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Evaluating Tax Plans &Tax Proposals

10 Questions to Evaluate Tax Plans and Tax Proposals

Taxing is a simple concept:raise the money required to fund government activities without harming economic activity.

Taxes should be:

  • Simple
  • Transparent
  • Stable
  • Promote economic growth

The economists at the Tax Foundation have developed 10 basic questions,broken into four basic areas we can all use to decide whether a plan or proposal is a sound tax system:

How Does the Plan Affect Fairness and Neutrality?

1)      Does it make taxes less of a reason in decision-making and cut social engineering?

  • Taxes should play as small a role in the decision to buy a home,replace the windows on that home,build a factory,or hire new workers.
  • Our tax code incentivize taxpayers into all types of activities,from buying hybrid vehicles to investing in historic buildings.

2)   Does it cut special interest provisions or “loopholes,”and lower special interest’s ability to seek favors?

  • The estimated cost of tax “loopholes”is over $1 trillion per year,or ~7% of GDP.
  • Loopholes narrow the tax base,which drives tax rates up to raise the same revenue as a simpler system

3)    Does it tax everyone’s income at the same rate?

  • A single rate tax system is treats all Americans equally,no matter their age,occupation,income,or station in life.
  • The current personal income tax code taxes different incomes at different rates;higher incomes face higher rates than those with lower incomes.
  • Progressive rates are typically justified to make sure that wealthier taxpayers “pay their fair share,”but rates are set by political process not economic rationale

4)   Does it end the double and triple taxation of saving and investment?

  • Income should be taxed only once,and as close to the source as possible.
  • The current system taxes income multiple times,often at very high rates. For example:
    • Personal income is taxed once by the income tax,and a second time on the returns of any saved or invested post-tax income
    • Corporate profits are taxed first at the firm level,then a second time when they are distributed as dividends,or when they are realized as capital gains
    • The Estate tax is a second or third tax on a lifetime of the accumulated savings by business owners,farmers,and citizens

5)   Does it tax business income equally,regardless of organizational form?

  • Taxes should affect businesses should be taxed equally,regardless of size,how they are organized,or whether they are owned by an individual or a group of shareholders
  • A fair tax system would cut the incentives to arbitrage the tax system.

How Does the Plan Affect Compliance Costs and Complexity?

6)   Does it cut complexity and make the tax code easier to understand?

  • Complying with the federal income tax code costs taxpayers about $400 billion each year.
  • About 62 percent of all taxpayers use tax return preparers,but the percentage jumps ~73 percent for people claiming the earned income tax credit (EITC).
  • According to the Tax Foundation the complexity in the current personal income tax system costs $110 to $150 billion

7)   Does it improve certainty in the tax code?

  • People and businesses need a stable and economically sound tax system to make long-term plans and investments
  • Short-term tax provisions,such as tax holidays and stimulus measures,only make planning more unpredictable and investment riskier

How Does the Plan Affect Competitiveness and Growth?

8)   Does it make the U.S. more competitive and attractive for investment?

  • Most of the U.S. business partners have moved to a business tax model focused on lower tax rates and exemptions for foreign earnings that give resident multi-national firms a competitive edge
  • The U.S. is the only OECD country with a worldwide tax system and a corporate rate above 30%;our 39% rate is second only to Japan
  • As globalization continues capital will flow to places where costs,including tax costs,are low relative to market demand;a sound tax reform plan will position the U.S.to compete globally and attract investment

9)   Does it promote economic growth over redistribution?

  • The U.S has the most progressive income tax burden among leading industrialized nations:
    • The top 10% of U.S. taxpayers pay a larger share of total income tax than in any other country,including “high-tax”countries such as France,Italy,and Sweden.
    • Almost half of America’s tax filers pay less than 0% due to refundable credits for low-incomes,such as the EITC and the child credit
  • Progressive income taxes are harmful to long-term economic growth,because they preferentially undermine high-income earners,who drive economic growth by doing most of the saving,investing,risk-taking,and high-productivity labor

How Does the Plan Affect Tax Revenue?

10)  Does it improve revenue stability?

  • Whatever the size of government,the ideal tax system should raise a sufficient amount of revenue to fund government activities with the least amount of harm to the economy
  • A fiscally sound tax system should have a broad base that is not restricted to volatile sources of income.

Conclusion

The Tax Foundation developed these 10 questions to help taxpayers evaluate tax plans.  The questions focus on simplicity,transparency,neutrality,and stability,all issues that naturally increase prosperity:

  • Unnecessary complexity and a lack of transparency means most taxpayers do not understand how their taxes are related to the services they receive from government,a critical element of democracy
  • The lack of neutrality and stability is preventing long-term investment and economic growth.

 

VOW to Hire Heroes Act:The Flaws of Targeted Incentives

Veterans Day just passed.  As a veteran,I am proud of all the servicemen/women standing strong for our country and I appreciate both the contribution our military member’s service represents to our country.

On November 10th,a bill labeled the VOW to Hire Heroes Act passed the Senate by a margin of 95-0.  The VOW to Hire Heroes Act includes provisions to spur hiring of veterans;the unemployment rate among veterans is comparatively high at ~8% According to the Bureau of Labor Statistics.

The problem is,like many targeted incentive programs,the act is terribly flawed.  The law provides a tax credit to employers for hiring a veteran,but legislators failed to include a provision requiring businesses to increase net employment to receive the credit.

Therefore,employers could hire a veteran and lay one-off on the same day…and still receive a targeted credit without any net increase in either veteran…or overall employment.  This represents the critical flaw in targeted incentives:they are often poorly thought out,poorly implemented,and/or short-sighted in their impact.

What this country truly needs,and what veterans would benefit from as a whole,is a congress that forgoes gimmicks and political posturing to issue truly impactful tax policy reform to drive a sustainable,growing economy.  Meaningful tax reform would drive down unemployment for everyone,which serves veterans and our country.

by,Henry Wilson

Note:I joined the American Legion to ensure that my interests as a veteran are well represented.  The A.L. is a veterans-for-veterans organization with ~100 years of experience promoting smart policy for veterans,and our Pickens County A.L. Posts are incredibly active in the community.  Join today.

Duke Rate Increases

Two years ago Duke Energy held three public hearings about rate increases.  After the hearings, Duke was allowed to increase their rates.  At the time it had been 10 years since their last rate increase,and we were not ~4 years into a deep recession w/double-digit unemployment.  Now,two years later,Duke wants to raise their rates again.  I do not support a new rate increase,because we cannot afford it.

During the last Rate Increase hearings,many people testified before the Public Service Commission with reasons why Duke should not be allowed to increase their rates.  I attended two of the meetings, and it was clear that Duke had spokespersons speaking for them that were very ready to testify on behalf of the rate increase.

Of all the citizens that testified before the Public Service Commission only one asked them to allow the rate increase.

This year there are 4 public hearings, which all begin at 6:00 PM:

  • Oct 19,Spartanburg
  • Nov 8,Lancaster
  • Nov 9,Greenville
  • Nov 10,Anderson

The rule in 2009 was that a person could only speak at one hearing and was under oath.  Arrive early to sign up to speak.

I like most forms of energy that allow a hot cup of coffee and warm shower,but I testified against the rate increase during the last public comments sessions and I plan to testify against this increase.  I will be ready to justify my position,just like the Duke representatives!

We all have a commissioner for our district, look yours up at: http://www.psc.sc.gov/ and contact them by phone,email or in writing to discuss your position on this issue AND please attend one of the public comments sessions.

Mary Beth G.

SC Policy Council

The first time I heard Ashley Landess of the SC Policy Council speak it was refreshing to hear someone clearly and effectively supporting conservative values as they applied to our statesmen in Columbia.

Focusing on a handful of issues,the SC Policy Council  research resulted in support and passage of roll call voting,often called “Transparency.” With this measure,citizens can trace the voting record of their delegation in Columbia on significant issues which had not been the case prior to passage.  SC citizens can now be informed voters when election time comes.

The SC Policy Council also hired three veteran journalists and continues to recruit citizen journalists through the website,The Nerve.org.  People from all walks of life are now able make government accountable.  When the Swansea Town Council wanted a citizen to pay $10,000 for public documents she had requested,her plight was reported through this website exposing Town Council’s oppressive actions.  Another citizen reporter saved taxpayers millions of dollars when a bond measure was stopped by using The Nerve.

We are fortunate to be able to participate in exposing our local governments in this effective manner.

Mary Beth Green

 

I Stand for Freedom

In her introduction to Ben Robertson’s Red Hills and Cotton,Lacy K. Ford points to a pivotal part of Mr. Robertson’s earlier book where he describes watching pitched air battles from the white cliffs of Dover during the Battle of Britain.

Mr. Robertson said watching the air battles “changed me as an individual.  I lost my sense of personal fear…because I saw that what happened to me did not matter.  We counted as individuals only as we took our place in the procession of history.  It was not we who counted,it was what we stood for.  And,I knew now for what I was standingI was for freedom.  It was as simple as that…We were where we were and we had what we had because a whole line of people had been willing to die

In the next passage,Mrs. Lacy summarizes Mr. Robertson’s conviction and lesson from that experience,“I understood Valley Forge and Gettysburg at Dover…and I found it lifted a tremendous weight off your spirit to find yourself willing to give up your life if you have to…I don’t see now why I ever again should be afraid”.

Over the last 70 years,Mr. Robertson’s experience is reflected in the huge tests and rebounding strengths of the American people.

Like Mr. Robertson, I stand for Freedom.

Through my belief in Freedom,I believe in a culture of service,shared sacrifice,and an understanding that even in hard times that better times are not only possible,but within reach given the incredible gifts we share as an American people.

Through my belief in Freedom, I reject the idea that today’s hard times foreshadow darker,bleaker times that will overwhelm our power of will and undermine the strength of our united experience with the tests of time.  Through adversity grows strength.

Through my belief in Freedom,I reject the idea that our country is in decline.  I see opportunity for America to become stronger by taking the difficult steps to improve our competitive advantage in a changing world economy.  Renewal and change are the hallmarks of growth.

Through my belief in Freedom,I reject the idea that our society is in decline.  Many years ago,Socrates complained about the “youth of today” ,and it has been common through history to question the coming generations.  In America today,we have incredible opportunity in the generations that will lead us through the next age,because with discipline,common goals,and leadership Americans of any age achieve great things.

For you skeptics,I offer simple proof:the average age of our military is about 19,and in their youth they are role models of achievement,honor,and ability.

Through my belief in Freedom,I demand more of myself than to simply be angry,mad or bitter.  I exercise my belief in Freedom through acts of faith,community works,and activism.  To believe is to act.  Anything else and you are a spectator.

Through my belief in Freedom,I know that America is a great nation of involved citizens.  Citizens with skin in the game.  Our future lies with Americans that serve America,not only in the military,police,or fire services,but also by voluntarily building and developing the social support networks that insulate society from the eventualities of life.

Through my belief in Freedom,I reject the fatalism that has become a growing part of our national dialogue.  I reject fatalism because I am an American and our country needs each of us to do our part not just to recover from a recession,but to forge a path toward a better tomorrow.

Through my belief in Freedom, I know that loss can offer salvation.  I know that the wars in Iraq and Afghanistan have cost many lives,and as a veteran each life lost has pained me.  In the pain of loss,I see the returning veterans as a new generation of citizen soldiers that will view their country with the protective eye of a parent.  A parent concerned about their child’s future.  A parent willing to take tough,moral and bold positions to guide their child along a path toward opportunity and long-term security.

The sheer number of veterans participating in the recent state-wide elections,along with their positive,uplifting vision of the future is a small example of a tide of disciplined,principled veterans that will stand-up in the coming years to continue to serve their country at all levels of elected office nation-wide.  This cycle of renewal in government has followed all of America’s wars and the opportunity for new,strong leadership honors our fallen soldiers.

When I consider Mr. Robertson’s explanation of when and where he understood the meaning of Freedom,I think back to my own similar realization which occurred while standing at attention in the first nervous hours of Boot camp.  A Master Chief Petty Officer set all us recruits straight by telling us that regardless of what our recruiter had said “the Navy is not a training program!”

He simply said “The Navy serves our country.  Your country.  The Navy protects our Freedoms.  The Navy defends the Constitution of the United States.  Some of you might die doing it…”

In the Master Chief’s clear message I recognized the following:I stand for Freedom.  Freedom earned and Freedom justified by a commitment to Service. 

What do you stand for?

 

by Henry Wilson