President Trump has a lot riding on getting a new tax code passed, and everybody in Washington knows it. Folks elected him largely on his promise to restore prosperity to working-class precincts. Making the issue even more basic: Millions of Americans want some of their money back.
Today’s tax code runs about 10 million words. It is so convoluted you need an advanced degree in business to have a clue. If you like chaos, tax preparation should be your sport.
Donald Trump may be one of the few people who actually understands the tax code. As you may know, he refuses to release his own tax returns, which could indicate he’s not real keen on voters seeing how his businesses complied with the code — speculation, but don’t bet against that.
Not since President Reagan has a U.S. chief executive been so bullish on tax reform. Reagan cut personal tax brackets from 11 to two; corporate taxes went from five to three.
The result was a bull stock market, which ran from 1987 to 2000.
But then came the war on terror, including Iraq and Afghanistan, not to mention Barack Obama’s income redistribution brigades. Government spending exploded and taxes of all kinds went up ... and up ... and up.
But that was then.
Now, tax reform is a Trump priority. Of course the Democrats want no part of cuts, especially for wealthy Americans and corporations, Bernie Sanders’s favorite people.
So what’s best for the country? Herewith is my vision.
There should be three brackets for individuals. If you make $50,000 or less each year, you pay a flat 10 percent. In this way, most Americans at least pay something. (If you make less than $30,000, you skate — you need the money more than the feds.)
Americans making $50k to $500,000 are taxed at 25 percent. If you make more than a half million, the rate is 33 percent.
Home mortgages and charitable giving can be deducted. So can 50 percent of your state taxes.
That’s it. Simple, efficient, fair.
The corporate tax drops to 20 percent, with only a few deductions. No more writing $500 dinners off or seats to Lakers games. Let the lobbyists have cage matches to decide what is specifically deductible, but there must be a monetary cap so Caesar can get rendered.
As for corporate money parked overseas, it is taxed at 10 percent if brought back in one year. Every year thereafter, the rate goes up 2 percent. If a company refuses to bring capital back, a yearly surcharge of 3 percent per year of profits overseas is to be paid to Washington.
The goal is to put corporate money to work in the USA. That would mean higher wages as businesses expand and more tax revenue as salaries go up.
As for Social Security and Medicare, the eligible age has to rise for Americans currently under 40. Maybe benefits begin at 68. Entitlement tax rates for individual payers should be frozen at current levels.
As to investment income, interest should be taxed at 10 percent. Short-term capital gains should be taxed at 20 percent; long-term (more than a year), 15 percent.
If that kind of tax reform happens, the U.S. economy will skyrocket.
And somewhere, Ronald Reagan knows it.