This proposal will achieve tax reductions, spending cuts and tax code simplification- some highlights are listed below:
–Reduce the number of personal income tax brackets from 7 to 4
–Reduce the corporate income tax rate to one flat rate
–Reduce long term capital gains income tax rates
–Abolish (AMT): Alternative Minimum Tax provision
–Reduce the Social Security payroll tax rate
–Eliminate the payroll tax cap on wages earned
–Raise the Medicare payroll tax rate to one single higher rate
–Adjust Social Security full benefit age qualification
–Cut federal spending by 1% across the board
I. THE PROBLEM:
“Total federal spending for fiscal year 2012 reached $3.6 trillion or 22.9percent the size of the entire U.S. economy. In the past 20 years, federal outlays have grown 71 percent faster than inflation. The average American household’s share of this spending is $29,691-roughly two thirds of median household income ($44,986). This relentless growth is projected to continue, pushing total government outlays to $5.5 trillion a decade from now, and to about 36 percent of gross domestic product (GDP) in the next 25 years. Federal entitlements are driving this spending growth, having increased from less than half of total federal outlays just 20 years ago to nearly 62 percent in 2012.
Three major programs—
Medicare, Medicaid, and Social Security—dominate in size and growth, soaking up about 44 percent of the budget.
All three programs are growing faster than inflation, and when joined with $1.7 trillion in new Obamacare spending—will drain about 18.5 percent of the nation’s total economic output by mid-century. Because that is about the historical annual average of total October 16, 2012 federal tax revenue, it means all other government programs—national defense, veterans health care, transportation, federal law enforcement, and others—would effectively have to be financed on borrowed money. Other entitlements continue growing as well. Anti-poverty programs have surged by 49 percent in just the past decade, even after adjusting for inflation. Spending for food stamps alone has more than tripled since 2002. Health programs, including Medicaid, have increased by 38 percent, and housing assistance by 48 percent. Although these entitlement programs have dominated the government’s spending growth, discretionary spending—spending authorized by annual appropriations bills—also has grown by 40 percent more than inflation, to $1.289 trillion. Spending on non-defense programs has grown 29 percent. These outlays peaked in 2010 due to the stimulus bill, but remain 7 percent higher than their prestimulus level of 2008. The result of this increasing deficit spending—which is financed by borrowing—is growing debt. If current policies continue, debt held by the public will approach 90 percent of total economic output by 2022, and will be twice the size of the entire economy 25 years from now.”[1]
Folks we have a spending problem; not a revenue problem. This is a real threat to American prosperity, American security and for future generations of Americans. It is essential that both parties face this challenge “head-on” and for once actually cut federal spending to manageable levels that the country can afford.
In this proposal (which represents a “good start”) I advocate cutting federal spending by essentially 1% (or approximately 35 billion dollars) for the first budget year after this law is passed and then freezing federal spending at that budget year’s level for two successive years. This approach allows for modest restraint in the near term and affords three years to contrive a long term plan to develop responsible federal budgets that will reduce our debt burden and return federal spending to affordable, manageable levels. This plan broadens the tax base, cuts tax rates, simplifies the tax-code, eliminates certain tax perks that can entice fraud and rewards “skin in the game”.
Specifics follow:
II. FEDERAL BUDGET CUTS TO SPENDING:
My formula for cutting federal spending is simple. Take total federal spending in years 2012, 2013 & 2014…
average that number and take 1% percent. Next reduce the federal spending in year-one of this law (my proposal)
by that dollar amount. Here is the math:
2012 Federal spending 3.6 Trillion dollars
2013 Federal spending 3.5 Trillion dollars
2014 Federal spending 3.5 Trillion dollars
3-Year Federal Avg. 3.53 Trillion dollars
1% Federal cut .0353T or 35.3 Billion dollars
The 35.3 billion dollars must be cut across the board evenly against each line-item federal expenditure in year one of this law. In years two and three the federal budget is frozen at this aggregate spending level; adjustments on how that money is spent is at the discretion of the government. Summary: this reduction in spending represents a real cut to federal spending by 1% and freezes spending for two additional years. It is a good start but more reforms will be necessary to ensure federal fiscal solvency in the future. Government must decrease so we the people can increase.
III. SOCIAL SECURITY & MEDICARE:
Promises made shall be promises kept. Long-term reforms to Social Security and Medicare will be necessary and both programs will require periodic updating in order to meet future changes in the country’s demographics. The programs cannot remain static and also solvent at the same time as the two conditions are not compatible.
Efficiencies must be found within the system and requirements for persons to qualify for disability benefits must be scrutinized and strengthened to protect against fraud and abuse. In my proposal I make the following changes:
–SOCIAL SECURITY& MEDICARE CONT.:
(1) Cut the payroll social security tax rate from 6.2% to 4.75%.
(2) Remove the wage-cap upon which social security taxes
are collected; all income is taxed.
(3) Raise the “full-benefit” age for persons born after 1960 from 67 to 69 yrs.
(4) Raise the “full-benefit” age for persons born after 1980 from 67 to 71 yrs.
(5) No “full-benefit” age changes for persons born before 1960.
(6) Exempt a beneficiary’s social security income from federal income tax for the first 12 years; the beneficiary’s 13 year income received from social security and following is subject to federal income tax.
( 7) The federal government must re-pay all monies borrowed from the Social Security trust fund with interest (market rates not to exceed 4%) within 12 years of passage of this law. Future borrowing from the trust fund is prohibited.
(8) Social Security COLA formula changed to (50%) (CPI-W) + (50%) (CPI-E)
Example if applied to 2016 (.5) (-.4%) + (.5) (.6%) = .1% COLA raise
(9) Raise Medicare payroll tax rate from 1.49% to 1.75% on all income.
IV. AFFORDABLE CARE ACT:
I am a strong advocate of repealing the “Affordable Care Act” otherwise known as “Obama-CARE”. The additional taxes associated with this law are burdensome and costly to every stakeholder in the economy. This program alone represents huge expansions in entitlement spending that we simply cannot afford. Unless it is abolished and/or the reformed-replaced with a more affordable option, the program will collapse under its own weight.
I have stated that while I support a full repeal I find this outcome to be very unlikely given the partisan dynamics in
congress; there simply are not enough votes as of this writing for repeal. Notwithstanding until and unless repeal
can happen it is vital to drive systemic reforms to this program in order to achieve fiscal relief. The Court has
spoken with respect to the constitutionality of this law and while I do not agree with their interpretation- it is the
law. Leaders must be problem-solvers; that is what the people expect from their representatives in Washington. I
will pledge a two-tracked strategy on Obama-CARE: repeal first while simultaneously pursuing cost-cutting
reforms. We do not as a party have the luxury of unlimited time to wait for repeal to happen all the while ignoring
the high cost of this mis-guided law. The issue must be attacked on both fronts; I am committed to this approach.
V. PERSONAL INCOME TAXES:
Current tax law prescribes 7 income tax brackets: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. Some
highlights under my proposal: abolish AMT, no “marriage penalty”, 7 brackets are reduced to 4, charitable
deductions move from “Schedule-A” to “Form 1040”, casualty losses move from “Schedule-A” to “Form 1040”
and itemized deductions claimed on “Schedule-A” are capped at $30,000.00.
The following specifics apply:
(1) Abolish AMT (Alternative Minimum Tax), period.
(2) Personal Income Tax Brackets & Rates:
Single Filer Tax Rates:
$0 TO $40K 9% Long term Cap gain tax 0% (greater than 3 yrs.)
$40K-69K 17% Long term Cap gain tax 5% (greater than 3 yrs.)
$69K-$250K 26% Long term Cap gain tax 15% (greater than 3 yrs.)
$250K-OR MORE 32.5% Long term Cap gain tax 17.5% (greater than 3 yrs.)
* U.S. company paid dividends taxed at maximum rate of 15% for us citizens regardless of effective tax bracket or
length of term held.
Married Joint-Filers’ Tax Rates:
$0 TO $80K 9% Long term Cap gain tax 0% (greater than 3 yrs.)
$80K-138K 17% Long term Cap gain tax 5% (greater than 3 yrs.)
$138K-$500K 26% Long term Cap gain tax 15% (greater than 3 yrs.)
$500K-OR MORE 32.5% Long term Cap gain tax 17.5% (greater than 3 yrs.)
* U.S. company paid dividends taxed at maximum rate of 15% for us citizens regardless of effective tax bracket or length of term held.
Short term capital gains (securities held less than 3 years) would be taxed at regular rates as delineated above.
Long term gains (securities held longer than 3 years) would be subject to long term capital gains tax rates prescribed above.
(3) Cap “Schedule-A” itemized deductions to $30,000.00.
(4) Eliminate section 179 and bonus 50% accelerated depreciation provisions.
(5) Exempt social security wages from U.S. federal income tax for the beneficiary’s first 12 years.
(6) Eliminate all refundable tax credits.
(7) Move certain charitable deductions directly to “Form 1040” (not subject to schedule-A limits). Taxpayers employed by, a benefactor of or affiliated with a private foundation that is claimed as a charitable deduction can only claim this deduction on “Schedule-A”.
(8) Move personal casualty losses directly to “Form 1040” (not subject to schedule-A limits).
These provisions simplify the code, help reduce fraud and cut rates. There are fewer “set-asides” and loop-holes. It rewards investment in U.S. companies; it makes sense.
VI. CORPORATE INCOME TAXES:
“The United States has the third highest general top marginal corporate income tax rate in the world at 39
percent, which is the same as Puerto Rico and is exceeded only by Chad and the United Arab Emirates. The worldwide average top corporate income tax rate (accounting for 173 countries and tax jurisdictions) is 22.9 percent, 29.8 percent weighted by GDP. By region, Europe has the lowest average corporate tax rate at 18.7 percent (26.1 percent weighted by GDP). Africa has the highest simple average at 28.77 percent. Larger, more industrialized countries tend to have higher corporate income tax rates than developing countries. The World-wide average corporate tax rate has declined since 2003 from 30 percent to 22.9 percent. [2] We must cut corporate income tax rates in order to keep and attract businesses in America. We should be the best place in the world to conduct business and commerce for a variety of reasons to include our corporate tax structure. The following specifics apply:
(1) Corporate Tax Rate Lowered from 39% to 22.5%.
(2) All net income reported is taxed; no exclusions.
VII. SUMMARY:
This proposal cuts real federal spending, cuts individual income tax rates, cuts corporate income tax rates, simplifies the tax code, eliminates gimmicks and fraud-prone loop-holes, broadens the tax base, freezes federal spending for two years and goes a long way towards ensuring Social Security and Medicare are well funded and solvent for many generations to come. Continuous improvement has to be congress’ marching orders in order to earn the confidence of the American people; government must- starting right now strive to become a worthy steward of the people’s money.
After reading several documents put forth by the “Tax Foundation” and other sources, I am persuaded that this type of plan is the only viable near term logical pathway to fiscal security and sound budgeting. According to the Tax Foundation, “…eight presidential candidates have released tax reform proposals that lower marginal tax rates significantly. Yet, each of these proposals is estimated to cost more than $500 billion over ten years, with some reducing federal revenues by over $10 trillion. These high deficit figures indicate that candidates have not proposed sufficiently ambitious measures to broaden the U.S. tax base.”[3]
There are many ideas out there and I am open to suggestions to improve upon what I have proposed today; I reserve the right to amend this proposal for the better. I am, however, not in favor of a national sales tax, a valueadded tax nor any kind of new tax that could possibly come along side of our current income-tax. I welcome your feedback and critique. Thanks for listening and have a blessed day.
Regards,
“Of the people, By the people & For the people”
Kevin F. White, Lt Col USAF Ret. (Republican)
People for Kevin F. White
