Rik Schneider Online

Monday, January 28, 2013

AEI: Fiscal Policy: John Pethokoukis: Total Tax-Code Termination?: How to Reform The Tax Code

Total tax-code termination? - Economics - AEI

Down the line I would like to and believe we need to scrap the current Federal tax-code and basically start over. Thats based on promoting economic and job growth as well as fiscal responsibility. Rates low enough to promote economic growth and eliminating tax expenditures that leave the Federal treasury. Add to the national debt and doesn't do much if anything and in some cases hampers our economic growth. The tax reform I'm for would probably produce lower revenue for the Federal Government, not necessarily a bad. Thing but produce higher economic growth because individuals and business's would be judged by the tax-code based on how productive they are and what they spend. Rather then what they need to pay their bills and stay in business and my plan is something I believe should be passed if at all. Down the line after we get the national debt and deficit under control so they are no longer growing faster then our. Economic growth so I'm looking at ten years down the line when I believe it would be a good idea to pass my. Version of tax reform and it would also have to come with Federal spending reform to the make the Federal Government more efficient and cost effective and less centralized.

Assuming we were to get the debt and deficit under control and this is how I would do it and leave most of the current Federal tax-code in place until we accomplish this. And I would do this by first using the new revenue from the fiscal cliff deal to go towards deficit reduction. Plus an additional 500B-1T$ in new short term tax reform by closing wasteful tax expenditures, mostly relating to corporate welfare. But then lowering taxes on business's that invest and create jobs in America in exchange. But also eliminating the tax deductions for state and local sales taxes, we as Americans all have a responsibility to. Pay for the public services that we consume at least through sales taxes. The home mortgage deduction, cap that at 1M$ and index it for inflation and eliminate the deduction for second homes especially. Vacation homes, getting our defense budget back to 2000 spending levels, which means the revenue from the drawdowns of Afghanistan and Iraq would go towards deficit reduction. Medicare and Medicaid, stop paying doctors and hospitals based on how much they spend and only. Compensate them based on how healthy their patients are.

I would go much further with Medicare and Medicaid, Medicaid I would turn over to the states to run or oversee. Let each state have their own Medicaid program and let it be run independently of government but with the states and Feds serving as regulators. But then make Medicaid fiscally self sufficient with their own dedicated revenue coming from employers as well as employees. With an increase in the earn income tax credit to pay for that and I would also decentralize Medicare and let the states have their. Own Medicare system again with the states and feds serving as regulators and turning it into a public option. Allowing non senior citizens pay into Medicare and using it as their main source for health insurance. I would actually go further and turn the entire Federal safety net over to the states for them to run, again with the states and feds serving as regulators. With each of these services having their own dedicated revenue to pay for it and empowering non profits who perform similar services. To do the same thing as well.

Once we were to get the national debt and deficit under control and coming down. And then we have a reform plan for the Federal Government that brings its spending down, then we could pass what I call. A Progressive Consumption Tax that would bring in less revenue for the Federal Government but again. The Feds would be doing less and not need as much revenue to pay for its operations. What is a Progressive Consumption Tax, well its basically what it sounds like. We would tax as a country people based on what they consume not what they produce and would tax basic necessities that people. Need to live healthy, groceries, healthcare, housing, transportation, clothing to use as examples at a fairly low. Rate but tax luxury items, luxury cars, vacations, expensive meals, parties, vacation homes to use as examples. At higher levels, so groceries like a loaf of bread or gallon of milk would be taxed at 5-7% but a Mercedes or yacht would be taxed at lets say 25% to use as examples.

Tax reform is fairly simple and its based on do we want people to work hard and be productive or not. Hopefully for most of the country the answer is yes and if thats the case, then we shouldn't penalize them for doing so. But instead tax people based on what they consume from society instead so people are encourage to be productive. And hopefully smarter about how they spend their money but my Progressive Consumption Tax or PCT. Would only replace the Federal income tax, not the payroll or corporate tax but scrap income and production for consumption.