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NEW - In 2016 the 2-4-8 Tax Blend will become 2-4-8 Tax Choice
The "choice" would allow all taxpayers to choose an income tax rate between 8% and 28% paired with a net wealth tax rate of 2% going down to zero. Wealth taxes paid would reduce Estate and Gift taxes (also set at 28%). This would encourage wealthy individuals to pay some net wealth taxes as a form of inexpensive life insurance.
  Wealth
0%
0.5%
1%
1.5%
2%

Income
28%
23%
18%
13%
8%

Business
C - Corp
4% VAT
8% Income
   


The Washington Post, February 15, 2012

Obama’s budget guts the government

by Robert J. Samuelson

Mr. Samuelson writes a weekly economics column. He was a columnist for Newsweek magazine from 1984 to 2011. He opines:

...  But the second story has gotten only modest attention. It is how spending on the elderly is slowly and inexorably crowding out the rest of government — and creating enormous pressures for future, steep tax increases.

... Here are the next decade’s projected trends: Spending on Social Security rises 27 percent ... Neither Republicans nor Democrats want to discuss this openly. ... An avowedly liberal administration is gutting government because it lacks the political will to confront programs for the elderly.

... Granted, none of the political choices (limits on Social Security and Medicare benefits, deep discretionary spending cuts, much higher taxes or large deficits) is appealing to either party. But instead of a real debate on the size and role of government — which programs are important, which are ineffective, who deserves benefits, what’s a tolerable level of taxation — we are making choices by omission in a way that exempts the elderly.


2-4-8 Response:

Social Security and Medicare

The projected 10-year growth of Social Security (about 25 billion a year) and Medicare (about $20 billion a year) and the fact that the government is running on borrowed money is not really a “big” story. A new approach to solving the problem might be. Lowering the amount of benefits is not very popular with those already living near the poverty line. Delaying the retirement eligibility age on the rational that people are living longer is not fair to those that are less likely to live as long (i.e. males, minorities, overweight, smokers, hypertension, etc.). When seniors work into their golden years it also has the unintended consequence of there being fewer jobs for younger workers.

One solution that has not been fully explored is that of cutting back a bit on tax exempt retirement programs – (those in addition to social security). Since the 1974 Employee Retirement Income Security Act (ERISA) employers and workers have participated in a wide range of tax exempt retirement programs. There are 90 million people with $17.5 trillion in retirement assets (a household median of $100,000).

A question arises as to what public savings might be achieved by ending the retirement tax saving holiday for those who don’t really need it. The tax subsidy might be ended for those with private wealth that will effectively match the maximum social security amount. It’s not that $40,000 or $50,000 would be a lavish income. Rather it is a matter of fairness to suggest that other taxpayers should not be subsidizing more than a basic retirement life style (I call it the Social Security times two level). By taxing surplus accumulated retirement money that has never been taxed and by halting tax exempt participation when that level is reached, the expanded tax base would produce significant additional revenue. For example, it would only take an expanded tax base of $3 trillion to produce $45 billion a year at a 15% tax rate.

A more stable long range solution would require a bold reform that expands the tax base for all. I call it the 2-4-8 Tax Blend and it is described at www.TaxNetWealth.com.

Eugene Patrick Devany, JD, MPA  
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Copyright 1985 to 2015 by Eugene Patrick Devany