Monday, September 24, 2012

Revising U.S. Taxes

I just saw a video clip from CBS's "60 Minutes." U.S. Republican presidential candidate Mitt Romney said that he thinks it's fair that he pays a lower tax rate than someone earning $50,000 per year.

Even Ronald Reagan said that was unfair. But wealthy Americans like Mitt Romney have had great success convincing Congress and the last U.S. president (George W. Bush) to revise the U.S. tax code in ways that are highly favorable to the wealthy and to corporations. The compromised tax code is one of the three major reasons why the U.S. economy is weak and why deficits are moderately high. (The other two reasons are privatized medical care rather than single payer, and too much spending on wars of choice, including the "war on drugs" and other contributors to the high incarceration rate in the U.S.)

I've posted my ideas for fixing the U.S. tax code before, but here's a simpler version:

1. Raise the top income tax rate to at least 40%, or add a new rate;
2. Tax all interest, dividends, and capital gains at the ordinary progressive income tax rate after adjusting for inflation (i.e. index the gains first);
3. Eliminate all Social Security and Medicare payroll taxes on the first $15,000 of income, with that amount adjusted for inflation every year;
4. Eliminate the income cap for payroll taxes, and extend payroll taxes to interest, dividends, and capital gains;
5. Eliminate the "carried interest" and other loopholes involving financial assets.

I'd also like to see the U.S. federal government, through the U.S. Postal Service, enter the supplemental defined benefit pension business. That is, you could visit any Post Office to open a modest retirement account, and you'd have a guaranteed retirement benefit above Social Security. Those retirement accounts would be managed (and taxed) just like any other classic, private sector defined benefit pension. The Post Office would also be allowed to provide basic banking services (but not loans), including low cost international remittance services.

No comments: