The most surprising thing about the Republican tax reform package that President Donald J. Trump (R-New York) signed just before Christmas is how many good things it contained. I was quite shocked that the GOP actually accomplished something and took real risks.
The portions of the tax reform I liked were the abolition of the Obamacare health-insurance mandate (the worst public policy inflicted on the American people in generations) and lowering the corporate tax rate to 21%. Also great was the increase of the standard deduction to $12,200 for individuals and $24,000 for couples – smart move, taxing the poor is always dumb.
Those two measures might actually benefit average people and the greater economy, so I was surprised they got passed. I’ll be even more shocked if some future Congress does not eliminate them.
Some Needed Changes to the Tax Code
That being said there are a few changes I would like to see made to the tax reform scheme. They include:
- Keep the top tax bracket at 37% but lower it to $250,000 for individuals and $500,000 for couples.
- Lower the maximum mortgage interest deduction to $100,000.
- Cap charitable tax deductions at $1 million.
- Eliminate the cap on the FICA (Federal Insurance Contributions Insurance Act) or Social Security tax. Currently, it only applies to the first $127,200 a person makes.
- Apply the FICA to all individual income regardless of amount. Everybody from the waitress to Jeff Bezos; the world’s richest man, would pay the FICA on his or her entire income. The waitress would notice no change; Jeff would have to pay several hundred million dollars; or several billion dollars, in additional taxes a year.
- Increase FICA to 12.4% for all individual incomes over $200,000.
- Raise the Medicare tax to 3% and expand Medicare to cover all Americans.
- Apply the 3% Medicare tax to all individual, business, investment, and corporate income.
- The Medicare tax will double to 6% for all individual incomes over $200,000 and household incomes over $500,000.
- Collect a 1% luxury tax on all private vehicles, collectibles, jewelry, and clothing that costs more than $100,000.
- Collect a 2% luxury tax on all private vehicles, collectibles, jewelry, and clothing that costs more than $1 million.
- Collect a 5% luxury tax on all homes that cost more than $10 million.
- Collect a 1% luxury tax on all homes that cost more than $500,000.
- Collect a 2% luxury tax on all homes that cost more than $1 million.
- Collect a 1% tax on all bets and gambling winnings that exceed $100,000.
- Collect a 1% surcharge tax on all incomes that exceed $1 million.
- Collect a 5% surcharge tax on all individual incomes that exceed $10 million.
- Collect a 10% surcharge tax on all individual incomes that exceed $100 million
- Collect a 20% surcharge tax on individual incomes that exceed $1 billion.
- Collect a 1% federal sales tax on all candy and sweetened drinks such as soft drinks. Proceeds would go to Medicare.
- Collect a 5% federal marijuana tax – proceeds will go to Medicare.
- Collect a .5% federal sales tax on all online purchases.
- Exempt the first $100,000 in income from the federal income tax. Persons making less than that amount would only pay the FICA and Medicare taxes.
- Individual Incomes over $100,000 would be subject to a 5% federal income tax.
- Individual Incomes over $200,000 would be subject to a 10% income tax.
- The 37% federal income tax will kick in at $250,000.
- The first $24,000 in household income will be exempt from the FICA and Medicare taxes.
- The first $2,000 in Social Security income and all veterans’ pensions will be exempt from all federal income taxes.
- All individuals would be able to keep up to $250,000 in tax-deferred savings, money market or CD accounts.
- Set up a return-free income tax system in which the IRS simply bills Americans for what they owe. Those who object would have the right to appeal the IRS’s decision.
- Seriously consider adopting a border adjustment tax on all imports. This would offset the effects of free trade without suppressing international commerce.
Such measures would be more popular and get more votes than the mess recently passed by Republicans. They will also undoubtedly be far more popular than whatever tax-reform nightmare the Democrats attempt to inflict upon Americans in the near future.