2-4-8 Tax Blend
Outline for Tax Analysis and Scoring of Tax Plan
Changes to the
2-4-8 Tax Blend (updated September 2012)
1.
Removed deductions for state and local taxes
2.
Added exemption for Retirement Funds (subject
to reasonable limits to be determined)
3.
Added net wealth exemption for $15,000 cash
(credit up to $300 per person)
4.
Deferral of wealth tax payment permitted for
seniors and persons in need due to limited cash liquidation (i.e. high value
of primary residence and limited income). Tax due upon sale of property.
NEW: Two changes in July of 2013 :
-
The 2% wealth tax and 8% income tax became optional. A taxpayer not
wishing to pay the net wealth tax could elect to pay a flat 26% tax on
income but would also be subject to estate, gift and capital gains
taxes. The estate and gift taxes would effectively be recoped when the
taxpayer died or otherwise give the assets away. A later taxpayer
election to pay the net wealth tax and lower income tax rate would
require a penality.
-
The charitable deduction would be retained but would be available only to public charities that sponsored
new jobs with the tax deduction portion of the donation.
Tax Plan
Overview:
The 2-4-8 Tax Blend uses individual net wealth, sales,
and both individual and corporate income as tax bases. All gross income and
assets are taxed (i.e. deductions, credits, etc. are eliminated) except:
·
wealth tax exempt and income tax deferred
until withdrawal on individual retirement savings plan assets up to $500,000
value per person
·
wealth tax deferral permitted for primary
residence value up to $1,000,000 for retired or disabled homeowner with less
than $500,000 in additional assets and under $50,000 in income.
·
wealth tax exclusion for up to $15,000 cash
per person (includes persons now considered dependents on income tax,
applies only to accessible funds in bank checking or savings account)
|
Tax
|
Data
|
|
Individual
income tax at 8% on all income (except capital gains, tax exempt
retirement funds and government bonds currently not subject to tax)
|
Individual
Gross Income (no tax exemptions except for business deductions to
compute profit)
Capital Gains
(excluded/not computed/not taxed)
Tax Exempt
Government Bonds (interest excluded)
Tax Exempt
Retirement Funds (up to $500,000 or to $1,000,000 for married
persons)
-[requires
estimate of excess retirement funds]
Non-Compliance
(10% reduction or as otherwise standard/recommended)
|
|
Average Net
Wealth Tax - 2% tax on average individual net wealth (excluding
$15,000 cash per person and $500,000 in retirement funds)
|
Individual
Assets (average value)
-[requires
estimate and exclusion of cash assets below $15,000 per person]
Individual debt
(average value)
Non-Compliance/Underestimate (20% reduction or as otherwise standard
or recommended)
|
|
4% business
value added tax (VAT)
Businesses pay
4% on gross domestic sales of goods and services but may deduct VAT
taxes paid by suppliers of any and all goods and services. The VAT
would apply to new and used goods.
|
Total domestic
sale of goods
Total domestic
sale of services
Non-Compliance
(10% reduction or as otherwise standard or recommended)
|
|
8% corporate
income/profit tax
|
Corporate
taxable income (profit)
Non-Compliance
(5% reduction or as otherwise standard or recommended)
|
|
|
|
|
Miscellaneous
taxes and fees
No estate tax
No gift tax
|
Per current law
except:
Taxes on items
in the nature of goods and services that would be subject to VAT tax
(i.e. gasoline, alcohol, cigarettes, telecommunications, etc.) would
be reduced by 4% so as to eliminate increase based on special tax
and VAT.
|
Suggested
Analysis
Assuming all baselines are conformed to tax law changes
as indicated by the 2-4-8 Tax Blend and that the 2-4-8 tax rates continue,
what changes would there be over the next 10 years in:
Consumer Spending
Number of Jobs
Rate of Unemployment
Mean individual income (by income quintile and wealth
quintile) [quintile or smaller unit]
Mean individual net wealth (by wealth quintile and
income quintile)
GDP
Individual tax liability versus current law projections
(by net wealth and income groups)
Corporate tax liability versus current law projections
Miscellaneous taxes and fees versus current law
projections
Federal Revenue
A.
Revenue from individual income tax
Business portion (pass-thru)
Other Income
B.
Revenue from individual net wealth tax
B1. Total individual
assets
B2. Total individual
debts
B3. Total cash assets
exempted by $15,000 limit
B4. Total tax exempt
retirement assets exempted by $500,000 limit
C.
Revenue from VAT
C1. VAT from C Corporations
C2. VAT from pass-thru business
D.
Revenue from Corporate income tax
E.
Miscellaneous taxes and fees
Federal Budget Deficit
All additional standard comparisons and projections
used in comparing federal tax reform plans.
|