Friday, December 23, 2011
NEWT’S TAX PLAN
This post seems to be a bit “déjà vu all over again”.
Here, taken from his, “21st Century Contract with America”, are Newt Gingrich’a tax proposals (all highlights are mine), which seem to be, for the most part, a “tweaking” of the proposals of a fellow Republican candidate (click here) -
“My Jobs and Prosperity plan will then make four major tax cuts:
Reduce the Corporate Tax to 12.5%. Reducing the corporate income tax, currently the second highest in the developed world, will make America the number one destination in the world for foreign investment and the millions of jobs that will accompany this designation. Additionally, we must end the practice of double-taxation for American firms that make profits overseas. Under a new territorial tax system, American businesses will only pay income taxes on profits earned within the United States, and American firms will be able to repatriate over $1 trillion in profits currently trapped overseas.
Abolish the Capital Gains Tax. Lowering the cost of investment means hundreds of thousands of more jobs will be created. It happens every time we lower the capital gains tax. At a zero percent rate, hundreds of billions of dollars in new investments will pour into the United States to create new firms and build new factories.
Abolish the Death Tax. This law is economically misguided and morally indefensible, and it is time for the government to stop destroying family wealth. Abolishing the death tax ensures family-owned businesses can focus on creating jobs and growing rather than on dealing with tax law.
100% Expensing. We want American workers to have the most modern and most productive equipment in the world, and we can encourage this development by allowing companies to write off all their new equipment in one year.
My legislation will also include an optional flat tax of 15% or less. All tax filers would be given the option to pay their income taxes subject to current income tax provisions or to pay under a lower single rate of taxation with limited deductions. A revenue neutral flat tax reform would save hundreds of billions of dollars in compliance costs each year and would eliminate the need for taxes on savings, dividends, and capital gains.
This optional flat tax system will create a new personal deduction of $12,000 for every American. This deduction is well above the current poverty level, ensuring that this new system does not unfairly target the poor. The current $1,000 tax credit for each child aged sixteen or younger would also apply, as would the current earned income tax credit (EITC).
An optional flat tax reform will be simple: tax returns can be done on one sheet of paper. Subtract from income a standard deduction and deductions for charity and home ownership, multiply the result by the fixed single rate of taxation of at most 15%, and the process is over.
Gone will be the stressful hours spent figuring out whether your military service or marital status will adversely affect your return. No more headaches trying to determine where estimated tax payments go. Tax preparation fees could be money spent on something more rewarding.
Such an optional flat tax system would create a new standard deduction, which would be above the established poverty level, meaning an optional flat tax would not unfairly target the poor.
An optional flat tax would eliminate the Alternative Minimum Tax. And if a person had twice as much income as another, he or she would be taxed twice as much. Furthermore, a single rate tax structure would eliminate taxes on savings, capital gains, and dividends. Saving would increase and businesses would expand to create new jobs.
This concept of an optional flat tax would give American taxpayers an opportunity to choose simplicity versus complexity and a single rate over a lot of deductions.
Because the flat tax is optional, it does not raise taxes on a single person or unfairly impact seniors, lower income workers, or the poor.”
Again with the “optional” flat tax! What is the purpose of keeping the current mucking fess as an option? All this does is create more work for tax pros and higher fees for our clients – as we will have to prepare two separate tax returns for each and every client (three returns for some) to see which is better. Just replace the current system with the flat tax option!
I am certainly all for eliminating the dreaded AMT, but I do not support eliminating taxes on savings, capital gains and dividends. If we do this Warren Buffett’s secretary would definitely pay more tax – as Warren would pay nothing! Investors must not escape taxation altogether. I do, however, support a lower tax rate for long-term capital gains, or rather a 50% capital gain deduction, and eliminating double taxation of dividends by providing corporations with a “dividends paid deduction”.
I am also not opposed to eliminating the “death tax”, as long as we maintain the stepped-up basis of inherited property.
But I do not support a permanent 100% “Section 179” expensing for all business equipment.
Does Newt want a $12,000 personal exemption AND a standard deduction? Is he proposing a $12,000 per taxpayer and dependent personal exemption – or $12,000 each for a taxpayer and a spouse only (and not for dependents)? The $12,000 personal exemption (if per taxpayer and dependent) would be enough. And if there were a $12,000 personal exemption why the need to also have Child Tax and Earned Income credits? No credits (except possibly the Foreign Tax Credit) – especially refundable ones – is better. Or do the credits replace the per dependent exemption?
I do strongly support the concept of doing away with the different filing statuses, as Newt’s plan seems to suggest - i.e. no more Head of Household, Married Filing Joint or Separate, or Qualified Widow(er). There should be neither a marriage penalty nor a marriage benefit in the Tax Code. And the $12,000 per dependent exemption, if that is what he proposes, eliminates the need for a Head of Household status.
And I do support limiting “tax expenditures” to “deductions for charity and home ownership” (here I assume “home ownership” includes both real estate taxes and mortgage interest).
While I certainly do not want Newt Gingrich, or Governor Perry, in the White House – I do think some of their tax proposals deserve serious consideration.