Two events killed any chance Republican Presidential candidate Mitt Romney had to win in 2012; one was a hurricane that hit New Jersey and New York instead of Alabama and Mississippi a week before the election and, an amateur James Bond who recorded and released a political bombshell statement made in a private meeting by Romney that “47 percent” of Americans paid no income taxes.
Now, five years later, we have a President who wants tax reform, a congress that can reform taxes and two Democrats as Secretary of Treasury Steven Mnuchin and Presidential economics advisor Gary Cohn who are charged with crafting tax reform.
Can we achieve tax reform or will we have to settle for income tax rate cuts without reform? Can we cut 35 percent corporate tax rates that strangle American business? Is President Trump’s insistence on a 15 percent corporate tax realistic?
Can we spread the tax burden around to include some of the “47 percent” that don’t pay in? Is it fair that so many people have little “skin in the game?” Should the wealthy pay the same or more than they do? No tax cuts for the rich, says President Trump. If the rich must pay more, President Trump says, so be it. Taxes must be cut for the middle class, Trump insists.
Considering that a record high of American income was set in 2016, cutting taxes for those whose median income is over $59,000 can significantly affect 2017’s and 2018’s economy in terms of after-tax income and consumer spending.
So, here’s a program that we might try to spread the tax burden, cut the burden for the largest segment of the population, help cut the perpetual budget deficits that are caused not by over-spending as much as by revenue shortfalls.
Repatriation of foreign-based corporate profits – bring the off-shore money home by imposing a 5 to 10 percent tax rate instead of the current 30-35 percent. Make the windfall repatriation subject to capital investment and billions of dollars for business expansion will ensue.
Lower income tax rates for all who earn $500,000 or less; cut the existing rates by 25-50 percent. These cuts will fuel savings and consumer spending, both items needed to grow the economy. These cuts will hugely benefit small business people who file their business income on personal income tax forms.
Increase rates for those who earn $500,001 or more to 40 percent or more. They can afford it. They should volunteer to pay more as thanks to a society that makes it possible for them to make money.
Limit inheritance taxes to one million dollars.
Impose a national one (1) percent economic transaction tax on all economic activity so that everyone has “skin in the game.” It is immensely unfair that “47 percent” of Americans pay no income taxes while most of us have to.
Limit mortgage tax deductibility to mortgage interest on principal residence only and limit it to a $50,000 cap. Limit deductibility of state and local taxes (sales, property and income taxes) to $5,000.
Revoke private business-provided health insurance expensing and add the company paid premium into individual income.
Increase Social Security and Medicare taxes to forestall potential bankruptcies of those system so many depend on. With the suggested income tax cuts, there is room for modest increases in these two programs. Suggested increases: one percent.
This plan would cut income tax burdens for many, raise revenue, spread the tax burden to those who do not pay into the system, eliminate loopholes in the tax system that benefit few; individuals will benefit with increased after-tax income that will collectively increase consumer spending and savings by billions of dollars.
This would-be tax reform will bring back a trillion or two dollars sitting in foreign banks in foreign countries to be used for capital investment or infrastructure through public/private partnerships; this program would cut middle-class tax rates while those less fortunate can pay some taxes when they buy a bag of potato chips.
Can President Trump’s house Democrats, Cohn and Mnuchin come up with tax reform that benefits the country instead of their buddies at their old company, Goldman Sachs? Can Congress follow through and give us tax reform? President Trump can’t do it no matter how much he talks about it, only Congress can do it. Will they?
Raoul Lowery-Contreras is the author of “The Armenian Lobby and U.S. Foreign Policy” (Berkeley Press, 2017) and “The Mexican Border: Immigration, War and a Trillion Dollars in Trade” (Floricanto Press, 2016); he formerly wrote for The New York Times’ New America News Service.