In an earlier article I posed the question does the Tax Code need a makeover? IRS expert Wayne Wayne Vinson seemed to agree and with 33 years of experience under his belt as a tax collector he is obviously more than qualified to talk on the subject!
While I enjoyed his treatise on the infamous 1040 form, it was most illuminating, I was still left in the dark 🙂 I decided to try a layman’s approach to the whole issue about how to simplify the whole tax code. Might it not be possible to implement a ‘sales tax’, essentially this would level the playing field. Warren Buffet and his secretary would be paying the same percentage of their income.
I was pretty sure that Wayne would not buy into the idea, but, as the saying goes, there are no stupid questions. Wayne had this to say:
Might a straight sales tax work? Probably not, because it would not generate the income the government must have. And a straight sales tax would affect everybody-everyone would pay. Keep in mind that millions of American adults now do not pay Federal income tax because their income is too low or because some portion of their income is exempt from Federal tax-like Social Security income. Millions of low income people would suffer real hardship
OK, I know when I am beaten. But I don’t like to go down without a fight. So a straight sales tax would not work. What might? There is a clear disparity between rich and poor. Wayne Vinson had this to say:
The disparity between rich and poor is not good for the country. We hear statistics like one third of the wealth of the country is owned by one percent of the people-those who make the most money. I favor increasing the top rate of income tax by 3 or 4 % on people with incomes over say, $400,000.The capital gains tax should also be capped at say, $100,000 per year.
Warren Buffet’s income is, I think, pretty much all from the sale of stock. The profit from stock held longer than one year and then sold is a long term capital gain, and is not taxed as ordinary income. A long term capital gain is taxed at a 15% rate. Obviously, Warren’s secretary’s wages are ordinary income and taxed at a rate higher than 15%.
I believe the theory of taxing long term capital gains at a relatively low rate, is that it stimulates investment. I say keep the 15% rate for the first $100,000 of capital gains and tax any capital gains over $100,000 as ordinary income. That should motivate ordinary people and guys like Warren Buffet alike.
What Wayne Vinson says makes a great deal of sense, but I doubt that anyone in Washington would have the guts to get behind such an initiative.
Wayne Vinson was an IRS agent for 33 years and the author of a real thriller, Tax Collectors and Other Sinners, the story of a psycho killing tax collectors. It is available at amazon.com as an E-book or soft cover.