Frank Bernheisel: The View From Here
Frank Bernheisel
Frank Bernheisel
Posted 07.29.17
Just Outside Washington


Let the US Congress get to work on real tax reform

The Republicans seem to be done with health care. They failed to Repeal and Replace; they failed to Repeal, and Mitch McConnell has said: "it is time to move on." On the side, the Republicans have been sabotaging the Affordable Health Care program, which is the law of the land. And, you know, this is all President Obama's fault. Oh, well.

The next high priority item in the Republican governing agenda is Tax Reform. Given the Republican's track record on health care, I thought they could use some help on Tax Reform. First I thought, WE (As in "We the People" acting as stated in Article I, through the Congress) need some goals for Tax Reform: (1) raise revenue (2) simplify tax filings, (3) eliminate favorable treatments that some receive, (4) lower tax rates, and (5) make taxation more fair.

Raise Revenue is the first goal because the Constitution specifies it is the job of the Congress; and for years the Republicans have been crying about the national debt and the lack funds for infrastructure and vital services. The American Society of Civil Engineers estimates that the revenue shortfall for surface transportation (highways, bridges, commuter rail, transit), water and wastewater, electricity, airport and waterborne transportation is $144 billion each year for the next ten years.

To meet these Tax Reform goals, WE will need to adopt some specific language, in law, that makes specific changes and addresses specific issues. My first cut at this follows:

Individual Income Tax

    1. Lower tax rates across the entire income scale;
    2. Increase the progressivity of the tax rate structure, the more you make the more you pay;
    3. Eliminate the Alternative Minimum Tax;
    4. Tax all income at the same rate regardless of source. That includes wages; benefits like company paid health insurance; social security; pensions; dividends; capital gains, etc;
    5. Eliminate itemized deductions, everyone takes the standard deductions;
    6. Eliminate all deductions for charitable giving;
    7. Restrict home interest deduction to one, primary residence and cap the deduction to say $1 million;
    8. Consolidate retirement accounts (IRAs, etc.) and raise the cap individual contributions so that the self-employed can plan for an adequate retirement;
    9. Develop an on-line tax form in which the IRS pre-populates the data it has from employer withholding, past filings, etc.

    Corporate Income Tax
    1. Lower tax rates to the level of other developed countries;
    2. Establish a single corporate tax rate;
    3. Revise treatment of overseas income to be similar to other developed countries;
    4. Revise treatment of defined benefit retirement plans so they stay solvent including raising corporate insurance payments into the Pension Benefit Guaranty Corporation;
    5. Eliminate the deduction of debt interest payments;
    6. Eliminate all deductions for charitable giving;
    7. Eliminate business tax credits and other tax expenditures, these are a means of "picking winners and losers"; 8. Eliminate the tax deduction for lobbying and other political activities.
    9. Institute a financial transaction tax, 1 percent has been suggested by Representative Chaka Fattah of Pennsylvania;
    10. Increase federal oversight of the deduction of the cost of luxury goods, such as corporate jets, yachts, vacation retreats, multiple and expensive cars, etc.

    Federal Gas Tax
    1. Increase the federal gas tax immediately by $0.25 per gallon;
    2. Make the gas tax adjustable by inflation; and
    3. Increase the gas tax over five years to $0.50 per gallon.

    Carbon Tax
    1. Pass a carbon tax (more on this later).