When I have time to relax I like to crack open a beer, crack open Microsoft Excel and just go to town… This is what I came up with tonight. I am frustrated with the tax scam I see being passed in Washington DC.
The only thing that is worse than “tax and spend” is “don’t tax and still spend more” which is exactly what the GOP (in complete control of Washington DC) is doing right now. The economy isn’t working for a significant portion of Americans despite the fact that we are the richest country in the history of the world. There are so many possible solutions out there that can’t get implemented because of the unholy trinity of dirty politics: voter suppression, gerrymandering, and money in politics.
The proposed tax reform bill currently being voted on will likely have some dire short and long term effects. It would appear that the worst of the provisions as they apply to city finances have been pulled back. You can read a summary of what is in the bill here.
The bill will create a huge increase in deficits while primarily providing gains to the most wealthy. Stop gaps like the alternative minimum tax are being eliminated. Most of the tiny benefits to the middle class go away in time while the benefits for the wealthy and corporations are permanent. The most innovative places which also happen to be the most expensive will likely see middle class tax increases. The provision to eliminate the individual mandate for insurance will deteriorate the market place.
Probably the biggest issue here is the increasing deficits that would go on forever. In the shot run this will likely be used as justification to cut programs like social security and medicare. In the longer run this will likely increase interest rates. When the debt hits a certain level the Federal Reserve may have to resort to inflation to devalue the dollar to just pay interest. Already in 2017 the value of the dollar has fallen relative to the Euro.
To me the most frustrating part of tax reform is that the goal of eliminating special breaks isn’t even happening. Lobbyists are still writing their own tax provisions. Golf course and private jets get a tax break. All the BS aside; the total cost of government is near generational lows as a percentage of our economy.
My Crazy Idea:
I want a super simple policy that would replace, social security, medicare, all forms of welfare, and the existing tax code. Unlike a pure flat tax it would address issues with low income populations. First a couple of disclaimers, I chose the numbers I did because they were easy to work with. A more thoughtful analysis could dial this in. Corporations would pay the same rate. Earned or unearned income would pay the same rate. There would be absolutely no tax deductions, exemptions or loop holes. Tax revenue would be sufficient to not run a deficit.
Here would be my dream “new deal”
- Every American Adult would receive an annual Tax Credit (Universal Basic Income) of $25,000.
- Every American Adult would pay an income tax of 50% (less the tax credit).
- Every American Adult would have access to single payer healthcare and education.
- Every American Adult would be paid a living wage.
- Figures would be updated annually to ensure the tax credit is higher than the federal poverty level and minimum wage stayed a living wage.
Below is what the effective tax rate would look like. Remember that there would be no social security or medicare taxes. An individual would have to make $50,000 before they effectively paid any taxes. A retiree, a student, someone starting a business, or a disabled person would have enough money to subsist beyond poverty. When the American economy does better everyone would do better.
The highest income earners would pay an income tax rate that approaches, but never actually gets to 50%