All income under the Busler Single Rate tax plan is treated the same no matter how it is earned.
WASHINGTON, November 16, 2015 – Since the last Republican debate on November 10 when tax plans were discussed by the candidates, the New York Times has published a number of opinions noting that the plans are not fair, are more complicated than the candidates admit, will cause large losses in tax revenue for various reasons and are really just tax cuts for the wealthy. If the NYT examined the Busler Single Rate Tax plan, none of those criticisms could be made.
Assuming that the goal of tax policy is to fairly and easily raise sufficient tax revenue to cover government expenses, without causing market distortions, the Busler Single Rate tax plan achieves those goals. And if it is determined that the plan is not completely fair, then it should be deemed to be the “least unfair” plan.
The Busler Single Rate tax plan taxes all income above a livable minimum (twice the poverty rate) at 15%. All income is treated the same no matter how it is earned. This includes wages and salaries, rent, interest, profit, dividends and capital gains. There are no deductions for anything. Corporations also pay 15%, but they pay the entire 12.4% Social Security Tax.
This plan treats every American exactly the same with no special loopholes given to anyone for any reason. There are no market distortions caused by tax policy. The entire code will be very short, although it will be a law which requires lawyers to write the bill. Lawyers tend to be wordy.
Tax liability is simple to calculate: add up all income for the year, subtract the livable minimum based on household size, multiple the balance by 15% and that’s what is owed.
In a November 11 editor’s blog, the NYT noted that the concept of everybody paying the same proportion is an “extraordinary simplistic notion of fairness.” Ben Carson pointed out that no matter how much is earned each American pays exactly the same proportion. To him, and most of us, that seems fair. The current progressive system means that high achievers pay disproportionately more.
They further note that the plans offered don’t generate sufficient revenue. The Busler Single Rate Tax plan is revenue neutral in the very short term and increases revenue in the longer term because the plan significantly increases economic growth.
Last year the personal federal income tax generated $1.5 trillion. Assuming GDP is $18 trillion, resulting in $15 trillion in personal income, then after subtracting $5 trillion for livable minimums, $10 trillion would be taxable. Multiple that by 15% and it generates $1.5 trillion.
In a November 15 column, the NYT times criticized Carly Fiorina for saying she could reduce the tax code to three pages. That length may be possible, subject to the lawyers writing the Busler Single rate Tax plan legislation.
There was also a criticism from a Columbia University Law Professor who noted the basis of Fiorina’s plan would allow employers to pay workers in methods other than money so the employee would avoid a tax liability. Under the Busler plan anything received as income or in place of income would be treated as income, at fair market value, and subject to the 15% rate.
The NYT was critical of abolishing the charitable deduction, claiming it would devastate charities. A similar argument was made in the 1980’s when the top income tax bracket was eventually reduced from 70% to 28%. In fact, the opposite occurred and charitable contributions increased as Americans, with much more disposable income, donated because of compassion rather than for tax reasons.
While many argue this is just a tax cut for the wealthy, the reality is that the wealthy will pay more tax dollars. Under the current system the top federal income tax rate is almost 40%. The wealthy hire very knowledgeable tax lawyers and tax accountants who find a series of loopholes to reduce their tax liability to very low rates.
Recall during the 2012 presidential election, Warren Buffet complained that he paid only a 13% tax rate on the $42 million he earned that year, while his secretary paid a 20% rate. This is not fair, he said. And he is right. All Americans should pay the same rate above a livable minimum. The 15% rate will be an increase for many of the wealthy.
The Times also criticized Ted Cruz and Marco Rubio for suggesting a Value Added Tax which essentially results in a national sales tax. Although not mentioned in the column, they may have the same issue with Mike Huckabee and his “fair” tax, which is a national sales tax. They are right on this one, since any tax on consumption is regressive and therefore places an undue burden on the lowest income earners. The Busler plan taxes income not consumption.
The Times does suggest that the tax code can become simpler and the IRS can complete the tax form for most people. Under the Busler tax liability is a simple calculation that anyone can do by themselves.
The Times concludes that the current flat tax ideas are a “bizarre and terrible idea” and the “country is worse off for it.” The Busler Single Rate Tax plan is simple, fair, raises sufficient revenue, is easy to administer, causes no market distortions, eliminates tax based inefficient decision-making and accelerates economic growth.
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