January 23, 2015


Obama's Bad Economic Ideas (GLENN HUBBARD, JAN. 21, 2015, NY Times)

So how can we enhance growth, work and opportunity? Four steps can help get us there.

The first is to move to a simple business tax system, with a lower marginal tax rate and no special industry preferences. There would be no separate corporate tax, only a single business income tax for all businesses. Ideally, investment would be expensed, and its cost deducted in the year it was made, rather than deducted gradually. Businesses would be able to bring back overseas profits free of additional United States taxes. A one-time modest tax on current overseas earning could be used to help finance reform. Such a business income tax would encourage both growth and investment opportunities in the United States, while offering more jobs and higher wages to American workers.

The second step is to use the individual income tax to better reward work. The top tax rate for most Americans would be the same as the business income tax rate. To maintain progressivity, a surtax on wages would be collected on very high earners. To make work more attractive, low-income workers, including single workers, would receive an expanded earned-income tax credit and a tax credit to buy health insurance (as opposed to the more complex subsidies that exist under the Affordable Care Act). The earned-income tax credit would be phased out gradually.

Workers would have the choice of switching to options available under current law for employer-provided health insurance and a health savings account, or a tax deduction for their own health insurance and health savings account as incomes rise. Reductions in marginal tax rates to support work would be paid for by limits on tax deductions for more affluent households.

If the goal is growth, income, investments and savings, why would we tax business and income at all?  Tax consumption.

Posted by at January 23, 2015 11:24 AM

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