Trump's Tax Proposal

These are the Trump rates, simplifying our current system of 7 brackets down to 4 brackets and doing away with many of the deductions, sort of a Reagan redux but less ambitious; Reagan's tax reform left us with 2 brackets.  Also, he plans to close loopholes and stick it to the hedge fund managers.  I like simplicity in the tax code.

 

As someone who would love nothing more than to abolish the IRS and repeal the 16th Amendment to the Constitution (the one that provides for an income tax), it will come as a surprise that I don't like the 0% bracket.  Everyone should pay some tax.  Of course, that is a political loser since so many people are already in the 0% bracket in the current tax system.  Yes, that is a bad thing.  If someone pays no income tax, he has no incentive to keep taxes from rising.  In fact, there is an incentive to have taxes on others rise in order that those not paying taxes can receive more generous government benefits.

 

Though my econ classes taught that an old tax is a good tax (because the market has already adapted to it), I disagree.  Income tax requires that the government know everyone's income.  What business is it of government how much a person makes?  What happened to that right to privacy?  It requires a massive and, as recent events have shown, corruptible bureaucracy.  This is why a national sales tax is preferable.  It taxes consumption, which will have the benefit of encouraging saving.  Much as state sales taxes exempt food items, a national sales tax could do the same.  The rich will pay much more because they will consume much more.  Better still, the government need not know how much anyone earns and no one need ever file a tax return.  Furthermore, Congress wouldn't be able to pit the rich against the poor against the middle class.  The very best of all would be the visibility of it on every transaction by every taxpayer; no more withholding that hides the cost of government; if it goes up a penny, everyone will know and want an explanation.  Yes, the tax accountants would hate it and I am sure they are even now lobbying against such a wicked idea.  Such a system would take too much power away from politicians so they will never willingly allow it to pass.

 

Trump's plan is better than what we have but not as good as Rand Paul's.  He would have a single tax rate of 14.5% with certain deductions.  This would be for everything.  Now that is simplicity.  The economy would love it though Congress would, as aforementioned, be apoplectic about the loss of power.  As stated in another blog, the tax code is a protection racket where the Congress provides special tax breaks to certain donors and lobbyists.  This is why the codes keeps getting convoluted and colossal.  So long as the 16th Amendment exists, that will forever be the case.