Sunday, November 25, 2007
Fred Thompson Unveils Tax Plan
Republican Presidential candidate Fred Thompson today unveiled his Tax Relief and New Economic Growth plan. The centerpiece is the adoption of the plan developed by the House of Representatives Republican Study Committee to give taxpayers the option of remaining under the current, complex tax code or opting for a simplified, flat tax code:
The simplified tax code would contain two tax rates: 10% for joint filers on income of up to $100,000 ($50,000 for singles) and 25% on income above these amounts. The standard deduction would be more than doubled to $25,000 for joint filers and $12,500 for singles. The personal exemption amount would be increased to $3,500. Therefore, a family of 4 would be exempt from income tax on the first $39,000 of income. The simplified tax code would contain no other tax credits or deductions. It would also retain the 15% tax rate on capital gains and dividends. This approach would dramatically simplify taxes for tens of millions of Americans. In addition, the larger standard deduction and personal exemption amounts will still provide significant tax relief to families with children. This proposal would serve as a stepping-stone to fundamental tax reform.
Here are the seven elements of the Thompson tax plan:
- Permanently Extend the 2001 and 2003 Tax Cuts.
- Permanently Repeal the Death Tax.
- Repeal the Alternative Minimum Tax.
- Reduce the Corporate Tax Rate.
- Permanently Extend Small Business Expensing.
- Update and Simplify Depreciation Schedules.
- Expand Taxpayer Choice.
See the Thompson campaign press release. Press coverage:
https://taxprof.typepad.com/taxprof_blog/2007/11/fred-thompson-u.html
Comments
401K's are an end-around the current tax system. Under this plan, they might just become unnecessary.
'course, that's a layman's first response. Deeper analysis needed.
Posted by: Andrew | Nov 25, 2007 5:54:27 PM
Wonderful tax plan. Those who complain no doubt would protest if the federal government decreed cake and parades, but the wrong flavor of cake.
Posted by: Jake | Nov 25, 2007 5:51:13 PM
Flat taxes have worked in many countries. We can slowly phase it in here, or wait for more and more countries to adopt it.
Posted by: Aaron | Nov 25, 2007 5:36:05 PM
Fred already had my vote, this just reaffirms it. Now if we could just reduce the size of government (# of workers for starters) by about 50%...
Posted by: Peg C. | Nov 25, 2007 5:31:19 PM
The goverment overspends in direct proportion to the money it collects. Reduce the collection and the overspending will be reduced.
Posted by: Greg | Nov 25, 2007 4:32:56 PM
Regarding "paying for it", it's about time Federal, state and local governments experience cutbacks like we in the private sector endure.
My employer (a large well known company) just let go of one out of three managers and 10% of non-management employees, having done a similar downsizing just a couple of years ago. Expensive employees in particular were given opportunities to leave so that the overall cost of the company is significantly lower. Those of us who remained have been told to do more with less, or consider other professional options.
When is the last time any government organization riffed employees? Was forced to cut costs? Had its budgets slashed 20% or more (and not the fictional baseline budgeting "we cut 20% of our requested 200% expansion" nonsense)?
One out of two government employees is likely not needed given decades of bloat. In our county offices, I'm aware of dozens of useless management types who do little than report on what their employees did periodically.
It's our dollar. We demand you clean house and do more with less.
Posted by: redherkey | Nov 25, 2007 3:23:55 PM
George, I miss the days when I could do the 1040EZ. Enjoy it while you can, assuming you will ever actually get a job and buy a house.
Posted by: Hogarth | Nov 25, 2007 3:13:26 PM
This is a very good plan. Thompson is the only guy who seems to be giving the issues any thought. It is usually poison to give specifics since your opponents will pick on your plans weaknesses while not saying what they would do instead.
The best way to shrink government or at least to stave off the rate of increase is to starve it. Unfortunately we haven't been able to cut taxes enough to do that since the economy picks up with the lesser tax rates and thus generates more revenue. We need to keep cutting until the government has to start shrinking. Then we will have made true progress.
Posted by: Orwell | Nov 25, 2007 2:25:39 PM
Let them worry about "paying for it". This article doesn't go into the amount of revenue it could create but I'm worried more about my own wallet than Washington's. Maybe if we send them less of our money, they'll be forced to tighten their spending. If big government wants to keep growing, let's make it harder on them with less out of our pockets to pay for it.
Posted by: Don | Nov 25, 2007 2:13:51 PM
Chris: Thompson's pretty far ahead of all the other candidates just having the first part, don't grouse because he doesn't have the whole shebang at once.
daveg: Why would a consumption tax negate the problem of deciding between methods? Or are you advocating a wholesale change to consumption taxation?
Posted by: Math_Mage | Nov 25, 2007 1:58:11 PM
Why does everyone assume this is a tax cut?
Take the case of a husband and wife with no dependents, making $150K total. Assume 401k (20K), an FSA (5K), state income and property tax of (10K), and a 25K mortgage deduction. Added to that is a 7K personal exemption, leaving $83K AGI. Using the 2007 tax tables that comes out to a Federal Income Tax of about $13,600.
Under the simplified 10-25 plan, with NO DEDUCTIONS: 150K - 25K (base) - 7K (personal) leaves a AGI of 118K, for a tax of $14,500, or a $900 increase.
Wonder what happens to 401k plans under this. If non-deductible (as assumed here) the withdrawal should be untaxed, like a Roth.
Posted by: Kevin Murphy | Nov 25, 2007 1:40:57 PM
George, your arguments were old-hat when McGovern ran. Let's evolve the topic a bit, shall we?
Posted by: Russ | Nov 25, 2007 1:14:14 PM
There is no "paying for it". The Government isn't entitled to our tax money (whatever the amount), no matter how much you wish it to be so.
Posted by: Mark | Nov 25, 2007 1:09:36 PM
This tax plan alone would make me vote for Thompson regardless of any of his other positions. And I haven't been too exited about any of the GOP candidates. McCain - no way after McCain-Feingold. Paul -- too isolationist. Guiliani -- Good on crime, but 2 divorces, 3 marriages, blech. Romney -- Big question mark. If Thompson runs with this, guaranteed he'll lead the pack.
Posted by: Liz S. | Nov 25, 2007 1:01:55 PM
What all of these so called simplified tax proposals do not explain is where they propose to get the money to pay for it. Nice proposal Mr Thompson but who is going to pay the bill? Our grandchildren? If, for the sake of simplicity, we continue to drown our country in red ink and undermine our economy by expanding government debt than that simplicity comes at a dear price. I have three simple ideas:
1. Learn to do the forms people, they are not that hard or complicated.
2. If you cannot, hire a good accountant. It is cheaper than cutting bad societal checks that we will not be able to cash.
3. Calling all Republicans. Stop whining about the tax code! We have a lot more pressing problems than worrying about taxes. Get us out of Iraq, make us secure, get the economy back on track by enforcing regulations against uncontrolled speculation and fraudulent business practices, and start balancing the budjet.
Posted by: george | Nov 25, 2007 12:50:58 PM
Usual Republican plan. Borrow and spend. Borrow and spend.
Posted by: talboito | Nov 25, 2007 12:11:08 PM
This approach would dramatically simplify taxes for tens of millions of Americans.
And for millions of others, it would add an additional calculation to determine which method was cheaper. A consumption tax (the only truly fair tax, IMHO) would negate that.
Posted by: daveg | Nov 25, 2007 11:50:28 AM
Uhm... and all the tax cuts are balanced out how? Where are the increases, or where are the spending cuts? A tax plan is pretty freaking worthless without a spending plan, too.
Posted by: Chris | Nov 25, 2007 11:50:23 AM
401K's are an end-around the current tax system. Under this plan, they might just become unnecessary.
'course, that's a layman's first response. Deeper analysis needed.
Posted by: Andrew | Nov 25, 2007 6:01:49 PM