US Tax Code

President Taft authorized income taxes with the 16^th Amendment to the Constitution in 1913. Muhtar Kent, CEO of Coca Cola, said the US owes itself a 21^st century tax code that doesn’t have 1,000s of exceptions. Yesterday, I said Cain and Huntsman are the only 2 Republicans offering tax code revisions. On October 4, 2011 on the View, Herman Cain said he proposes a 9/9/9 plan for jump starting the economy; 9% federal sales tax and 9% business and 9% personal income tax. Mr. Cain said such a plan is not regressive on the poor and everyone has a lower rate. A long time ago (in my twenties), I used to think a flat tax was a good idea but I’ve changed my mind. The average American is paying 15 or more percent in income tax now so a lowered tax rate as a standalone change would not resolve our deficit; I’m assuming that’s why he proposed a national sales tax. The flat income tax for business and people may allow some tax realignment. However, the people do not have the opportunity to hide their paycheck money as a business can inflate expenses or hide revenue. As I mentioned earlier, families with more children need to buy more and thus would be paying a larger percentage of their income with a sales tax. Therefore, I believe the income tax along with the sales tax would be a move backwards in realigning the taxes of the rich with the lower 2 classes. In the October 10^th New Hampshire debate Cain’s fellow Republicans attacked his plan. ABC News also said that independent analysts have looked at his plan and agree that it would give the rich a huge break, give the poor and middle class a real increase and increase the deficit.

Jon Huntsman is a Republican moderate from Utah that I heard speak on the View on October 6, 2011. Huntsman says we have a 1950s dilapidated tax code. He says he would phase out all the loopholes and deductions for everybody (I heard this will reduce the budget by $1 trillion), all the corporate welfare and subsidies. He says he would raise the revenue and buy down the (tax) rate and this would make our tax code lower, broadened and simpler. He also said that creating a flat tax would lower the rate in 3 different categories (he didn’t specify which ones). Huntsman said he was guessing that most corporations aren’t paying the higher 35% tax rate and thought by eliminating the loopholes we could lower their rate to 25% and it would make us more competitive in the world market.   

I liked what Huntsman said about getting rid of corporate welfare and phasing out loopholes. I think certain so-called loopholes should remain as long as they’re across the board. Charitable contributions encourage people to help one another and casualty and theft losses as well as job expenses are pertinent to all. College and medical expenses (includes vehicle use) encourage people to better themselves. Along this same line are the deductions for mortgage interest, property taxes and energy credits (I think this gets people to reduce global warming). As all states do not have a sales tax, sales and other tax deductions would give a better picture as to actual spending money available. I don’t think a deduction for a safety deposit box is a valid as it’s geared to someone with more money. And, I’m not sure but I believe boarding school, which includes food and more, is a write off as an education expense. The cost of raising a child until age 17 without college in 1960 was $25,000; in 2010 it was $227,000. This is an increase of $4,040 per year (18.2%) or 908% in 50 years. And, there was a study that found day care costs exceed public college tuition is 36 states. The average American cannot afford such luxuries and do not get to write off the money spent on clothes, food, school supplies, transportation, etc. that are included in boarding school or day care expenses. Perhaps the exemption for each dependent should be increased and eliminate the deductions. Because of the way we treat subsidies, I believe subsidies to be a form of Welfare. However, I don’t think it’s in the public’s interest to eliminate them all. We have a history of providing subsidies to transportation and that’s not necessarily bad. The problem today is that the government gives subsidies as a gift instead of a loan; I’ll go into this further at a later date. I agree that the tax code needs to be revised and made simpler. But I do not like the approach represented by either candidate as I do not find them to realign the taxes paid with the expenses incurred by the government; businesses need to pony up for the costs associated with the oversight created by irresponsible business practices.