ii iv viii	Merry Christmas and Happy New Year 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

... what’s their “theory of change”? ... One common theory is that the two parties are so far apart that this election, finally, will provide a mandate for the winner and shock the losing side into cooperating. “We’re going to have as stark a contrast as we’ve seen in a very long time between the two candidates,”

... Rep. Paul Ryan (R-Wis.), speaking at the Reagan library in California, was even more emphatic: “If we make the case effectively and win this November, then we will have the moral authority to enact the kind of fundamental reforms America has not seen since Ronald Reagan’s first year.”

... McCarthy, of course, was right. Minorities don’t become majorities by helping the other party govern successfully. When things go well, voters reward the party in charge. More often, they become majorities by grinding the gears of government to a halt, amping up partisanship and doing all they can to make voters disgusted with Washington. The belief that minority politicians will clap majority colleagues on the back, mutter “good game,” and get out of the way is fantasy.

... Fiscal policy is a special case in which the consequences of gridlock will make action necessary and Senate rules make passage easier. On most issues, neither Obama nor Romney is likely to have the votes or cross-party cooperation to get much done. Washington is too bitterly polarized for that, and the U.S. political system is too easy to stymie. If voters don’t like that state of affairs — if we want elections to produce leaders who can govern effectively — then the question, really, is what our theory of change is.

2-4-8 Response

My "theory of change" in tax reform is simply to have the best plan and hope that a lot of the members of congress will agree.

From a social science perspective Washington’s lack of serious study of “all” tax reform options is unconscionable. Given the scope and magnitude of our economic malaise, this scholarship should be pushed like the 1939 Manhattan Project. Instead, President Obama appointed the Simpson-Bowles Commission but they were not permitted to consider a VAT or net wealth tax.

From a political perspective however, it is understandable why the leadership of both parties might want to avoid documenting the unintended consequences of their respective failed approaches. When the economy is askew, Democrats see the wisdom of creating better consumers (and votes) by borrowing money for entitlement programs which do not create sustainable jobs. Republicans see the wisdom of lowering the tax rates and other tax expenditures (instead of direct spending) to encourage investment by business (even without a solid consumer base). The tax incentives (“loopholes”) yield little because there are few consumers (although a few businesses may be able to export). At least businesses are able to profit (and continue political contributions) during the economic downturn. The tax expenditures also keep many business going that should fail for the greater good of making their competitors stronger (rather than making all a little weaker).

A consumption tax is regressive and will not heal consumers, even though a small VAT is admittedly an optimal means of fairly taxing business (and used by every developed country in the world except the arrogant USA). Economic recovery requires a net wealth tax - the nuclear option in tax reform (efficient, fair, powerful [i.e. $55 trillion base] and controversial) as an essential component. In one sentence:

Tax individual and corporate income at a flat 8% rate (with no deductions, credits or loopholes), tax individual net wealth at 2% (excluding $15,000 cash and retirement funds) and impose a 4% Value Added Sales Tax (VAT) on business.

The 2-4-8 Tax Blend has the lowest rates and will produce about $500 billion more than current federal revenue [around 18.5% of GDP] with no need for payroll, estate, and capital gains taxes or deferral of foreign income. A typical family would have an after tax take home boost of about $641 per month. The economy would recover quickly and remain stable.

Eugene Patrick Devany, JD, MPA

Read more at www.TaxNetWealth.com

 

 

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Copyright 1985 to 2015 by Eugene Patrick Devany