Taxes. Taxes. taxes.
Well, I guess that the T-word is a necessary evil in a society like ours.
Regarding Glenn Hubbard - yes, he needs and deserves a voice, and oh, hum, it is the same old stuff. I am certainly in favor of tax reform. Heaven knows that our tax laws are a mess. But Hubbard's suggestion starting with "no tax on capital gains or dividends" reveals his agenda, which is to soak the poor and middle classes, and make the rich, richer. The rich are the ones who would have the most to gain in removing the tax on capital gains and dividends.
My alternative, in a nutshell, would spread the burden in a more fair manner. My plan would work in three ways.
First, like local real estate tax, let's tax wealth - let's apply a federal tax to real estate, stocks and bonds. For example, with the value of the NYSE of about $24 trillion, a rate of just one percent on that and the NASDAQ would be at least a third of the Federal Budget. And with the rising value of stocks, it seems to be a fair application. The stock market has risen, on average, about 12 percent per year. for the last 100 years. A one percent tax on value would be about an 8 percent tax on the rise in value.
Second, I agree with Hubbard regarding a Sales Tax. It would be a consumption tax, which a tax payer could avoid just by not buying stuff. A Federal Sales Tax would also be applied to imported goods as well as locally manufactured goods. Our taxing of income hurts local manufactures and foreign imports have an advantage, being manufactured without high income taxes applied to the workers. If we taxed sales, then the imports would be paying an equal share. This would be a 5 percent sales tax.
Third, let's reduce the income tax rate to about 5 percent and eliminate all deductions. This would make the whole tax process so much easier for the taxpayer, and eliminate the major part of the whole tax bureaucracy, and I think it would allow all those current tax cheats to come back into compliance.
Currently, our tax system is not just to raise money for the workings of the government, our tax system is used as a social engineering carrot and stick. I feel that the social engineering aspect needs to be separated from the important aspect of financial support for our government. Mixing the two has not benefited either function. If you want to give money to college students, home buyers, farmers, or people who buy green cars, then do it, and do not mix this function with taxes.
Regarding my first suggestion of taxing wealth. Our current system lets the rich (like, say, Bill Gates) own billions of dollars of stock and never pay a penny until taken as "income". Let's get real. And sorry, Bill, but you are such an easy and obvious example.
My study shows that the combination of these three ideas would fully finance the Federal Budget, and do it in a more fair and equitable fashion.