With elections this year and as we get into the meat of tax season, it gets me thinking about our financial laws and what I would change if I were King. If I was in charge (as a King without needing anyone’s approval) these are a few of the financial matters I would address:
- Social Security
- I would not tax social security benefits for any recipient regardless of other income. Currently, you may owe tax on up to 85% of your social security income if you earn more than $25,000 (single) or $32,000 (joint). I think it is unfair to penalize (tax) people for making money while they are receiving social security. Your social security income is a return of the money you set aside from your paycheck and it was never meant to be taxed.
- While on on this topic, I would index the social security age mirroring it to life expectancy (increasing eligibility age as life expectancy increases). When the social security benefit was created during the Great Depression, life expectancy was 62. People collecting the benefit received it near the end of their life, generally when they were no longer able to work. Today, if you make it to age 65, men are expected to live 17 more years and woman 20. I would come up with a formula that would have a full benefit starting maybe ten years before the life expectancy of a 65 year old. So today, that would be age 72 for men and 75 for woman. Of course, this couldn’t be imposed on those currently close to or older than 65. Maybe it would be for people under 40 today. Without a program like this, the social security system will crumble as too many people will be collecting benefits compared to paying into it. More and more seniors are living past age 90. In fact, life insurance companies now routinely run their illustrations to age 120.
2. I would simplify the income tax system and use a flat tax. The more you earn the more income tax you pay. Treat people equally. You could say it is not fair that somebody that earns more is forced to pay more to fund government programs, but I’m sticking with the flat tax.
3. Capital Gains from investments held more than one year would not be taxed. I’m a capitalist and want to encourage investment as much as possible and a capital gains tax is an unnecessary hurdle to investment.
4. Interest and dividends would not be taxed either. Again the principal investment has already been subject to income tax once, there is not reason to tax it again.
5. I would get rid of the Required Minimum Distribution rule for IRAs. This is the rule that forces people over age of 70 1/2 to take money out (and pay ordinary income tax) of their IRA or 401k.
6. I would lower corporate income tax rates from 39% to 20% (the world average is 22.6%) to make our tax code much more competitive with countries around the world. Currently our corporate tax rate is the highest among the industrialized nations in the world.
I believe in lowering tax rates. Leaving more money in the pockets of individuals and businesses, would spur amazing economic growth and prosperity in our country for people at all income levels. Economic growth leads to more income tax for the government. I learned this in my college business and economics courses and have seen it work. If I had time as the King, I would also look into cutting wasted government programs (Government Waste). That’s for another blog.
Obviously I believe less government (from either party) is better and would rather have people and business keep much more of what they earn. I’m sure you have your own ideas of what you would like to see done regarding tax and financial matters. Mine is a partial list, but I believe it would be a good start.
What would be on your list?
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