As tax time approaches, it is time to take a progressive whack at the tax code. It seems like us liberals and progressives treat taxes like some sort of third rail, ceding debate to the cheap labor conservative greed heads. There is no reason do this when progressive tax reform can level the playing field, balance the budget, provide economic disincentives for unsustainable activities, and help Middle America. In short, government expenditures that enhance and protect our natural and man-made infrastructure, provide social services such as retirement, disability protection and health care, and build the economy, benefit everyone. It is only fitting that we paraphrase one of our favorite cheap labor conservatives that we love to hate, Phil Gramm, that there are those who are pulling the wagon, and those riding in it. Of late, it appears that the wealthy, by benefit of the regressive tax code, are the ones riding in the wagon by not paying their fair share. It is way past time to change this situation, and we will look at an alternative tax code below the fold:
As part of breaking the stranglehold the Bush Regime and their pro-corporate Greedy Oil Party and reactionary YOYO (you are on your own) cronies have on tax policy, it is time for us progressives to suggest an alternative tax code for the people. In a nutshell, a tax system must be fair, simple, and reward good behavior and punish bad behavior. It should also be simpler than the current loophole ridden, regressive tax code that favors wealth over work. Tax reform is another bold initiative on my five point proposal to break the box of the Bush budget. Along with deep cuts to the military/war budget, this reform provides the cash to financially support environmental, renewable energy, and the sustainable infrastructure and transportation initiative and to shore up social programs without increasing the tax burden on over 90 percent of Americans.
In my last post on breaking the Bush budget box with alternatives for the people, the focus was on the sustainable infrastructure initiative, which proposes a sustainable transportation, ecological and structural infrastructure that both helps the environment, is carbon neutral, and will help restore good paying, domestic jobs. This was the first of the five initiatives that I proposed in my original post.
The second two initiatives, a new energy paradigm, and a single-payer health care system have been covered well in other articles, diaries and sites, including Energize America a work in progress by our own Kossacks, and the Apollo Alliance program for renewable, sustainable energy; and our own nyceve’s health care diaries and Physicians for National Healthcare that detail health care reform, including Medicare for All, that will decrease our dependency on foreign oil and an out-of control health care system that costs more and delivers less than any other advanced nation.
Since I am fundamentally in agreement with the above, with some tweaks, will not spend time rehashing the energy and health care reform proposals, rather, follow the links to look at the healthcare alternatives to Bush’s silly tax incentives to purchase worthless health insurance, and real alternatives to Bush’s paltry energy initiatives. Tax reform, tax fairness, and cuts to a bloated military will provide the funding for these bold new programs.
Lets cut to the chase. Here are some proposals to reform the tax code. These are up for discussion, and analysis, and further suggestions, but from my WAG (wild ass guesses) these will end up being revenue-neutral, or even revenue enhancing, if enacted in total, and will achieve the following objectives: ensure the viability of Social Security, provide funding for single payer (Medicare for All) health care and reduce Federal taxes on the lower 90 percent of Americans, as well as fund vital infrastructure and environmental programs.
- Tax all forms of income at the same rate. No more preferential treatment of non-wage income. Non wage income can be tied to inflation and the income can be considered to be the amount of the income minus the inflation over the life of the investment. For example, 100 dollars is invested in stock x, and 5 years later, stock x has increased in value to 150 dollars. The inflation over that time period was 25 percent. Therefore the income gain was 25 dollars. Tax rate would be the percentage tax for the same amount of wage income, personal business profits, or other compensation over the same time period. I would argue for a slight reduction in the tax rates to compensate for new waste and carbon taxes (see below), but a progressive structure must be retained, with the highest 39 percent rate restored, which of course would apply to all forms of personal income.
- Social security tax reform. Junk the current employer-employee match system and the highly regressive tax structure and replace it with a 3% flat tax on all types of income and corporate gross receipts. That relieves companies of having to pay the 7.5 percent match, and eliminates the 15% self-employment tax that is a barrier to startup businesses. It also taps into the substantial amount of nonwage income that is enjoyed mainly by the wealthy, and equalizes the payments. It also puts more money into the pockets of the vast majority of wage earners that earn less than $100,000.
- Medicare reform: Single payer for all. Similar tax on all forms of income. I could see an approximate 5% universal flat income tax on individuals and company profits or a alternatively, a somewhat lower tax on company gross receipts to cover this. Eliminating the current system of health insurance and savings will more than wipe out the out-of pocket added costs of the additional tax. For example, it is not unusual for a family of four under the current system to pay $15,000 for one years worth of health insurance, which is nearly 25 percent of median family income. Remember, its not about the taxes, its about the balance of payments, stupid. Freeing employers from having to fund health insurance except on net corporate profits will free more money up to pay their employees or re-invest in the company.
- If we are keeping the current deduction/exemption based tax system, fix the alternative minimum tax (AMT). Reset the income level to $250,000 per year (combined, all forms of income) to make that the threshold, and index to inflation after that.
- Better still, set the standard deduction to $5,000 per family member (indexed for inflation), with a 1% income tax effective on incomes above this up to $15,000 per family member. For example, a family of four grossing $60,000 would pay $600.00 in federal income tax. In exchange for this, eliminate itemized deductions altogether. Lower tax rates for adjusted gross incomes under $100,000 will compensate for the loss of the itemized deductions. Large cost savings will be derived through the simplification.
- As Bill Clinton proposed, only allow the first 1 million of wage or non-wage payments (stock options) to each employee, per year, be tax deductible or to be applied against corporate profits.
- Reduce income taxes to those earning less than $100,000 per year adjusted gross. Replace with a fossil fuel/carbon tax that taxes fuel at the equivalent of $1.50 per gallon of conventional gasoline.
- Institute a waste tax on items that are not reusable, recyclable or are purposely designed to have a short product life by not feasibly being repairable. Institute a heavy Federal and/or state/local tipping fee for landfilling. Force companies to take responsibility by taking back products for reuse as has been done in Germany.
- Limit tax deductibility against profits for advertising to 10 million dollars per company. Basically this item in the tax code currently subsidizes large scale propaganda and unsustainability in large business.
I do not necessarily say that tax reforms be limited to the above. As Energize America is a work in progress, these proposed tax reforms are also. Flame away with suggestions, comments and criticisms, as it is way past time us progressives treat taxes as a GOP tar baby. Its time for us to drown Norquist's outmoded supply side tax policies in the bathtub, not good government.