I have stated a number of times that tax reform isn’t simply the ‘biggest tax cut EVER’ as our president is wont to say. But what do you think should be in a tax reform bill? Well, I’ve got a few thoughts on it and invite all of you to weigh in.

First – I don’t disagree with the current discussion about reducing the number of tax rates for individuals from seven to the current talking point of four. But I don’t think the top rate should be cut and the other three smoothed a bit with the bottom one disappearing entirely and those currently subject to it become tax free.

I agree that the personal deductions should be doubled. That too will lower taxes effectively for the bottom econimic rung.

As a compromise I would anticipate a reduction in the corporate tax rate from its current 35% but no way should it be allowed to slide to 20%. Maybe 30%? That may repatriate dollars as the GOP is promising but it won’t create jobs and it won’t create corporate investment. It will see bigger executive bonuses, bigger stock buy back programs and bigger shareholder dividends. Those will give a very small incremental boost to jobs and the economy.

Deductions? They are talking about cutting 401(k) caps, possibly as low as $2,400 per year. They could actually get away with that. Articles I have read indicate that a lot of Americans barely save that much and many are not able to make any contributions to retirement accounts at all. If they slid it to $3,500 they’d probably slip it past us with few complaints because of how few people it would affect. And the only reason to change this is to garner the taxes on these savings in the short term rather than the long term. A nebulous attempt to balance their top level and corporate cuts. I say leave retirement accounts alone.

Other places they want to cut? Deductions for state and local taxes. My feeling is the main deductions from personal income should be housing (mortgage interest and property tax on primary house only or rent for those who don’t own), health insurance or health care, education (tuition at all levels and get rid of vouchers) and retirement savings.

And leave the estate tax in place. It is available to so few at the very top of the economic ladder that it makes no sense to retire it. It isn’t a middle class tax.

Jobs and economic growth are driven by demand for goods and services. Increasing the disposable income of Americans at the bottom and middle rungs of our economy drives demand. Not loading the wallets of those at the top. And we already have proof enough of that: the failed Reagan tax cuts and the deterioration of the economy in Kansas this past four years or so.

I am sure that I left something out…I’ll add it later when it pops back into my head.

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4 Responses to Some Thoughts On Tax Reform

  1. onevote says:

    A well-researched review of our current tax code. As the son of a very competent Reaganesque accountant, I learned much about it, but my interests were more in creative thought.

    Your ideas help peoples’ cause now, but it just ignores the tax and economic schemes that have made our country in the living crisis it has become.

    Don’t mean to rag on your posts, Ed, or website, but wish other Dems could contribute so that Dems could move forward with a chance of winning elections. Not trying to dominate comments to your blog, just wish other Dems would contribute to the conversation. And I think it unfair that our national tax burden has been shifted onto the very people that can least afford it, while the rich lead their Lifestyles of the Rich & Famous.

    “Where have you gone, Joe D., a nation cries our lonely…” Please contribute John, nonquix, Waukesha Blue, Jake, capper, Jeff, Duane–even elected Dem political figures that would have the wherewithall to truly describe our election landscape, with plans at reversing our Wisconsin plight since 2001 and 2010.

    Yeah, I realize my comment may seem so really (self)righteous, but you have to eventually face your problems before you can solve anything and move forward into the future. Scott Walker etc. I am not.
    Please contribute and add to the conversation. My and your vote and opinion in theory count just as much as anyone else’s. Even the head of Amazon.com’s.

    • Ed Heinzelman says:

      I wish the conversations here a bit more lively myself and maybe I should stay out the comments section? But I think blogs may have peaked because it is far easier (and cheaper) to rant on Facebook or Twitter (just ask the president) than put together a few coherent paragraphs. I continue to do it because I enjoy it but feel guilty when I don’t have time to get something posted. Oh well.

      I appreciate all of our readers and particularly those who comment as well. And I have been working on adding contributors…but as I said…it is easier to do things on the social media sites than on a dedicated blog site.

  2. Jake formerly of the LP says:

    Cap 401K contributions only if you expand Social Security to Age 55 (since 401ks are supposed to replace pensions).

    Scrap the cap where people that make over $130K next year pay a lower rate into Social Security than we do.

    Close corporate loopholes and keep rates relatively high on,corps to encourage investment and job creation over profit-hoarding and stock buybacks.

    And the obvious one- restore 70% tax on the super-rich incomes, like we had 40-60 years ago when workers actually got some of the benefits of economic growth.

    One vote- just because we aren’t commenting, it doesn’t mean we aren’t reading.

  3. Ed Heinzelman says:

    During the campaign didn’t the president promise to change the tax code on investment profits so that they would be paying more taxes than they are today? Has anyone seen that in any of the discussion in Congress?

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