July 9, 2016

TAX WHAT YOU DON'T WANT:

Swapping the employer share of the payroll tax for a consumption tax (Howard Gleckman, TaxVox JULY 9, 2016, CS Monitor)

Would you be willing to swap a new, broad-based consumption tax for your employer's share of the Social Security and Medicare payroll tax? According to a new paper by my colleagues Jim Nunns and Joe Rosenberg, it would be a good trade for all but the highest income taxpayers. Not only that, but the change would be more economically efficient, unlikely to drive up prices, and relatively easy to administer. If it were set at a rate of 4.1 percent, the new consumption tax would raise the same amount of money as the employer share of the payroll tax.

Consumption taxes are in the air--House Speaker Paul Ryan and his GOP caucus proposed a variant (called a business cash flow tax) last month. Three GOP presidential hopefuls--senators Ted Cruz and Marco Rubio and former governor Jeb Bush--made a business-side consumption tax a key piece of their tax reform plans. And economists of all political stripes are exploring such levies.

Keep the payroll tax.  Cut corporate and income taxes.

Posted by at July 9, 2016 6:14 PM

  

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