The key to financing National Health Care, solving Social Security's long term funding problem and going to college free of charge is to lower taxes. As incredible as this sounds, it's true. This can be accomplished by eliminating tax deductions and a simple restructuring of the tax code.

Eliminating the tax deduction is the key to tax reform. This is because tax deductions are the main cause of tax fraud and the inequities associated with our current tax system. It is the tax deduction that allows the tax code to favor some segments of society over others, decrease the amount of revenue the government needs to properly fund the programs our society deems important, and leads directly to waste, fraud and corruption.

No serious attempt at tax reform can take place without addressing this problem. Therefore, abolishing the tax deduction is the first and most important reform that must be implemented. When combined with a simple restructuring of the tax code, a new tax system is created that treats everyone equally, and when everyone is treated equally three things happen. First, the current codes ability to favor some segments of society over others is eliminated. Second, tax fraud will decrease. And third, government revenue will increase.

For example, in order to increase tax revenue from corporations we must first change the tax structure that allows some businesses to reduce, delay or eliminate the taxes owed. Currently, corporations subtract from their gross revenues those deductions found in the tax code and labels the resulting number the net profit. This figure is then used as the basis for determining the taxes owed. The first $50,000.00 of net profit is taxed at 15% and above $50,000.00 of net profit the tax increases up to 35%. This creates a very strong incentive to add as many deductions to the tax code as possible in order to reduce the net profit so that the corresponding tax liability is lowered. By definition then, the deductions found in the tax code allow corporations to reduce, delay or eliminate the taxes owed. This decreases the amount of revenue that should be going to the government.

The solution is to replace the tax on net profits with a small tax on gross revenue. By definition, the tax on gross revenue means that there are no deductions. This eliminates the ability of corporations to use the deductions found in the current tax code to reduce, delay or eliminate the taxes owed. When the tax on net profits is replaced with the small tax on gross revenue, government revenue increases because all corporations are now paying taxes and all corporations are paying their fair share of taxes. (For complete details, please go to my website.)

The small tax on gross revenue also produces a much lower corporate tax liability. Under my new system, the business tax corporations will now be required to pay is so small that employer payroll taxes can be expanded to include National Health Care. The combination of the small tax on gross revenues and the expanded payroll tax for National Health Care creates an overall tax liability lower than what corporations are currently required to pay. This lower tax liability will be the basis for corporate acceptance of their expanded payroll obligation.

These same principles apply to individual taxes. When deductions are eliminated, the ability of individuals to reduce, delay or eliminate the taxes owed comes to an end. This means that the scenario that now occurs, where wealthy individuals end up paying less in taxes than poorer individuals, is no longer possible. This translates to increased revenue for the government.

The elimination of tax deductions also means an end to personal income taxes. The elimination of income taxes presents as a tax reduction and this tax reduction allows for the expansion of payroll taxes to include National Health Care and Public Education. These new payroll taxes will be readily accepted because individuals will be paying less in overall taxes than they currently are. Because people are paying less in overall taxes and yet receiving more benefits, most people will wonder why these reforms had not been implemented before.

Paradoxically, even though individuals and corporations are paying less in taxes , government revenue has increased. And, increasing government revenue is essential because current revenue is inadequate. For example, in fiscal 2007 the government collected $2.4 trillion dollars in tax revenue, however, it spent $2.8 trillion dollars. This created a deficit of $400 billion dollars and this was added to the national debt (which is approaching $10 trillion dollars). Contrast these amounts with the revenue generated from my proposal. Based on very conservative numbers, my tax reform plan will increase government revenue from $2.4 trillion dollars to $3.31 trillion dollars. This means that rather than running a budget deficit we will be running a budget surplus so we can fund all current programs and fund additional programs without endangering the economy. (Please see sources and assumptions, pages 102 - 106)

As incredible as all this sounds, it's true! By lowering taxes and restructuring our tax code government revenue increases and this allows for the full funding of National Health Care, solves Social Security's long term funding problem and expands public education to include college, free of charge.

By Mark Fishman Comments(0) 2008-05-16 22:30:02