As I noted yesterday, the economic portion of my study began with how people can better get more money in their pockets, but this morning I’m going to discuss how best people can keep what they earned. (To start from the beginning, go here. I’m linking to each succeeding part at the end.)
Regarding taxation, the next president should (in five bullet points or less):
- Strive for a consumption-based taxation system to replace the income-based system.
- Work to repeal the Sixteenth Amendment, as that is a key element in accomplishing the first point above.
- Corporate taxes should be lowered to be competitive with other nations.
- Do away with the estate tax while we’re at it.
- Stop using the tax code to reward behavior, aside from the reward for saving and investing a consumption-based tax would produce.
So how do our candidates look regarding these points? Honestly, some look pretty good – and this is one of the shorter parts. This is the first of our double-digit point categories; 10 points are available.
Castle: I have proposed a taxing system whereby taxes would be apportioned to the states as the census dictates. If my state of Tennessee had two percent of the nation’s population, for example, it would be liable for two percent of the budget. It would be incumbent upon the representatives from Tennessee to help hold down Federal spending. The Federal Government would be encouraged to spend less not more. The states would be empowered and Washington would be dis-empowered. Washington’s hold over the states would be broken and the states would be sovereign again – Washington would have to ask the states for money. States would be free to collect their revenue as they see fit. Alaska might tax its natural resources and Florida might tax tourism. In Nevada, it would obviously be gambling. Since people could keep their income the economy would explode with growth.
Prefers FairTax to income tax, but has less control by states. “I would like to see (the Sixteeneth Amendment) repealed, if possible.” (Facebook page)
Hedges: Until renewed Volstead Act (Prohibition), higher taxes on alcohol and tobacco.
“There is no way to cut back income and at the same time deliver more services. Things that taxpayers want, the taxpayers must pay for.”
Hoefling: We consider the federal income tax to be destructive of our liberty, privacy, and prosperity. Therefore, we are working to bring about its complete elimination and the repeal of the Sixteenth Amendment to the U.S. Constitution. We recommend that the current system be replaced by an equitable, simple, noninvasive, visible, efficient tax, one that does not destroy or even infringe upon our economic privacy and liberty. (party platform)
Johnson: Stop special interest loopholes. Reward responsibility. And simplify our tax code.
Today’s federal tax code does all the wrong things. It penalizes productivity, savings and investment, while rewarding inefficiency and designating winners and losers according to political whim.
For far too long, tax laws have been used not just as a means to collect needed revenues, but as a way for special interests to penalize their competitors while subsidizing themselves. The result is a tax code that is more than 70,000 pages long, enforced by a government agency with almost 100,000 employees. As a result, our tax code has created a nightmare for the average American, while providing shelter for those with the means to manipulate it.
Governor Johnson advocates for the elimination of special interest tax loopholes, to get rid of the double-taxation on small businesses, and ultimately, the replacement of all income and payroll taxes with a single consumption tax that determines your tax burden by how much you spend, not how much you earn. Such a tax would be structured to ensure that no one’s tax burden for the purchase of basic family necessities would be increased. To the contrary, costs of necessities would likely decrease with the elimination of taxes already included in the price of virtually everything we buy.
Many leading economists have long advocated such a shift in the way we are taxed, and Gary Johnson believes the time has come to replace our current tax code, which penalizes the savings, productivity and investment we so desperately need. (campaign website)
McMullin: Evan McMullin will…make the tax code fairer and simpler, helping to spur business innovation, especially the growth of small businesses, which are the country’s most important job creators. Small businesses should pay closer to 25 percent of their profits in taxes, whereas now there are many that must pay almost 40 percent. Right now America also has the highest corporate tax rate – 35 percent – of any advanced economy. Even Barack Obama has said that it should be substantially lower. Income tax rates also need to come down, especially for the middle-class; once the economy starts growing again at an acceptable rate, high-earners should also get a break.
The Earned Income Tax Credit (EITC) is one program that shows how we can fight poverty while encouraging work—it provides a tax refund for those who have jobs but don’t earn enough to be self-sufficient. One shortcoming of the EITC is that tax refunds may not arrive until someone has been working for more than a year. To provide a stronger incentive to work, there should be immediate benefits for those who have jobs. This can happen by transitioning from tax refunds to wage supplements, which add money to every paycheck, starting from day one. Wage supplements also create a strong incentive to spend more time at work, since the benefit rises with each hour spent on the job.
By adding to the paychecks of low-income workers, EITC and wage supplements accomplish the same goal as an increase in the minimum wage, but without reducing the number of jobs available or punishing job creators. If the federal minimum wage rose from $7.25 to $15 per hour, many jobs that pay $9 or $10 per hour would disappear, because employers could not afford the cost. When such jobs disappear, the primary victims are the poor and unemployed, who depend on such jobs to acquire skills and get a foot in the door so they can eventually rise up. (campaign website)
With the exception of a slightly higher corporate tax rate, McMullin’s tax proposal is largely in line with the tax reform plan put forth by House Republicans over the summer. Individual income taxes would be reduced to three brackets from seven at rates of 12%, 25% and 33%. Small business taxes would be reduced to 25%, and the corporate tax rate would also be reduced to 25% (the House GOP plan pegs the corporate tax rate at 20%). (TheStreet.com)
I think Darrell Castle‘s idea is very intriguing because it would certainly rein in the federal government. Let’s say the federal budget is $4 trillion. Castle uses 2% as an example; it so happens Maryland is roughly 2% of the national population. That would mean the state would be liable for $80 billion, which is about twice our state’s annual budget – but certainly is doable when you figure the state’s GDP is about $365 billion. If a state didn’t want to come up with its share, well, maybe its Congressional delegation would become serious about rightsizing government. To me, that’s the beauty of the idea. He also gets the point regarding the Sixteenth Amendment. 8.5 points.
I question the wisdom of Jim Hedges and his ideas about taxation. It’s understandable that he wants higher sin taxes given the nature of his party (albeit these are consumption taxes, which doesn’t make them completely bad), but the implication that taxpayers want more services is the part I am at odds with. I think taxpayers want more efficient services, but if you ask almost anyone they can point out something they feel the government is wasting money on. This is another area where Hedges’ more leftward tendencies step away from what I think his party really stands for. 1 point.
Tom Hoefling and his America’s Party platform is spot on, except for not specifying the types of taxation which would qualify as “equitable, simple…” and so forth. He has the basics down cold, though. 8 points.
In so many words, Gary Johnson is for a consumption-based tax, too. His misstep is not calling for repealing the Sixteenth Amendment because everyone knows that when the government wants to spend more money they will immediately return to soaking us with the income tax as double taxation. 5.5 points.
The problem with Evan McMullin is that his tax platform tinkers around the edges of a terrible system; in fact, he makes it worse and more progressive to the extent that high-income earners will have to wait for their break until the economy improves. (But who really drives the economy with investment as opposed to consumption?) I think the EITC was intended as a tool to help the working class but now it’s become just another government handout – yet McMullin wants to double down with wage supplements? We do not need another entitlement program. Stick with the lower rates for all, mmmmkay? 2 points.
Well, that spread the field out some. We will see how much more of that occurs tomorrow when I resume the series with immigration.