Remember democracy and our Republic are participatory
endeavors, not spectator sports.
The Republicans managed to get another version of their tax
relief for the uber rich passed through the Senate. Remember you can continue
to write or contact your Senator or Representative and let them know your opinion
and stress to them this isn’t the tax reform this country needs. Vote No.
And if we don’t pass their plan, what are the options? Actually,
there are thousands. And in that spirit, I have pieced together some of my
ideas on this blog and other places into a rough draft to post here. This is a
start for you to discuss and either support or develop something better. There
are many points to this plan, yet in no particular order of importance. It is a
plan and some of the plan is designed with the idea to incorporate it into
other policy to address other issues facing this country. To regular readers
some of this will be familiar. Plus, we can add more flexibility into plans to
allow for changing economic conditions so like the Republican plan we have certain
triggers in place to adjust based on debt levels or surpluses.
First raise the corporate a small amount, maybe make it 45%,
not to increase taxes on them, rather to get their attention to the more important
part of the plan which is to give deductions for reinvestment in their
companies, raise wages, increase training and retraining, maybe add deductions
for better benefits etc... the goal is for the corporations to actually follow
through on what the current tax reform bill says it is going to do. These
changes put the horse before the cart instead of relying on some vague notion that
they will invest with tax cuts. Even some CEOs say this cut will not encourage
them to make the changes the Republicans say they will. At least the
corporations are honest, if unfortunately, the Republicans aren’t.
Currently the level where you stop having social security
wages withheld is $127,200.00 or also referenced as the social security cap. Nothing
for social security is withheld for earnings above this amount. So, let’s decrease the percent withheld by
15-20% for federal taxes up to this same amount. I am not talking about a
straight reduction where your tax rate goes from 25% to 15% for example, more
15% less than 25% if that is your rate. The math comes to current tax bracket of
25% times .20 (20% reduction) = a new tax bracket of 20% for federal. Wait
there is more, of the amount reduced which equates to a 5% lower bracket 2.5% gets
added to the employees share of social security wages and the other portion of
the reduction is what ends up back in the employees’ pockets. For now, you contribute
6.2% of your wages and your employer contributes 6.2% of your wages from their
pocket. To help your employer they would not have their portion increased and
stay at 6.2%. These numbers are hypothetical, yet want to give a simplistic
example to help explain. Numerically let’s
say you earn $50,000 and are taxed at 25%, with reform now 20%. At 25% you are paying
$12,500, yet at 20% you pay $10,000. The $2500 difference is split in half, so
your social security withholding is added $1250 and your take home is
$1250. None of these numbers are based
on anyone’s true levels with deductions etc... yet I hope you get the idea of
how it will work. And of course, these numbers are not written into stone. They
can be adjusted to better fit will tax brackets. The employer is not charged
anymore than the 6.2% so no extra burden on them. This puts back money in your
pocket and is part of a plan to continue to fund social security for all. The income tax deduction is spread more evenly
throughout all income levels because everyone’s taxes are reduced up to the
$127,200 amount. Above this limit all current tax brackets apply to everything
earned above this amount. Everyone receives approximately the same benefit.
Now you can adjust brackets a bit for different income levels
if needed.
The two proposals above help with reinvesting in the working
and middle class.
To help savings and to encourage more investment in
corporations, we decrease the long-term capital gains rates for investors under
certain incomes so they can comfortably invest in stock and mutual funds
outside of retirement plans. We also allow more retirement savings. We increase
the capital gains on short term trading especially for institutional and block
trading. This encourages investments in corporations, not algorithms.
And for the Estate tax, the Republicans are saying we need
to eliminate it, so it doesn’t hurt small businesses. How about we completely
exempt certain small businesses from the Estate tax calculation? For example,
the 2018 estimate for estate tax is 5.6 million for single payer and 11.2 million
for couples. And bear with me since what can be considered a small business,
and what we can exempt may be up for some debate. I am open to discussion on
how we define this, however, for a quick simple example lets try this. The
entire is estate for the single person is $8,000,000. The business is worth $4 million
so you subtract out the 4 million for the business leaving a taxable amount of
$4 million and now it is under the limit so no Estate tax. Very simple example,
however, you can see how the business is protected, but if there is other
significant wealth it would be taxed. For example, change the Estate to $10
million subtract the $4 million which leaves you 6 million extra and part of
the Estate is taxable.
Defining what is a small business will be tricky, however,
for discussion purposes we can keep it straightforward. A business that is
privately owned, employs at least five people, is passing to family members or
other partners, will remain in business and keeps people employed, it can be
registered in a few ways, yet privately held. It must remain in business for
original owners as a small business; so, some caveats could be written in if
sold within a certain amount of time, if closed, but not for going out of
business (may need to be proven that it is a non-viable business anymore to
avoid taxation) The upper dollar value could exceed the tax exemption limit if
it meets all the other criteria that will be determined. This paragraph is more
for a starting point on this discussion rather than an actual proposed policy.
What remains taxable in the estate is large amounts of cash
and standing investments such as stock holdings or other investments. There is
much more that should be taxable. It would need to be defined in the code.
Hopefully this adjustment to the estate tax allows for small businesses to pass
on to the next generation, continue to grow, provide income and resources for
the same next generation, and keep people employed. Money that is only invested
in wealth hording would be the primary target of the Estate tax. You must be
very specific or it wouldn’t surprise me to see the lawyers for ExxonMobil or
whomever attempt to classify family holdings of large blocks of stock a small
business.
As with everything, you can improve on it and I hope you do.
I just ask you keep the philosophy of primarily benefiting the working and
middle class, yet some benefits fall to all including poor, upper middle class
and rich too.
This is not a complete plan, however, I think these ideas
better address tax reform for the benefit of the whole country.
On a different note, I like the idea of welfare and
unemployment becoming workfare because people need to stand on their own. Not
everyone can work, however for the ones that can the programs need to retrain people
or help young people receive an employable education. This is a start and a
discussion for another day. The current system is failing those it is supposed
to help.
Remember to contact your Representative and Senator. This
link gives you a start.
I hope you think about this for a bit and have a great
evening.
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