At least the way it reads is that the FICA seems to be separate from federal tax. At the site, it says that the worker would have the option of leaving the FICA tax in SS or putting it into their own retirement system.
IMO, the complexity isn't in the computation of taxes, but in the computation of the AGI. Once you have the AGI, whether it is a two step system, i.e., 0% and 17% or whether it is 7 gradual steps doesn't affect the complexity of the system in a meaningfull way. The simplicity is eliminating the computation of the AGI.
A couple of other observations...
On "FICA", well not exactly FICA, I didn't see anything about the Medicare component, presumably that is unchange. It seems quite different than the Medical Savings Accounts as he has suggested. Interesting point of the savings plan is that under current code law, contributions to medical savings plans are deducted from earned wages, i.e., they are non-taxable income and any unspent funds at the end of the year are forfeited by the employee. (I've wondered where those funds go?) Since he proposes replacing the tax code in it's entirety, it would be interesting to note if this aspect is preserved in his proposed tax code. I would assume that it does, but it's worth a question.
On the FICA, since future contributions to the Social Security system would be reduced and probably substantially, one would want to know how the shortfall for benefits under the current SS system would be handled. It seems that they would likely have to come out of the general fund.
Taxes...everybody seems to win! Isn't it great when everyone wins. First question...is the proposal revenue neutral? If it is than that question is over with ...with the exception of the shortfall on SS benefits as above. If it produces a lower revenue stream, then what gets cut and how much or does it go into deficit spending?
It seems as if all capital gains, long or short term are not taxable...I could envision some pretty substantial changes in executive compensation and likely lower levels as well....resulting in a decreasing revenue stream. I doubt that the public at large would view this as "fair", in spite of the double taxation language.
The site says personal savings are exempt....does this mean that the interest is exempt or the contribution and the interest are exempt. The words say the later.
Death taxes: Honestly, I don't even understand why this is even an issue. I'm pretty convinced that it just makes a great sound bit..death taxes....bad...no death taxes...good. Under current tax code, there is absolutely no reason for anyone to pay estate taxes. First the exemptions...$625,000 this year, as I recall and going up to a million in a few years....one would think that might take care of most...ok...small family businesses, farms and all the other rhetoric one hears...did anyone ever hear of joint ownership and beneficiaries...a little estate planning goes a long way....between those that should take care of it. But, if they really cared about preserving the estates for your heirs, what they ought to be telling you is to set up a living trust. First all federal estate taxes are irrelevent, a living trust doesn't pay federal estate taxes. I won't begin to guess how each state handles living trusts but there is some hope that will also get you out of state estate taxes, which isn't addressed at all by the elimination of federal estate taxes. But even IF you get rid of estate taxes, you would still want a living trust. A living trust gets all your assets out of probate hell. Also contesting a living trust (it is astounding how greedy and selfish survivors get when estate $$$ are glistening before them) is more difficult than contesting a will or fighting over assets in probate. For those interested there is plenty of info on the web on "living trusts", unless you plan to never die.
Fair taxes...everyone wants that...what is fair? That's where the debate should be. I don't know what "fair" is, so I don't know whether a change is fairer. Let's look at the FY2000 budget from OMB. Use GAO if you like, the questions remain the same. Approximately $1,914 Billion receipts ($1,717B outlays and $142B Social Security Reserves). I'll include more than I need for the point...I think it's interesting. :0)...Oh, numbers may not add up due to rounding.
Economic Assumptions...
Wages and Salaries $4,578
Corporate profits before taxes $ 722
Other personal taxable income $1,839
Receipts
Individual Income Taxes $921.1
Corporation income Taxes $187.5
Social Insurance and retirement receipts $641.1
Excise taxes $ 72.1
Estate and gift taxes $ 31.4
Custom duties $ 17.2
Miscellaneous receipts $ 43.9
Source: access.gpo.gov
Does this distribution seem fair?
On to individual income taxes. Some rounding ... there are somewhere around 300 million people, a subset of which pays $900B or about $3,000 a head. How does one distribute taxes fairly? I'm married with two dependents...my base "liability" is $12,000 (4 times $3,000) but adjusted for how much the family makes. If our AGI is 30,000, I probably pay $0, if my AGI is $200K the fair tax is ___? If my AGI is constant, but the number of dependents is different, i.e., single, married, children, etc., but my AGI is still at $200K my tax liability is the same. Is that fair? How progressive or regressive should the system be to be fair?....$3,000 per person, flat, two steps, seven steps, linear, parabolic?
We do all sorts of things via the tax code to stimulate certain sectors of the economy, deductions for mortgage interest to encourage home ownership, deductions to stimulate investments in environmentally friendly factories, etc. And we certainly do some, bizarre things, one of my personal favorites is a US tax credit for foreign taxes paid...encouraging investments in foreign interests...I find that bizarre. I digress, we encourage economic sectors through the tax code. Certainly, some would say that is unwanted government interference and most certainly others would say it is needed for a healthy coutry and economy. There could be endless debate on this point alone.
Which leads me to say goodnight without a preview and hoping everything lines up...which I doubt.
Regards,
Jim |
