John Cochrane, University of Chicago Booth School of Business Professor of Finance (among other positions), writing in a Wall Street Journal op-ed, proposed an Alternative Maximum Tax. He was on the right track, but he didn’t go far enough.
Here is a partial list of Federal taxes and tax-related limits on our weal which we currently pay:
- Income tax, to tune of $1.2 trillion as recently as 2007
- Cap on tax deferred savings: no more than $6,000 (in 2013) on Roth and Traditional IRAs, including catchup contributions if you’re a geezer; no more than $23,000 (in 2013) for 401(k)s, including catchup contributions
- Tax on dividend income—this money is taxed twice: once at the corporate level where this profit sharing is not allowed to be deducted from corporate income and once at the individual level where the money is taxed as high as 20% in 2013
- estate tax, as much as 40% on amounts over $5.25 million
- payroll tax, 7.65% of every paycheck, and both employer and employee pay this—a total of 15.3%
- Federal communications taxes
- Federal excise tax of 3%
- Federal Universal Service Cost Recovery tax of 15.5% of net interstate and international long distance tolls
- Federal personal transportation taxes
- gasoline tax, 18.4¢/gallon
- diesel tax, 24.4¢/gallon
- Obamacare taxes
- 0.9% additional payroll tax for Medicare, paid by employees of a certain wage
- 2.3% tax on top line revenue on medical equipment manufacturers
- medical expense personal income tax deduction only after expenses reach 10% of income
- surtax on investment income raises the top dividend income tax to 43.4% and the top capital gains tax rate to 23.8%
- Obamacare Individual Mandate—by order of the Court, this is a tax: both the premium paid for buying the government-approved policy and the…tax…for not buying health insurance
I do think at a certain point, we’ve been taxed enough.
Instead of an alternative max tax, it’s time simply to eliminate a bunch of taxes and lower the rates on the others. A straight flat tax, with no deductions, no credits, no nothing would be good. No redistributionist, no social engineering, froo-froo of any sort.