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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
   


World Magazine, May 9, 2012

Tax Reform Now!

By Alex Tokarev

Alex Tokarev is the chair of the Department of Business at Morthland College in West Frankfort, Ill. He opines:

... hordes of accountants and lawyers are more efficient in diminishing our economic vitality, sabotaging our social progress, and extinguishing our personal freedoms than any foreign enemy America has ever faced.

... We need a bill that is no more than a dozen pages long. Flat tax, sales tax, a combination of both—take your pick. What we have now breeds corruption and subverts the democratic process. It is insane and it has to stop.


2-4-8 Response: The 2-4-8 Tax Blend

Tax expenditures (a/k/a tax breaks, tax extenders and loopholes) cause the government to lose over $1 trillion in revenue and to pay $750 billion in interest each year on the $15.6 trillion in national debt. The tax code has slowly redistributed income and wealth to the top as can be illustrated by the fact that Mr. Romney legally pays a 15% tax rate while a typical family earning $70,000 pays 19% (combined income and payroll tax). The tax code has also contributed to the loss of middle class purchasing power, mortgage defaults, unemployment and increased federal spending on safety net programs. The wealthy investment class and multinational businesses take advantage of provisions permitting an indefinite delay in paying taxes through capital gains, tax havens and trusts (to name a few).

It doesn’t matter if you think it fair, the redistribution of income to the top not only has to stop, it has to be reversed in order to create a robust economy of healthy consumers.

Please consider the 2-4-8 Tax Blend – a comprehensive tax reform for both individuals and business that can be defined 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.

For business the combined 8% income rates and 4% VAT would be the lowest and most competitive business taxes of all the developed countries. [The U.S. is the only developed country without a VAT]. The 8% income tax rate also resolves the significant problem in the deferral of taxes on foreign profits caused by imposing a 35% tax (less credit for foreign taxes paid) when the money is brought back into the U.S.

For investors, the net wealth tax might seem revolutionary by U.S. standards, but most high earners would willingly pay a 2% net wealth tax in exchange for eliminating the capital gains and estate taxes and keeping 92% of taxable earnings. The ability to buy and sell assets without being taxed on the gains would spur a new era of investment freedom. The increased after tax income would also create wealth much faster than a 2% net wealth tax could diminish it.

For workers, the elimination of the payroll tax and reduction of the income tax rate creates an immediate boost in take home pay. For example, a young family earning $70,000 currently pays combined federal taxes of 19% but would take home $7,700 more with an 8% income tax (assuming net wealth of under $30,000). This additional $641 per month represents an enormous opportunity for both savings and consumption. The $15,000 per person cash wealth tax exemption also encourages a responsible level of liquidity. The retention of tax exempt retirement savings programs recognizes the need for the elderly to have sufficient assets to supplement social security. Current interest tax deductions for mortgages and student loans are replaced by the ability to deduct the loan principal in computing net wealth. This is the equivalent of a 2% reduction in the interest rate and is arguably a better incentive for both home ownership and higher education.

Eugene Patrick Devany, JD, MPA
http://www.TaxNetWealth.com

 

 
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Copyright 1985 to 2015 by Eugene Patrick Devany