In Newsweek, Keith Libbey and Evan Thomas think they've found a way to solve the nation's taxation woes. We can, they insist, lower taxes, simplify the tax code, increase revenue, and get the IRS out of everyone's hair all at once. It's all part of their plan, which combines ideas from both sides of the political spectrum. They published it a few weeks ago, and, thanks to recent political focus on taxation, is now getting more attention.
"The place to start," they declare, "is to cut almost everyone's payroll and income taxes by half." People making $2 million a year and above would still be taxed at 30 percent.
All individual taxes would be collected through company withholding taxes on compensation (salary, bonus, deferred payments, etc.) and investment income (dividends, interest, capital gains, rents) to individuals. ... The rate on investment income would be 15 percent. The result: individuals would not have to file tax returns, most Americans would take home more pay than they do now, the tax base would be broadened, and the AMT--the alternative minimum tax, which sweeps up more taxpayers every year--would be eliminated.
Of course, the revenue lost from cutting taxes "has to come from someplace else," they admit. It will come from getting rid of tax dodges and deductions, which currently siphon off "between a fifth and a quarter of all revenue." Then slap on a 12 percent tax on consumer goods and you're done. Though a consumption tax has its drawbacks, they point out that "many economists" think it would help "in the long run" by encouraging "saving and investing over consumption and debt."
This plan, they say, offers "a simple way to boost revenue that is fair, open, and progressive--and gets the IRS out of people's lives." Though the "basic version" of this Clean Slate Plan is "revenue-neutral," it is easy to adjust to increase revenue or boost the economy, they argue. Slight adjustments could be made for the poor and the elderly with the VAT, and 401(k) pretax exemptions and the like could stay, so long as the tax code stayed relatively simple. As a plus, they say, their plan could even be viewed as more progressive than our current one, because it lets the rich get away with less--there are fewer loopholes.
This article is from the archive of our partner The Wire.