Letter to the editor: Offer the rich an alternative to high taxes that helps U.S.Candidate slogans have pummeled us for the past year or so. “Taxes kill jobs,” “taxes stifle growth,” and so on. Neat slogans, endless repetition, but little supporting proof. Is that because the evidence is self-evident and need not be displayed, or is it because voters are incapable of understanding the evidence or the argument?
By: By Robert Brown, Jamestown, The Jamestown Sun
Candidate slogans have pummeled us for the past year or so. “Taxes kill jobs,” “taxes stifle growth,” and so on. Neat slogans, endless repetition, but little supporting proof. Is that because the evidence is self-evident and need not be displayed, or is it because voters are incapable of understanding the evidence or the argument?
It puzzles me that tax accountants have not spoken up on the consequences of increasing the income tax rate from 35 to 39.6 percent for those with an adjusted gross income over $250,000 per family. The AGI is gross income minus allowable deductions. The 4.6 percent increase applies only to the portion of AGI above $250,000.
The Internal Revenue Service states that this increase affects 2 percent of our taxpayers.
Actually, the proposed rate may be an involuntary stimulus program financed largely by this group who, as a matter of principle, will work hard for new deductions or to extend existing ones. The result for many small businesses would be a redirection of income to purchase goods or services such as a new vehicle, office equipment, upgraded health plan, etc. It is an immediately effective stimulus with no big government staffing — just greater IRS diligence next year.
Along with those campaign slogans we heard repeatedly that the Bush tax cuts are vital for investment and job creation. Yet, in spite of solid returns for banks and businesses, the actual result has been slow growth for the past few years.
According to media reports our national infrastructure — roads, bridges, water and sewer systems need serious help but many of the state, city and county budgets are at the breaking point and cannot respond.
Here is a suggestion to overcome investment hesitancy:
Step 1: restore the tax structure in force during the ’90s on the top 2 percent, on dividends, on estates and most importantly, close the tax loop holes.
Step 2: simultaneously offer the 2 percenters an option of paying 39.6 percent directly to the IRS or paying the present 35 percent rate plus an additional 4.6 percent as a purchase of newly created Federal Infrastructure Bonds. These bonds, with say a five-year maturity, would be targeted to that purpose only and feature tax-free interest, as do municipal bonds
The economic stimulus from these bonds would be huge, yielding new income taxes on labor and sales taxes on materials, equipment sales/rentals, and reducing unemployment payout.
Increased economic activity would offset bond interest payments. Bond retirement or long-term debt would be repaid during a restored economic condition. Incidentally, this program would replace the Obama stimulus proposal and be financed by U.S. money, not by treasury bonds sold to the Chinese.