Why Fred Thompson Part II

The next topic I wish to address in explaining my reasoning for supporting Fred Thompson is taxes and tax reform.  Some candidates, Huckabee most recently, have supported the fairtax proposal.  Please go to their website and spend some time, read it thoroughly.  When you have most of you will come to the same conclusion I have which is that this is just another expansion of government that will become the single biggest entitlement program we have.  It puts everyone on the government entitlement program so that the ever efficient government will dole out checks to everyone each month.

Now let’s contrast that with what Fred Thompson proposes.  There are many people in this country that are resistant to change, Fred recognizes that and has come up with a plan that addresses the problem of tax reform without forcing everyone into a new system they don’t support.  Details of Fred’s plan are here but below are some highlights:

1. Permanently Extend the 2001 and 2003 Tax Cuts. Tax relief enacted in 2001 and 2003 has proved critical to generating a strong economy that has experienced growth despite the war on terror, the collapse in the housing market, and other economic challenges over the last six years. Unless action is taken, every American taxpayer will see a massive tax increase after December 31, 2010.

2. Permanently Repeal the Death Tax. Current law provides death tax relief, but only through 2010. The death tax is inherently unfair. Under the Thompson Plan, the death tax would be permanently repealed, thus protecting millions of American families, including small business owners and family farmers, from double taxation at rates ranging as high as 55 percent.

3. Repeal the Alternative Minimum Tax. The AMT is a separate tax system that was intended to ensure that a few high income Americans could not use deductions and credits to eliminate their tax liability. However, because the AMT is not indexed to inflation, it is penalizing Americans it was never intended to affect. While in the U.S. Senate, Fred Thompson authored legislation that would have repealed the AMT. Consistent with that earlier proposal, the Thompson plan will eliminate the AMT as part of broader tax and spending reform. Until comprehensive reform is feasible, the Thompson plan would index the exemption amounts annually so that millions of middle class families will not become subject to this tax.

4. Reduce the Corporate Tax Rate. The United States has one of the highest rates of tax on businesses of the industrialized nations, second only to Japan. EvenJapan is currently considering reducing its corporate tax rate. Economic studies suggest that the U.S. Treasury is actually losing tax revenue by keeping the corporate tax rate so high. In order to increase the competitiveness of U.S. companies in the global marketplace, the Thompson plan would reduce the U.S. top corporate tax rate (including the corporate capital gains tax rate) from 35 percent to no more than 27 percent, which is the approximate average of the world’s leading economies—the nations of the Organization on Economic Cooperation and Development. This tax reduction will promote U.S. competitiveness, encourage companies to keep their operations (and jobs) in the U.S., and spur continued economic expansion and growth.

5. Permanently Extend Small Business Expensing. Small businesses create two-thirds of all new jobs in America, and employ nearly 59 million Americans — more than half of the nation’s private-sector workforce. Women own a quarter of all small businesses, minorities are nearing the 20% mark, and Hispanic Americans are opening their own businesses at a rate three times the national average. Current law allows small businesses to write-off purchases of equipment of up to $125,000 per year, rather than depreciating those assets over time. Making expensing of equipment and other small business items permanent will encourage greater investment and growth.

6. Update and Simplify Depreciation Schedules. The current depreciation schedules are outdated and in many cases do not reflect the realistic useful life of an asset. This is particularly true for investments in high technology. For example, computers must be depreciated over three years, even though they become obsolete in half that time. The Thompson plan would simplify and update these schedules to allow American businesses to make the investments they need to compete and create more high-quality jobs.

7. Expand Taxpayer Choice. The Thompson plan would give Americans greater choice about how to pay their federal taxes. This plan is based on a proposal developed by the House of Representatives Republican Study Committee that would provide taxpayers the option of remaining under the current, complex tax code or opting for a simplified, flat tax code. The simplified tax code would contain two tax rates: 10% for joint filers on income of up to $100,000 ($50,000 for singles) and 25% on income above these amounts. The standard deduction would be more than doubled to $25,000 for joint filers and $12,500 for singles. The personal exemption amount would be increased to $3,500. Therefore, a family of 4 would be exempt from income tax on the first $39,000 of income. The simplified tax code would contain no other tax credits or deductions. It would also retain the 15% tax rate on capital gains and dividends. This approach would dramatically simplify taxes for tens of millions of Americans. In addition, the larger standard deduction and personal exemption amounts will still provide significant tax relief to families with children. This proposal would serve as a stepping-stone to fundamental tax reform.

Now, this shows that not only has Fred drafted a plan that appeals to individuals in terms of fixing the punitive nature of the tax code but he understands economics today better than the so called experts that seem to be surprised at all the positive things we have in today’s economy.  Now I would wager that 99% of the public has no idea that this country has the 2nd highest corporate tax rate of any industrialized nation.  After all we constantly hear how evil corporations are taking advantage of workers, or polluting the air and water, blah blah blah.  Yet while many European countries have high individual tax rates they have smaller corporate tax rates.  Is it any wonder the Euro is doing so well against the dollar?

As for Fred’s plan for expanding taxpayer choice.  His approach couldn’t be better, he has put this out in terms that everyone can understand and in a way that Democrats will look like idiots to criticize.  A basic flat tax rate for everyone with joint incomes of under $100,000.000 per year that is 10% and a family of four exempts their first $39,000.00 in income.  This means that a family of four with a joint income of $100k pays $6,100.00 in federal tax.  For those of you that get paid every two weeks that breaks down to roughly $254.00 per pay check (assuming $100k income).  If you’re making $100k per year I urge you to go get your last pay stub and see what your federal confiscation was for the last pay period.  For 95% of you I would bet that it was higher than $254.00

Again we are getting close to election time and I urge people, even if you have made up your mind on what candidate you support, do your homework.  What plan does your candidate have to address tax reform.  Does that plan make sense, can you easily figure out how that plan will impact you?  Research the plans of the other candidates, research what all the candidates have said not only today but what have their positions been over their life in public service?

This election is too important to make our judgements based on how a candidate packages not only himself, but also how he packages his message and his past record.

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