Tuesday, June 1, 2010

Is it now time for a Middle-Class Flat Tax?

Baxk in 2007 Harold Ford Jr made such a proposal that would help Average Americans.

And with the Bush Tax Cuts set to expire, it maybe time for congress & the president to seriously look into implementing Ford's idea:

The Middle Class Flat Tax

Here's what Ford wrote in regards to the tax in 2007:

We ended the last century with America's economic might at its zenith, with Americans at their most optimistic, and with nearly all who endeavored to make the most of their opportunities and talents getting ahead in life. John F. Kennedy's declaration that a rising tide will lift all boats was alive and well.

Middle-class Americans generate little or no national savings. We've had four straight years of rising productivity and falling incomes. Many Americans are earning less, while the costs of a middle-class life have soared: In the last five years, college costs are up 50 percent, health care up 73 percent, and gasoline more than 100 percent. Rising housing costs have driven people farther and farther from their work.

These trends undermine our way of life because middle-class strength and growth represent the backbone of American life.

Our national political discussion about how to grow the middle class often becomes just that, a political discussion punctuated by harsh talk of "class warfare." In fact, class warfare is under way -- as billionaire Warren Buffet is fond of saying -- and the middle is not winning.

To address the challenges of the middle class, Democrats should advance an agenda that aims to do something loftier than just repeal the Bush tax cuts on millionaires. It should boost incentives for average Americans to increase savings and investments, and help them participate more fully in the upside of economic growth.

Toward that end, here are a few ideas that will help more people share in the rewards of the modern economy:

Middle-class flat tax: This is simple and fair: no middle-class family with an income of under $150,000 should ever pay an effective tax rate of more than 10 percent. If what they owe after calculating their taxes is more than 10 percent of their income, they won't have to pay a dime above 10 percent. If they owe less than 10 percent, they pay the lesser amount.

Permanent capital-gains tax cuts: Long-term capital gains tax rates now are between 5 percent and 15 percent. The rates are progressive: People in or below the 15 percent personal income tax bracket (which applies to married couples making $60,000) get the lower capital-gains rate. We should lower the capital-gains tax even further for people making up to $100,000 a year, provided they hold the asset for up to five years. Thus your tax would be 4 percent if you hold the asset for three years, 3 percent if you hold it for five years. This sliding scale for taxing capital gains will encourage investment and increase savings for a majority of Americans.

Cut corporate tax rates to 30 percent: America has one of the developed world's highest corporate tax rates. Let's change that by lowering the corporate tax rate from 35 to 30 percent -- with an even lower rate for new knowledge-based industries in energy technology, biotechnology and other science-rich sectors. We should follow House Ways and Means Chairman Charles Rangel's lead and cut the corporate tax rates from 35 percent to 30.5 percent.
All these proposals would be paid for by eliminating inefficient tax loopholes and wasteful corporate subsidies. We can also pay for it by modernizing the financing of Social Security and Medicare.

Let's strike a new covenant with millionaire Social Security recipients so those who don't need the benefits can go without them in exchange for favorable tax treatment on their long-term investments.

America is at its best when we are optimistic and focused on the future. In a 21st century global economy there will always be people who make spectacular sums of money. We should not impose impediments or penalties on people who do well. Instead, we should expand the opportunity for all Americans to benefit from the hope and promise of the 21st century economy. That's the American way.

I say its time for a total overhaul of our Tax System.

Harold Ford, Jr. is former chairman of the Democratic Leadership Council & congressman from Tennessee

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