Universal Exchange Tax (UET)
Implement a tiny Universal Exchange Tax of between 0.05% (50 cents per $1000) and 0.1% (1 dollar per $1000) on all automated financial transactions of any kind. With a tax base estimated to be in excess of $4 quadrillion, this tax should raise between $2 trillion (half the federal budget) and $4 trillion (the entire federal budget).
Not only would it eliminate the deficit, it would create a surplus large enough to eliminate or dramatically cut all other forms of taxation at both the federal and state levels.
NOTE: We do NOT take credit for coming up with this idea; it was found posted on an anonymous website. Also, economist Dr. Edgar Feige apparently thought of a similar idea back in 2005.
Individual Income Tax
Overhaul and simplify the federal tax code by repealing the regular income tax while retaining and tweaking the AMT to reflect the following:
Absolutely no income tax on those making less than $20,000 per year, period.
Ideally, no income tax on those making less than $50,000 per year.
With preferably the following marginal income tax brackets for individuals:
Below $20,000 -- no income tax
$20,000 to $50,000 -- 5%
$50,000 to $90,000 -- 10%
$90,000 to $150,000 -- 20%
$150,000 to $250,000 -- 30%
$250,000 to $1,000,000 -- 40%
$1,000,000 to $10,000,000 -- 50%
Over $10,000,000 -- 70%
With no loopholes and no deductions other than state/local taxes and a limited amount of charitable donations.
All forms of income would be taxed equally at the normal rates, including dividends and capital gains. For capital gains, the basis will be indexed to inflation (which is currently not the case). The exclusion for capital gains below $250,000 from home sales will remain as is.
NOTE: If the Universal Exchange Tax (UET) is implemented and set at a high enough rate, we could theoretically reduce the income tax to only 10% on each dollar above $100,000 and 50% on each dollar above $1 million. We propose a UET rate between 0.05% (50 cents per $1000) and 0.1% (1 dollar per $1000) on all transactions, which would most likely be high enough to do so.
Corporate Income Tax
Overhaul the tax code to eliminate all loopholes and favoritism of any kind. Then implement the following tax brackets for corporations:
Below $100,000 -- no income tax
$100,000 to $1,000,000 -- 10%
$1,000,000 to $10,000,000 -- 20%
$10,000,000 to $100,000,000 -- 35%
Over $100,000,000 -- 50%
Unlike the current law, only undistributed profits would be taxed. Amounts distributed as dividends would not be taxed at the corporate level, but would be taxed at the normal rate for the individual shareholders.
Tax US corporate foreign income as it is earned, rather than when the income is repatriated.
Payroll/FICA Taxes
Remove entirely the wage cap for Social Security portion of FICA tax, or raise it to a very high value (i.e. $10 million) for as long as we still have a FICA tax.
Reduce FICA tax rates to the lowest possible level needed for long-term solvency, or better yet eliminate FICA entirely (if an alternative funding source such as the UET is implemented). If no alternative source is present, then raise the FICA tax by an additional 0.2%.
Create a tiny, fixed "Occupational Privilege Tax (OPT)" of about $50 per year at the federal level, similar to what many states and localities do. Use it for general revenue.
Luxury Tax
Similar to a sales tax, 2% on all new items priced at $1000 or more, and only on the amount over $1000. For vehicles of any kind, the exemption amount would be $30,000. For new homes, the exemption amount would be $1 million. Items purchased overseas would be considered "new" and taxable upon entering the country if purchased within the past year or two.
Estate Tax
Resurrect the estate tax ("death tax"), this time as a progressive one. The exemption amount would be $3.5 million, then 45% up to $50 million, 55% up to $500 million, 65% up to $1 billion, and 75% for $1 billion and above.
Excise, Vice, and Other Taxes
Bring back the Superfund taxes that expired in 1995, and expand it to cover ALL harmful and toxic chemicals.
Increase and equalize the federal alcohol excise taxes to $22 per proof-gallon for all alcoholic beverages, equal to the liquor tax in 1991 adjusted for inflation. Microbrewers (those who produce less than 6 million barrels) would continue to pay the current rate of $0.58 per gallon ($18 per barrel) on the first 2 million barrels.
Equalize the federal tax for all tobacco products by weight to $1.55 per ounce, and tax the tobacco itself at the producer level. Set a national price floor for cigarettes of at least $5.00/pack to encourage low-tax states like Virginia to hike their own tobacco taxes.
If and when cannabis and/or any other currently illegal drugs are legalized, tax them as well. For example, cannabis could be taxed at a flat rate of $10-$50 per ounce, or perhaps set proportionally to potency (e.g. $5 per ounce, multiplied by percentage of THC).
Raise the gas tax by 1 cent/gal each week until it is $0.50/gal higher than it is today. "A Penny for Progress."
Enact the following "menu" of new taxes:
- coffee beans or grounds ($0.10/lb)
- pure caffeine ($1.00/lb)
- refined sugars ($0.10/lb)
- salt ($0.10/lb)
- hydrogenated fats ($1.00/lb)
Enact a financial crisis responsibility fee (leverage tax) of 0.15% of covered liabilities of so-called "too big to fail" banks with more than $50 billion in assets.
Enact a Wall Street Gaming Tax of 0.5% specifically on derivatives and any other exotic financial products designed primarily for the purpose of speculation or gambling.
Carbon Tax and Dividend
Additionally, implement a "carbon tax and dividend" on all fossil fuels similar to what Steve Stoft proposes in Carbonomics. Start it at $10/ton in the first year, and double it every year until it reaches $160/ton, then increase it further by 5% each year or the rate of inflation, whichever is greater. Refund 100% of the proceeds directly to We the People.
Do these things and we can easily pay for all of what Bernie proposes and then some. Especially if we also nationalize the Feral Reserve and make our currency interest-free and inflation-free, as well as zero-out the national debt via money creation as discussed in a previous post. And our proposal would be even simpler and more progressive than his proposals currently are.
And yes, progressive taxation is indeed the fairest method and best for the economy as a whole. History has shown that "trickle-down" voodoo economics does NOT work, period. Cutting taxes at the top tends to create short-term "sugar highs" in the economy, followed by painful crashes. All while worsening inequality, and too much inequality ultimately kills growth in the long run. As Robert Reich famously said, the economy exists to make our lives better. We don't exist to make the economy better.