a basic income to people who, as you rightly acknowledge, exist in a corrupt system designed to exploit them on the backs of the rulers. surely you would grant the masses even a modicum of a dignified life in the face of the gross and savage existence they countenance now. tax cuts are irrelevant in a system that provides for little in the way of jobs and income.
I don’t see that it’s up to me to “grant” the masses anything, nor am I sure what’s so “dignified” about the idea of throwing them a bit of someone else’s bone and blowing smoke up their asses to try and convince them they’re being helped.
you acknowledge that control of the economy is vested in the hands of the rulers. therefore, that “someone else’s bone” is really the bone of the ultra rich, and not some poor blue collar slob striving to exist by his own merits. those “merits” as you correctly recognize, are the result of whatever crumbs are allowed to trickle down by the owners. since people are not permitted to exist in a fair and equitable system, dignity surrenders itself to ensuring your child is fed, does it not? you libertarians fail to recognized that the world is under the control of a very few sociopathic monsters. the freedoms and individuality that you extol that you believe exist for all of us simply do not exist.
80% of the worlds population live on less than $10/day. 22,000 kids die per DAY due to poverty. is that because they didn’t have the right job? or made the wrong “life” choice? didn’t study hard enough in school? or maybe it is because that’s the way the owners want it. ask a kid with a bloated stomach whether they care if its dignified to accept a scrap from “someone else’s bone.” somehow i don’t think they are going to give a damn.
the idea that you determine your own course in this world is a laughable absurdity borne out of ignorance and hubris.
“the idea that you determine your own course in this world is a laughable absurdity borne out of ignorance and hubris.”
Well, there you go then. So if I don’t determine my own course in this world, why the hell are you chewing me out for what I do or don’t do? Oh, wait, I see — you don’t have any choice either. Got it.