Primary Principle – Taxes should be used primarily to fund government operations and not for economic incentives. Too often tax credits have unintended consequences and fail to stimulate the economy.
Personal Income Tax
Eliminate AMT and all tax credit. Tax credits such as those for race horses benefit the few in the expense belonging to the many.
Eliminate deductions of charitable contributions. Need to one tax payer subsidize another’s favorite charity?
Reduce the youngster deduction together with a max of three of their own kids. The country is full, encouraging large families is pass.
Keep the deduction of home mortgage interest. Home ownership strengthens and adds resilience to the economy. In case the mortgage deduction is eliminated, as the President’s council suggests, the world will see another round of foreclosures and interrupt the recovery of layout industry.
Allow deductions for expenses and interest on student loans. It pays to for the government to encourage education.
Allow 100% deduction of medical costs and insurance policy. In business one deducts the associated with producing everything. The cost of labor is partly the repair off ones fitness.
Increase the tax rate to 1950-60s confiscatory levels, but allow liberal deductions for “investments in America”. Prior on the 1980s the income tax code was investment oriented. Today it is consumption concentrated. A consumption oriented economy degrades domestic economic health while subsidizing US trading collaborators. The stagnating economy and Online GST Return Filing the ballooning trade deficit are symptoms of consumption tax policies.
Eliminate 401K and IRA programs. All investment in stocks and bonds ought to deductable just taxed when money is withdrawn among the investment areas. The stock and bond markets have no equivalent into the real estate’s 1031 pass on. The 1031 real estate exemption adds stability to your real estate market allowing accumulated equity to supply for further investment.
(Notes)
GDP and Taxes. Taxes can be levied for a percentage of GDP. The faster GDP grows the more government’s ability to tax. Within the stagnate economy and the exporting of jobs along with the massive increase owing money there is limited way the states will survive economically any massive take up tax proceeds. The only way possible to increase taxes end up being encourage a tremendous increase in GDP.
Encouraging Domestic Investment. Your 1950-60s taxes rates approached 90% for the top income earners. The tax code literally forced great living earners to “Invest in America”. Such policies of deductions for pre paid interest, funding limited partnerships and other investments against earned income had the twin impact of growing GDP while providing jobs for the growing middle class. As jobs were came up with tax revenue from the middle class far offset the deductions by high income earners.
Today almost all of the freed income contrary to the upper income earner leaves the country for investments in China and the EU at the expense for the US economy. Consumption tax polices beginning in the 1980s produced a massive increase inside of the demand for brand name items. Unfortunately those high luxury goods were more often than not manufactured off shore. Today capital is fleeing to China and India blighting the manufacturing sector of the US and reducing the tax base at a time when debt and a maturing population requires greater tax revenues.
The changes above significantly simplify personal income tax. Except for accounting for investment profits which are taxed in a very capital gains rate which reduces annually based on the length of energy capital is invested the amount of forms can be reduced using a couple of pages.