It may seem hard to believe, but I am a CPA (Certified Public Accountant). In the past, I have worked mostly in general ledger/financial statement preparation and cost accounting. But for the last almost fifteen years I have worked in small accounting firms. Currently I am a working for a firm that I have been at 13 years 4 months and 14 days. I have to be a broad accounting generalist working in general ledger/financial statements, audits, inventories, payroll, and yes, taxes. I have seen the insanity of our tax system up close and personal. For those of all political persuasions who are disgusted by it, I join in your disgust.
Ah, elections! The time when we should be discussing issues but instead focus on birth certificates and dogs on roofs of cars. When the latest inadvertent misstatement is more important than the direction they'll take the country. When the election of the other guy will lead to a thousand years of darkness. In the face of that, I will continue to try to focus on some basic issues and what I believe is the direction we should take. And yes, I am taking a sacrifice in number of page views by going this route instead of the Mittbot Thurston Howell route or that darn Kenyan Socialist route.
I believe the tax system needs to be completely abolished and redone. We need to enhance and preserve it's progressivism and move it into the 21st century. Individual income tax should be eliminated. I propose a four tier system that I cannot do justice in this brief blog post. Just to sketch though, it involves 1) payroll taxes covering social security and medicare for all, 2) a financial transaction fee when investments are sold, purchased or exchanged, 3) a progressive sales tax that raises with the expense and/or luxury level of each item, and 4) a corporate/business fee based upon gross income, with the only deduction being from how much domestic payroll over a living wage the business pays.
Payroll taxes covering social security and medicare for all
Special notes to show how this part is different than the current system -
- there would be no cap on either, so that it would continue to be drawn out no matter how much a person made. Since there is no other direct form of wage taxes, the wealthy would continue to bring home mammoth portions of their paycheck
-health insurance would be covered in full by a medicare for all plan. Would this increase the percentage of income taken out from your wages to cover it? Oh, yes! But...you would have nothing...NOTHING...more that you had to pay for health care insurance....that would be your plan. No more insurance premiums no more worry about medical bankruptcies, no more worrying about whether something's going to be covered, no more worrying about pre-conditions or policy portability. Stressed about freeloaders? Well, I hate to break it to you, but you're ALREADY covering them, and as they go to the hospital or care in the most expensive way right now (ER, medical crises), you're paying A LOT more for them than you would under this plan.
-there would need to be some mechanism so that sole proprietors, partners and S Corporations could contribute as well.
A financial transaction fee when investments are sold, purchased or exchanged
-forget capital gains taxes. We can stop arguing about that. No more paying based on gain. Conversely, no more taking losses when investments go bad.
-this would just be a tax when money is moved from one investment to another, whether that be cash, to another stock, or to another instrument of investment. At what rate I cannot say.
-an example would be, you buy a stock for $1,000 you might have to pay a 1% transaction fee ($10). If you sell the stock at, say $900, you might pay $9. If you sell it for $1100, you might pay $11. It is irrelevant whether you made or lost money. You are neither punished nor rewarded,,,it is just a slight cost of investment, like a broker's fee.
-it may be possible, given our level of computer sophistication, that individuals could be given a break or exemption for transactions under a certain dollar value, either individually or on accumulated year basis. You could exempt the first $1,000 of each transaction, or for an individual for a year, the first $25,000 of total transactions (as an example). But understand, the more you exempt, the higher the transaction rate would have to be to generate the same level of revenue.
A progressive sales tax that raises with the expense and/or luxury level of each item
-since there other tiers of taxation, this may not have to be as sky high as some National Sales Taxes that have been promoted. For us liberals, the regressive nature of this tax is rather daunting, That is why I think the rate should be adjusted depending on the nature of each item. BUT, everyone should pay some tax. Even necessities should have a rate, even if it is low.
- an example, JUST an example, would be if someone were to buy a loaf of whole wheat bread, the tax rate might be 3%. A $3.00 loaf of bread might then cost $3.09. A loaf of bread that might have rare milled wheat that was shot out of the butts of cats, designed for the sophisticated gourmet, might be taxed at a higher rate, say 10%. So this special loaf that is $7.00 would cost $7.70. Overall, people who are willing to spend extra on luxury or status items are less concerned with cost.
-a conservative version of this, the Fair Tax, would hand everybody a check each month to cover necessity spending. I thought conservatives didn't like just handing people government checks, and I think my plan would avoid that while at the same time keeping some progressivity.
A corporate/business fee based upon gross income, with the only deduction being from how much domestic payroll over a living wage the business pays
-a tax based not on a complicated tax-basis profit loss statement and balance sheet, but a corporate fee based solely on gross income. Good lord, counties and cities do this, it shouldn't be that hard. Again, you don't get into how much they made or lost, it's just a straight up fee. A cost of doing business.
-the ONLY deduction should be domestic payroll, You hire people at a living wage, you get to take that in some fashion right directly off the fee.
-the level of the transaction fee could vary with industry or type of business. Again, I have seen this at the city and county level. We are not re-inventing the wheel here. The difference in rates could be established by regulation and/or Congress. It would give our Congress something to do. I would hate for them to get too bored.
Is all this likely to happen? Only if I become dictator, I guess. But mark my word. We can't keep going like we are. Big changes are going to have to happen. And whichever party gets out front of this the quickest, is likely to be the dominant party for the next generation.
So, wake up, Progressives! This is one area where you're running behind!
We need a new, progressive tax system for the 21st century!
Somebody take up this ball and run with it!
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