Post by ShivaTD on May 23, 2014 11:25:37 GMT
Senator Rand Paul is close but fails on his tax overhaul proposal.
The blunt-spoken, Libertarian-leaning senator from Kentucky, who won the 2016 presidential straw poll among leading conservatives, favors a flat tax: a one-rate income tax system with a minimum of tax breaks for individuals and businesses.
But Paul hasn't settled on what that rate should be.
He has publicly discussed 17%. An aide said if Paul does make a formal proposal, the rate would not be higher than 17% and could be lower.
Much would depend on which tax breaks Paul chooses to keep. Two would definitely remain: the standard deduction and personal exemptions. But both would be considerably larger than they are under today's code.
The Paul aide said the senator might also consider preserving in some form the tax breaks for mortgage interest and charitable contributions.
Under a Paul flat tax, an individual would owe taxes on his wages, salaries and pension payments. But fringe benefits at work would remain tax free to workers, as they are today. One example of that is the contribution employers make to pay for workers' health insurance.
Capital gains, dividends and interest would also be tax free at the individual level, but would be taxed at the business level. Capital gains on owner-occupied housing would also be tax free.
In addition, Paul would eliminate the estate tax and the alternative minimum tax.
Could a flat tax no higher than 17% raise as much revenue as the current system? No. To do that you'd need to have a rate at least in the low- to mid-20% range, said Joseph Rosenberg, a senior research associate of the Tax Policy Center.
money.cnn.com/2014/03/31/pf/taxes/rand-paul-flat-tax/index.html
Good on some points but a complete failure on others.
The most obvious failure is the fact that he proposes a 17% cap that the Tax Policy Center states is not enough to fund authorized federal expenditures and that is fiscally irresponsible. His "pie-in-the-sky" dreams of federal expenditures not requiring more than a 17% tax rate are a pipedream and tax policies can't be based upon pipe dreams. He needs to be realistic as opposed to acting like a pot smoking hippie.
Next is his belief that a dollar isn't a dollar when it comes to income where it differentiated between "investment income" (unearned income) and wages (earned income). His proposal that "capital gains" from investments be taxed at the "corporate" level ignores that most "capital gains" are not generated by the profits of corporations. Only "dividends" originate at the corporate level and taxing all dividends at the same "17%" tax rate adversely affects the small time investor that may not exceed the "exemption level" he wants to establish. A retiree, for example, that might be receiving income from dividends but only receiving $20,000/yr would effectively have a 17% tax imposed on their dividend payment but would not have had to pay this if they received it "tax free" from the corporation.
At the same time an multi-million investor that profits from a $50 million sale of stock wouldn't have any tax imposed on their income because the profits don't orignate from a corporation and it wouldn't be taxed at all because it's all "personal investment income" that he would not tax.
His proposal also fails because it maintains some individual deductions as opposed just establishing a "exemptions" based upon household size. For example he proposes maintaining the "mortgage" deduction but that is problematic. For an average household if an "exemption" is established their "mortgage" payment falls below the exemption level. In the article it refers to an example of the exemption level being $48,000 for a family of four (very close to my exemption level of $50,000/yr) and for almost half of all taxpayers their mortgage is covered by the "exemption" from taxation because their income is below $48,000/yr. At the same time a person with a million dollar mortgage that is currently tax deductable they would have an additional deduction of about $45,000 per year for the "mortgage" on top of the exemption.
Why should one of the Top 1% of income earners, the only people that can afford a million dollar mortgage, receive almost twice the "write-offs" from income taxes based upon the combined exemption and home mortgage deduction? They'd be writing off more than the vast majority of Americans even earn. Why does Senator Rand Paul want to continue favortism in our tax codes that basically only benefit the top 1% of income earners that are the people most able to pay income taxes in the United States?
Because of the tax loopholes for the wealthy that Senator Rand Paul wants to include in his tax proposal it destroys the "progressive nature" of a flat rate tax with an exemption. As also noted his tax proposal is also fiscally irresponsible because it doesn't fund government.
Nice try Senator Paul but no cigar on this tax proposal.