"A government that robs Peter to pay Paul can always depend upon the support of Paul." - George Bernard Shaw
I hear talk about revising the federal income tax code. No question, it is a sorry mess. Over the years, special tax breaks and exemptions have polluted the code, all targeted at gathering votes from special interests, and by special interests I'm not only referring to Wall Street and corporations, I am including AARP and everything in between.
Revising the code will surely elicit the cry, "Why don't the rich pay their fair share," which is a cowardly way out of enlightened debate. This whining invariably comes from those who pay little, if any, income tax and their ideas of rich are far from it. An annual income of $500,000 is not rich - well-to-do, but far from rich.
Anyway, being known for lion hunting with a fly swatter, here I go again: The following are my ideas for the essence of a fair and balanced tax code. Yes, I am a conservative, but you liberals may be surprised.
The way things are today, about 47 percent of our tax-age citizens pay zero income tax. That is outrageous. Every working person should pay something. The upper 3 percent pay about 45 percent of all federal income taxes. That, too, is outrageous. The top half of that 3 percent pay too little, and the bottom half, too much. Ideally, the federal income tax rate should increase using a gradual curve from one percent at the $2,000 income level to 30 percent at the $500,000 income level, and then a straight line upwards from 30 percent to 90 percent at the $5 million income level, and above. In the 1930s the top rate was 90 percent, limiting obscene profits.
Corporate income tax should be totally eliminated. Corporate money is the seed money for a healthy economy and job security. With sufficient capital reserves, companies do not layoff employees during hard times. Contrary to popular opinion, corporate profits cannot be siphoned off to managers as bonuses, or to stockholders as dividends, without their paying personal income taxes.
The two main failures of any tax code are 1) exemptions and 2) loopholes. We must close every loophole for corporations and individuals that permit tax dodging, and eliminate most exemptions. Our tax code is not only insidious, it borders on being corrupt.
Personal tax deductions should include interest, property tax, sales and state income taxes and medical and dental expenses over and above insurance reimbursements. We should do away with child deductions but increase the marriage deduction. Why reward people for having children?
And we should eliminategovernment-subsidized higher-education loans. The colleges and universities should use their own billions of dollars in endowments to finance student loans. That is exactly what Hillsdale College does.
Now, the biggest drag on our economy is inflation, and some of the biggest contributors to inflation are speculators - those who buy and sell without adding any provable value to what they buy and sell. I'm talking about commodity and stock market junkies. In the case of commodities that are vital to our nation's well being, such as oil and farm products, only the producers and final distributors should be licensed to trade in those commodities, not speculators.
The holding period for stocks, bonds and real estate before qualifying for long-term capital gains tax should be three years. Less than three years, capital gains should be taxed at 50 percent. Longer than three years, zero percent. This would encourage investment in real growth, not in the Wall Street crap-shoot. This is a start. There is room for much discussion.
We taxpayers need a drastic tax code change and we need it now!
• Bob Thomas was the founder and CEO of a high-tech division of Emerson Process, a Fortune "500' company. Later he served on the Carson City School Board, the Nevada State Welfare Board and as a state assemblyman. He also founded and served on the Carson City Airport Authority, and recently authored the book "Creating A World Class Company" (Amazon).