Fred’s Tax Reform Proposal

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Good editorial from the Wall Street Journal on Fred Thompson’s tax reform ideas:

…late last week he unveiled a tax reform that is more ambitious than anything we’ve seen so far from the rest of the GOP field.

Mr. Thompson wants to abolish the death tax and the Alternative Minimum Tax and cut the corporate income tax rate to 27% from 35%. But his really big idea is a voluntary flat tax that would give every American the option of ditching the current code in favor of filing a simple tax retur6n with two tax rates of 10% and 25%.

Mr. Thompson is getting aboard what has become a global bandwagon, with more than 20 nations having adopted some form of flat tax. Most–especially in Eastern Europe–have seen their economies grow and revenues increase as they’ve adopted low tax rates of between 13% and 25% with few exemptions.

The main political obstacle to such a reform in the U.S. has come from liberals, who favor punitive taxes for “class” reasons, and K Street corporate lobbyists who want to retain their tax-loophole empires. The housing and insurance industries, states and localities, charities, bond traders and tax preparers are all foes of low tax rates.

That’s why the idea of a voluntary flat tax–introduced on these pages a dozen years ago–makes political sense. The Thompson plan would allow taxpayers to keep their mortgage and charitable deductions if they prefer, by adhering to the current tax code and rates. But it would also allow the option to abandon those credits and deductions except for a single allowance based on family size ($39,000 for a family of four). Most taxpayers would pay a 10% rate on income above that allowance, with a 25% rate kicking in at $100,000 for a couple. There would only be five lines on the tax form and most taxpayers could fill it out in minutes.

Liberals are already objecting that the plan is not “paid for,” by which they mean it doesn’t raise taxes the way they hope the next President will. But Mr. Thompson is right in refusing to play by the “static revenue” scoring game that demands that one dollar in estimated tax cuts be offset by one dollar in estimated tax increases somewhere else. “The experts always overrate the revenue losses from tax cuts,” Mr. Thompson says, and history supports him going back to the Mellon reductions of the 1920s, the Kennedy tax cuts of the 1960s, the Gipper’s in the 1980s, and this decade’s success with President Bush’s reductions.

Excellent proposal by Fred to fix a tax system that is screwed up beyond belief.

The editorial also points out that Rudy and Mitt have both failed to endorse some kind of flat tax, seeing it as too politically risky. 

Just one more reason why I’m behind Fred.  A politician needs to take risks.  They need to put their ideas out there instead of hemming and hawing like a Clinton waiting for the polls to come out.

I just love Fred’s style of conservatism.  A conservatism that is older then Mitt’s, much more conservative then Rudy’s, and is fiscal as well as social.  He doesn’t have the baggage of most of the Republican candidates and is committed to federalism.

On top of all that he has begun to address the major issues in a series of position papers, something the other candidates have not done. 

While I could support Mitt, Rudy & most (you know which one I could not) of the rest of the candidates if they were to get the nomination I feel Fred is really the best of the field right now. 

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I don’t think this is actually ‘more ambitious’ than the Fair Tax proposal Huckabee is pushing. But Thompson’s proposal is actually very good whereas the Fair Tax is an awful idea.

More ambitious? Maybe not. But I would agree the Fair Tax is quite a bad idea, add in Huck’s history of increasing taxes and you have a major reason not to support him.

You know what’s going to happen to the whole tax preparation industry if he gets elected and succeeds in pushing this through??? Holy cow!! We’re talking H&R Block,TurboTax for starters, about 80% of accountants…a whole industry! I’m not knowledgeable enough to really evaluate the ups and downs of this, but I _do_ know that tax accounting is one heck of a huge business!

Suek,

And the loss of the tax preparation industry is bad because?

The fact it HAS to be a huge industry indicates that tax collection under current practices is wasteful and loses large amounts of tax revenues. This is backed up by several investigations of the IRS “overhead” costs. These reports and investigations alone indicate the entire tax collection system is fraught with fraud and abuse.

Also, H&R Block (from personal experience I had) hires temps during tax time. The actual accountants can easily find better jobs, especially when a lower tax burden spurs industry to invest.

I didn’t say it was _bad_ – but it also isn’t ‘nothing’. Agree with you on the huge industry and wasteful part, as well as the rest of that statement. I know H&R hires temps – I worked for them a number of years ago as well. I’m not so sure about the actual accountants finding better jobs bit, though. _Much_ of accounting is bean counting for the bureaucrats of the IRS. Maybe we could make the government hire them – heaven knows the government could use some “standard” business accounting practices – make the government use the same standards they enforce on business….! How’s _that_ for a novel concept!

I work with civilian government employees (though DoD employees are different from the rest). While the DoD forces itself to follow standard business practices, most of the government does not.

But then, it is only news when the DoD can be slammed. DOS higher ups flew very expensivly and committed other abuses which would have gotten a DOD employee fired and prosecuted and the media said next to nothing.

The first line was somewhat sarcastic (which does not print well..) but weaning off the confusing tax systems in place would save individuals, companies, and government (at all levels) huge ammounts of time and money.

That said, the IRS now realizes it has misplaced my 2005 tax return (as usual, they owe me money) and I have to send in the e-file all over again (for the third time)…..

May I suggest (re: 2005 return) hard copy and send to them by certified mail – return receipt requested? Really aggravating to have to do something like that, but you know – the third time’s the charm…and it would put it in _their_ court!

Good Idea!

I am going to also contact them by phone and tell them it is coming.