Perry’s Tax Reform Plans

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Republican presidential candidate, Rick Perry, is trying to set himself apart from the other candidates with his bold tax reform talk.  He wants to dramatically reduce taxes, and with that would come deep cuts in government funding and government programs.  Key points of Perry’s plan:

  1. eliminate taxes on Social Security benefits
  2. eliminate estate taxes
  3. eliminate taxes on dividends & capital gains
  4. popular deductions remain in tact
  5. $12,500 personal exemption plus $12,500 for each dependent

Under Perry’s plan, we would get to chose between paying a 20% flat tax or paying under the current system.  Those who oppose this proposal say that the wealthy taxpayers in our country would chose the flat tax and enjoy huge savings, everyone else would stick with the current tax system and pay what they are paying now, and there wouldn’t be near enough revenue for the government to continue operating.

Tax Reform Buzz

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Some great soundbites in the news today:

If you have a dramatic change in the tax structure at the federal level it’s going to upset the apple cart in every single state in one way or other, so it’s a tsunami.

~ Joan Wagnon, FedTax.net

GOP presidential hopefuls each have their own idea of what needs to be changed about the current tax system.  And each claims to know the effect their changes would have, whether it be tax relieffor the middle class or if there will be sufficient revenues to run the government.  But according to Wagnon, they’re just guessing (or hoping):

The trickiest question of any proposal is whether you are going to be able to replace all of the income tax and make up the same amount of revenue. It’s impossible to know.

Politicians also talk of abolishing the tax code and eliminating the IRS, but is this realistic?

You’re still going to have a white building with lawyers and accountants. They’re still going to do audits and there’s still going to be complexity to it.

~ Matt Schlapp, Cove Strategies

World Series of Tax Reform

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On October 22, 1986, President Ronald Reagan signed into law the most sweeping tax reform in United States history.  At the conclusion of his speech he said:

I feel like we’ve just played the World Series of tax reform, and the American people won.

Its been 25 years, so maybe we’re due for another win.  The consensus these days is that the tax code is a mess and we need to start over again.  But there are nearly as many opinions as there are pages to the code.  Here are just a few.

Is There Tax Reform on the Horizon?

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Today the House passed the debt limit deal and tomorrow it is expected to be approved by the Senate. A 12-member panel will then be called and charged with the task of locating $1.5 trillion in budget savings by late November. Inevitably some of the panel members will want to overhaul the tax code to achieve this task. This would be a huge deal as the last comprehensive tax reform occurred back in 1986.

The tax deal itself does not look like it would raise taxes on corporations or the wealthy. However, the special committee could raise money by getting rid of their tax loopholes and subsidies. Rest assured, there will be no tax relief for the wealthy. If the committee doesn’t clean up the tax code, then President Obama has said he will be allowing the Bush tax cuts to expire in 2013. See the full story in Reuters.

Presidential Candidate Bachmann wants to “Deep-Six” the Tax Code

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Not familiar with the term? It means that she wants to get rid of it. Throw it out.  Bury it at sea. And that’s not all she would like to do if she were elected to the presidency. She is also interested in a one-year moratorium on federal income taxes to try to fuel the economy. These are bold ideas. Could be just campaign rhetoric.

Earlier in her career Bachmann worked as an attorney for the US Treasury Dept. representing the IRS against people who underpaid or failed to pay their taxes.

One thing is for sure, if the 3.8 million word tax code were really buried at sea, it would sink like a rock.