I believe America needs both a short-term and a long-term tax reform plan not only because of our current partisan makeup in power but also because of our long-term economic outlook. The short-term plan is based on what can be passed now, which would improve our economy and give us a functioning and understandable tax code that anyone could understand that promotes economic and job growth. But long term, we are going to need something much better than that, which is even simpler and does a better job of promoting both economic and job growth as well as help us pay down our debt and deficit.
Short term, as far as a good plan that has any shot in hell of passing in this Congress or the next Congress, we need to simplify the code, and that means getting rid of a lot of wasteful tax deductions and credits, especially as they relate to businesses. We need to lower our corporate and business taxes on all investments and profits made inside the United States, so a 25 percent corporate tax rate sounds good to me, as long as you eliminate all corporate welfare, including agricultural welfare.
The home mortgage deduction needs to be reformed but not eliminated for all single or primary homes where people either live or work full-time up to, let’s say, $1 million and index that for inflation. But for all homes worth more than the HMD this would no longer apply and all vacation homes would no longer be eligible for the HMD, but someone with a home for work and for living could get the HMD for both places, just as long as they together are both worth under a million dollars, so we could stop the HMD for people who do not need it.
I could go along with keeping the top income tax rate where it is, or even lower, just as long as the wealthy are taxed on all of their income including capital gains so you no longer see people like Mitt Romney, who is worth over $200 million, only paying 15 percent in taxes. We should increase the cap on Social Security to, let’s say, $500,000 or $1 million so a 6 percent payroll tax applies to everyone equally, and lower taxes on the middle class as well as eliminating wasteful loopholes like deducting State and local sales taxes.
So that would be my short-term tax reform plan, but long term I would scrap the income tax and replace it with a Progressive National Consumption Tax so we are taxing people based on what they take out of society and no longer tax people based on what they produce for society because if we really want to create long-term economic and job growth, we need to stop taxing people for producing and instead tax people for taking.
I call this the Progressive National Consumption Tax (PNCT) for a good reason, because it would still be progressive. We would have lower taxes on things that people need to live well, like food, health care, and so forth, rent for middle class and low-income apartments, and middle income housing, to use as examples, but tax luxuries or entertainment higher, such as luxury cars, ballgames, yachts, vacations, movies, as examples. We need to encourage people not to stop doing what they are doing but to be smarter with their money.
The PNIT again would be progressive because low-income workers would still get their Earned Income Tax Credit simply by reporting their income to the IRS every year and would have to be truthful and accurate about that. But even before they get their EITC and pay taxes, they spend so little because they make so little and generally spend most of their money on what they need that they would have a very low tax rate.