Written by Ron Rabatsky   

Tax Reform.

The tax codes are broken and need to be fixed right away. This is where it all starts.

Get rid of all corporate deductions and loopholes, an idea put forward by Ronald Reagan. The 1986 Tax Reform Act raised corporate taxes by $120 billion over five years and closed corporate tax loopholes worth about $300 billion over that same period. He stated “that everybody and every corporation pay their fair share”. Pursuing this same strategy today—will make our companies much more competitive in the international market and also much more likely to bring some jobs back to the U.S. without having to bust Unions or cut wages and benefits. The radical Ryandontcare proposal calls for this new rate to be 25%, but is this revenue neutral? Michael Steele has said that “trial and error” will tell. That is a bad business practice, and a huge gamble we as a country and a key cog in international business cannot afford to take.

The personal and business tax codes need to be simplified. The one deduction I would keep for personal taxes is the mortgage deduction for people’s primary residence, limited to $250,000 and adjusted to the economics of each region ($250,000 buys quite a spread in Nebraska, but puts one out in the desert around Los Angeles, for example). Too many homes are still in foreclosure, and too many mortgages are still underwater. We need the real estate market to recover so people can rely on their homes to help fund their retirements. Maintaining this deduction will also give buyers an incentive to buy houses, bringing recovery to the construction industry.

There would similarly be no deductions or loopholes in corporate taxes, with the exception of a deduction for Charitable contributions. These Charities need to be thoroughly reviewed so that they are really charity to help support the country and communities with clinics and art and extra schooling programs, and not for wealthy executives to use with their accountants to avoid paying taxes.

A CBO study is needed to determine the effect of eliminating all loopholes and deductions (except for the mortgage deduction and charitable contributions) in the corporate and individual tax codes so we can see how low the tax rates can go and remain revenue neutral.

Being revenue neutral is critical to not increasing our national debt while we lower taxes. Contrary to the wrongful opinion of some, we have seen over and over again that tax cuts do affect debt. We have seen that tax cuts for the very wealthy do not create jobs. The cost of the Bush tax break for the top 2% is generally advertised at $678 billion over the next 10 years.

One of the ways we can reduce our debt is by increasing taxes for those who have benefited the most from the tax codes of the past. A CBO study is necessary to determine the effect of eliminating all loopholes and deductions in both the Personal and Corporate Tax Codes so we can see how low they can go and remain revenue neutral.

Once we know the minimum tax rates which can be established, then we can go on to enacting policies which make sure that we have the necessary funding to keep conservatives from rolling back social safety net programs from The New Deal to The Great Society. We can improve our educational system, maintain support for women’s health care, improve our environment, guarantee the future of Social Security, improve health care, and maintain funding for all of the programs which go to restoring the high moral code that has made our country the leader of the free world—all the while reducing our crippling deficit.

If turning our ideals into policy requires it, we believe that American are willing to pay more than minimum tax rates to make this happen, especially when it comes to education.

But instead of talking about tax increases, why not just eliminate the entire Bush tax cuts? It is estimated by the CBO that extending all of these tax cuts will cost $2.8 trillion, not indexed for inflation. Considering inflation, debt service costs, and the AMT, eliminating all of the Bush tax cuts will save over $5 trillion over the next 10 years. That’s a serious piece of the debt just by itself. And these way conservatives cannot make claims about redistributing wealth, or any perceived slights to their wealthy patrons by favoring the 98%. If we propose a total elimination and the republicans want to fight for tax cuts for only the rich, that’s a fight we want to have (as President Obama might say).

If, for some reason, Congress wants to extend the Bush tax cuts, indexing needs to be done to set the levels where tax cuts change. The $250,000 number for defining where the “wealthy” starts does not have much validity, as it buys a lot less in SF and LA and Boston and NY than it does in Fargo, Duluth, Dallas, or Charlotte. Eliminating the Bush Tax Cuts completely will also eliminate partisan battles in Congress where all of the fighting and obfuscation and resulting stagnation take place. We need to get better service from our Congress, and eliminating points of partisan contention helps that.

We certainly need to remove tax breaks for corporations who move jobs from America to foreign countries.