Tax Compromise Proposal
The highly contested debate on income taxes center around the percent paid on income, those who pay no federal taxes on income and, we can’t forget, the rich tax payers who should pay more because they can. That is the crux of the income tax debate. The Republicans want to lower taxes on everyone, including the rich, and the Democrats want the rich to pay more then their fair share. Enter: the thought of income redistribution and the war rages. Based on my previous blog on schoolyard compromise and the urgent need for the country to raise more money, not to spend on current programs, but, instead to pay off the crippling debt… I have a simple solution. My plan is called the 8,5,8 plan.
- Establish an 8% value added tax for all consumers to pay.
- Add 5% to the existing tax rate on those taxpayers earning over 1.5 Million in earned income. Add another 5% to capital gains for those who earn more then 1.0 million in capital gains.
- Establish an 8 year sunset term for the VAT
This plan would devote all the additional taxes from the VAT and the 5% tax premiums to exclusively go to reducing the debt. The Congressional Research Service estimates that each one percent of a value-added tax would raise $50 billion.
Do the math…50 Billion x 8% x 8 years = 3.2 Trillion.
Let’s now calculate the additional revenue for the 5% premiums. According to the IRS, in 2008 there were 321,294 U.S. taxpayers with an adjusted gross income of $1,000,000 or more. For easy math let’s assume that there are 400,000 taxpayers now that have an average income of 3.0 million = 1.2 Trillion X 5% = 60 billion x 8 years =480 Billion.
Let’s assume there are 300,000 taxpayers who pay only capital gains on an average of 3 million = 900 Billion x 5% =45 Billion x 8 years= 360 Billion.
So…We have added to the treasury over the next 8 years an amount equal to 4.04 Trillion to pay off a portion of the national debt. Incidentally, the amount of debt added since 2009 increased by 4.5 trillion.
The need to reduce debt now is critical. In order to make my plan work, the country needs to adopt a balanced budget amendment immediately and, in the spirit of compromise, we will start my 858 plan when the balanced budget amendment is passed! Again, “To compromise is for the Republican and Democratic Party to agree on an issue where each party gives up part of their demand.”