Financial Times Editorial, Feb. 26, 2012
The tax debate America needs
â€¦ All of a sudden Washington is talking tax reform
again. Last weekâ€™s release of tax reform plans by President Barack Obama and
Republican contender Mitt Romney has raised hopes there could yet be a
bipartisan middle ground after the general election. Both plans are flawed â€¦
Mr. Obamaâ€™s plan â€¦ brings in a new category of exemptions for manufacturers.
They will pay a top rate of 25 per cent. It also reinforces the â€œdouble
taxationâ€ problem by levying a minimum tax on overseas earnings. Yet the
plan as a whole would pay for itself. It offers a down payment on a debate
America desperately needs to have. â€¦ Mr Romneyâ€™s plan â€¦ would reduce the
corporate tax rate from 35 to 25 per cent, abolish the estate (inheritance)
tax, and cut each personal tax level by a fifth. â€¦ Most of the estimated
$500bn in foregone annual revenues would be filled by higher growth rates,
according to Mr Romney (but with no explanation of how he reached such rosy
â€¦ America badly needs a tax system that is more efficient, simple and fair.
The more plans in circulation this year the better the chances for tax
2-4-8 Response: Efficient, Simple and Fair
In reply to your challenge to circulate a tax plan that
is "more efficient, simple and fair", the 2-4-8 Tax Blend should be
Over the weekend Warren Buffet told CNBC that he would
accept a tax on a person's total wealth. Bill O'Reilly (the Factor) supports
a national sales tax and all other (OEDC) developed countries have a VAT. It
is clear that bold reform requires an expansion of the tax base to lower the
rates. Tax expenditures need to be eliminated and wealth, sales and income
need to be taxed to achieve low flat rates.
I sponsor www.TaxNetWealth.com which advocates a very
broad tax base by taxing individual and foreign-owned net wealth at 2%
(above a $15,000 exemption), retail sales (or VAT) at 4% and income at 8%.
It would yield $2.6 trillion â€“ ($400 billion more than FY 2010 federal
The tax mix is inherently progressive and efficient.
Rich and poor would pay the same low tax rates - making it the fairest tax
system on the planet and discouraging tax avoidance. The concurrent
elimination of payroll taxes for Medicare and social security (-to be funded
from general funds) and a significant reduction of the corporate income tax
rate to 8% should merit near universal support of the 2-4-8 Tax Blend from
social liberals and business conservatives alike.
The basic shift in the tax burden is to let workers
keep about 30% more income each year and pay more taxes gradually as they
accumulate wealth. Capital gains, estate and gift taxes which tax wealth at
the time of a transfer event would not be necessary. The 8% corporate income
tax combined with the new economic mobility and consumer power of the
working class would jump-start the economy.
Eugene Patrick Devany, JD, MPA
February 28, 2012