CommenTerry

Tax Reform, My Way

We need real tax reform and we need it now. Previous attempts have been made at tax reform, but they have only provided band-aid solutions that have still left us with too many quirks, complication, and read tape. There are several things Congress could do to simply the tax system and benefit the taxpayers and federal budget at the same time.

First, I would institute a simple two-tiered tax on earnings and passive income (interest, dividends, capital gains, etc.) that are not in a tax-sheltered account. They would be treated equally and no distinction would be made between long-term and short-term capital gains. Individuals (whether married or not) who have taxable earnings and passive income of less than $30,000 would pay no federal taxes. Amounts equal to or greater than $30,000 but less than $200,000 would be taxed at 25%. Amounts equal to or greater than $200,000 would be taxed at 30%.

Second, I would get rid of the quarterly estimated tax requirements and associated penalties for everyone except those who are habitually late (after April 15) filing their return and/or paying their taxes. Few things in our tax system are more complicated than trying to figure whether or not you paid enough estimated taxes, whether they were paid on time, and/or the penalty for not doing so. Even the IRS acknowledges how complicated it is to figure out this penalty, as they offer to calculate it for you.

Third, I would eliminate the annual limits on capital losses as well as those special “wash sale” rules, which further restrict the writing off of capital losses. The reporting of capital gains has never been limited and neither should capital losses. “Wash sale” rules restrict the writing off of capital losses for stocks and mutual funds sold at loss but bought back again within 30 days. As I mentioned in a previous writing, these rules can get very complicated, with those for figuring the estimated tax penalty being the only ones that are more difficult to understand.

Fourth, I would keep personal exemptions and child tax credits intact but eliminate all deductions except for charitable contributions and mortgage interest on one’s primary dwelling. There would be no standard deduction or Earned Income Tax Credit.

Fifth, I would eliminate the Alternative Minimum Tax (AMT). This is probably the third most complicated item in the tax law. It was designed to make sure the rich pay at least some taxes, but the elimination of most deductions would accomplish this goal now by taking away most of their shelters.

Sixth, I would make some adjustments to inheritance and gift taxes. For the most part, they would not be treated any differently than ordinary income. However, there would be some exceptions. Inheritances and gifts passed from one spouse to another would be exempt from federal taxes. Inheritances of family farms and other legitimate businesses by any family member from another would not be taxable.

These changes would benefit individuals by making the tax system less complicated for everyone and taking a smaller percentage of income from most taxpayers (especially the middle class). The government would benefit from collecting more taxes because more people would be working and receiving higher incomes (as this system would encourage more investment in infrastructure). Also, more people would be encouraged to make more taxable passive income. The current system discourages taxable passive income. In addition, the extremely wealthy would have fewer options for sheltering their income.

Who Really Benefits?

I'm a bit cynical about those government-produced ads that urge us to plan for our long-term healthcare (an obvious euphemism for the time we'll need to go to a nursing home). I'm suspicious because these ads never elaborate on just how this long-term planning actually benefits us or what advantage it would give us over someone on Medicaid. I can't help suspecting that the government would be the main beneficiary. That's because, if I sock away enough money for my long-term healthcare, l would be able to pay for all or almost all of it myself. I'd be one less person the government would have to put on Medicaid.

Shouldn't Separation of Church and State Work Both Ways?

Any time someone tries introduce even the slightest amount of religion into any government-sponsored institution, the ACLU and other liberal anti-religious groups will scream bloody murder. They will cite the imaginary wall that they believe the U.S. Constitution has built between church and state. They call it separation of church and state. But apparently, in their minds, it only works one way, i.e., it protects the state from the church, but it doesn't protect the church from the state.

A couple of year ago, the Virginia legislature considered a law that would have required pastors to notify social services of suspected child abuse. Why should the state get away with forcing a pastor do anything just because he or she is pastor? Yet I never heard a single peep out of any the groups that are always so worried about separation of church and state. I think it's high time the whole separation of church and state argument starts working both ways. Turnabout is fair play.

How Could It Not Be Censorship?

Some people will argue that, since the FCC doesn't physically block any broadcast (it fines TV and radio broadcasters for indecency after the fact), it does not practice censorship. It doesn't? How could it not be censorship? Whether or not you agree with what the FCC is commissioned to do by Congress, it should be clear that it is indeed censorship.

Here's an illustration. Let's suppose an armed man broke into your house and pointed a gun at you. Now let's suppose he drew a line on the floor and then said he would not physically stop you from crossing that line. However, he also says he will shoot you after you cross it. Now, would you consider his actions to be coercion? You're darn right you would. To say that the FCC's actions do not constitute censorship would be tantamount to saying that the armed man's actions from this example do not constitute coercion!

A Silly Separation-of-Church-and-State Argument

One of the most fallacious arguments made by the radical "separation of church and state" lobby is that when or if a religion other than Christianity becomes the majority in the U.S., its followers will remember how they were treated. First of all, if another religion ever becomes the majority in the U.S., we'd already be in big trouble and I'd be looking for somewhere else to live. Secondly, do you really think a radical Muslim majority, for example, would even consider how the Christians treated them when determining whether or not to set up a theocracy? No, they would turn the U.S. into an Islamic state without even thinking twice.

The 54 States of America?

Many people don't realize this, but we had a situation in 1995 in which the United States was nearly on its way to having four additional states. That year, the province of Quebec narrowly rejected a ballot measure to secede from Canada. Had the measure passed, it would have resulted not only in the independence of Quebec but also the isolation of the four Canadian Maritime Provinces from the rest of the country (since they are all east of Quebec while the remainder of the country is west of that province). Anyway, it is likely that those provinces - Nova Scotia, Newfoundland, Prince Edward Island, and New Brunswick - would have broken off from Canada and eventually petitioned for entry into the United States.

Another Big-Government Imposition

Recently, an unwed couple in Kansas successfully sued a landlord for not not renting them a house. The landlord and his wife are Christians who whose moral standards would not allow them to rent to a couple living in sin. Of course, one of the hazards of renting out a house or an apartment is the fact that the government will not not allow you to rent to whomever you wish and will often force you to compromise your moral and religious standards. We will never have true freedom in this country until this unjust imposition on private property rights is abolished.

Virginia Should Try this Compromise

A new law that went into effect in Virginia beginning in July has sparked widespread controversy. The law, enacted to fund Virginia's roads and highway system, calls for steep financial penalties for those being convicted of traffic violations, ranging from simple speeding to drunk driving to vehicular homicide. These civil fines are levied for three consecutive years following the convictions and would cost the violators (in addition to their normal fines and/or jail sentences) up to $2000 per year.

However, many Virginians do not think this law is fair, especially since it does not affect out-of-state drivers who use Virginia's roads. They also feel that it is too harsh on people who just slip up every once in a while. Others worry that this is just another form of taxation disguised as fines.

Therefore, I offer the following compromise: Have the law apply only to those who are convicted of more than two traffic violations in a calendar year. Have it apply to all of these habitual violators, whether in-state or not.  Then the fee they pay over the following three years would be based on the total number of points they incurred with those violations. Each point would cost them $100 for each of next three calendar years. For example, if someone had three traffic convictions in 2007, incurring 10 points in process, they would have to pay $1000 per year in 2008, 2009, and 2010.

A Gasoline Tax as a User's Fee?

A recent editorial that appeared in my local newspaper touted the idea of utilizing a gasoline tax as a user's fee to fund construction and maintenance of roads in the Commonwealth of Virginia. However, I cannot understand why any otherwise-intelligent person would consider a gasoline tax to be a fee for the use of roads. In the sense that one wanted to look at it as a user’s fee, it could correctly be stated that it is a fee for the use of gasoline. However, it is clearly not a fee for the use of roads. A true road user’s fee would result in all users of given roads paying approximately the same amount to use them -- and paying only when they use such roads. A toll would be an excellent example of a true user’s fee for a road or a collection thereof.

A gasoline tax does not meet this criterion. For one thing, gas mileage varies wildly. Those who drive small, fuel-efficient automobiles would pay considerably less to use Virginia’s roads than those who drive luxury cars or SUVs. If someone is getting twice the gas mileage that I’m getting, I would theoretically be paying two cents to use Virginia's roads for every one cent they are paying for the use of the same. Furthermore, not all the gasoline purchased in Virginia is used to navigate Virginia’s roads. For example, what if I filled up my tank in Richmond and then headed straight to Florida? I would obviously burn most of that gas outside the commonwealth. Then again, someone else might fill up just across the border in North Carolina and then drive into Virginia and burn it all here. Now, which part of “a gasoline tax is not a user’s fee for roads” do people still not understand?

Freedom: Demand More!

I think the best way to celebrate this Independence Day is to reflect on the freedom we have as Americans and then demand more. There's always room for improvement in the quantity and quality of liberty the people of any given nation have, even if that nation is the United States of America. We should let freedom ring even louder today by asking for absolute freedom of speech and absolute property rights.

Absolute freedom of speech would mean the abolition of censorship, except for situations in which the failure to censor would place human lives in imminent danger. Otherwise, people would be free to say, display, hear, and view what they wanted without the fear of government intervention and/or legal action. We could retire the FCC and any other person or entity whose job it is to curb the speech or expression of free people. Sure, some people would have to learn how to tolerate being offended every now and then. Also, parents would have to take an active role in controlling what their children hear and see, instead of relying on government babysitters, as they do now.

Absolute property rights would mean property owners would have the right to actually do what they want with their own property. What a concept! The only exception would be that they would have to comply with reasonable safety standards determined by local municipalities. Property owners would no longer have to worry about eminent domain or restrictions such as land use zoning or limits on how close to their property line they could build structures. They wouldn't have to worry about someone else's definition of an "eyesore." They wouldn't have to worry about some civic group forcing them to preserve a "historic" structure on their property. Also, environmentalists would have to keep their hands off private property, no matter how many rare insects, fish, birds, and/or trees make it their home.   

Have a happy and safe Fourth of July!