-----Original Message----From: Christopher J. Hughey [mailto:cjhughey@yahoo.com]
Sent: Saturday, March 19, 2005 10:06 PM
To: comments@taxreformpanel.gov
Subject: Tax reform comments: simple, fair
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Christopher J. Hughey, American citizen individual not associated with any organization for this
purpose
Date of submission: 19 March 2004
Contact info: cjhughey@yahoo.com
The philosophy here is simple: our economy is driven by essentially three sources of income salaries, corporate and property/rental profits, and returns on investments - and our government
should be supported in the same proportion as these three sources support the overall economy.
Are the percentages below accurate? I seriously doubt it. I have gotten as close as I can with my
limited skills, but it would take experts such as those at the CBO, OMB or GAO to get more exact
figures, but even they would never be able to get it completely right. Only enactment and then
tweaking in subsequent years would get the percentages right. But I am certain of four things:
the thresholds, the deductions, the need for automatic CPI and PPI adjustments and, most
important of all, the underlying philosophy of supporting the government in the same proportions
we support the economy. The only adjustment I have made is to shoot for about $100B less in
personal income tax revenue than would be proportionate because I feel quite certain that most
of the pollution rights costs would be passed directly to consumers through higher utility and
transportation costs and this must be offset. So take the tax rates with a grain of salt and focus
rather on the overall structure. Revenue goal: 2.1 trillion dollars.
Please note this structure assumes ending all business and agricultural subsidies and treating all
businesses equally (e.g. no special tax breaks, etc).
1. A tax rate of 30% applicable only to all income over $40,000.00 (2005 dollars) per annum per
person. A rate of 15% would apply to all income over $20,000 and up to $40,000.00 per annum
and 7.5% for income at or below $20,000. These rates would apply to wages, lottery and other
gambling winnings, and inheritances. In the case of inheritances, however, the first $150,000.00
will be exempt. There will be NO deductions except for 1) IRAs and other approved savings
plans; 2) day-care costs and higher-education tuition up to $11,350.00 (2005 dollars) per student;
3) a maximum of $12,500.00 in primary-residence mortgage interest; 4) $2500 per minor
dependant; 5) charitable donations; 6) and up to $2000 in out-of-pocket healthcare expenses per
person per family. All thresholds will be adjusted automatically every year by the 12-month trailing
CPI, with the exception of the primary-residence mortgage interest deduction, which will be
adjusted by the yearly percentage change in the average price for a new home, and the
healthcare deduction, which must be adjusted by healthcare-inflation rates. Guardians must take
either the standard per-minor deduction or the tuition deduction, but not both. For married
couples, the income thresholds will simply be doubled for those filing jointly. In other words, a
family with one bread-winner earning $80,000 per year with the couple filing jointly would pay a
lower rate than a single person earning that same amount.
2. Capital gains and dividend tax: flat 21% on the net gain for everyone, with no exemptions
except charitable donations.
3. A national consumption tax of 20% on selected items, including but not necessarily limited
to all tobacco and alcoholic products; homes selling for more than three times the average price
for their respective communities (only on the amount over that threshold); private cars, trucks and
RVs selling for more than $40,000.00 (2005 dollars and applied only to the value above the
threshold and applicable to the MSRP for the vehicle and any added options or the actual price
paid, whichever is higher, and exempting all vehicles with an overall MPG-rating of 35 or higher);
all jewelry; private boats; private airplanes; non-commercial recreational vehicles such as
snowmobiles, jet-skis, etc; non-essential personal services (e.g. domestic help, elective cosmetic
surgeries not covered by insurance, spa services, etc); individual home furnishings priced above
$2500.00 (2005 dollars and only on the value above the threshold). Every year, all price
thresholds will be revised automatically by the trailing 12-month CPI. The object of this tax is not
to discourage or encourage any type of behavior. It is simply a means of collecting revenue from
those most able to contribute. Congress must occasionally review and adjust these levels as the
price increases of many luxury goods do not stay in line with the overall CPI.
4. Corporations and those receiving rental income or other proprietors' income such as farm
income will pay a rate of 20% on profits, applied to all profits, foreign and domestic, of companies
incorporated in the US and on US profits of foreign corporations. Corporate income is defined as
all profit minus inventory valuation plus capital consumption adjustment. No deductions of any
kind except for charity and dividend payouts. Also, no amount over one million 2005 dollars for
any individual employee's compensation may be considered as a business expense when
calculating profit. Personal income tax rates will apply in cases of frivolous incorporation. Clear
guidelines will be established to help the IRS in determining justifiable incorporation. In the case
of individuals with no employees, for example, the corporation must provide more than half of that
individual's income. Finally, to help small business and the dwindling number of small-scale
farmers, the first $30,000.00 (2005 dollars) in privately-held corporate and farm income profit will
be tax-exempt, except in those cases in which the filing entity is owned by a larger corporate
entity whose taxable income exceeds 100,000 2005 dollars.
5. The second source of corporate taxation revenue will be a yearly sale of greenhouse-gas and
CO pollution rights. The price will be set by auction, but with a reserve price of $21 (2005 dollars)
per metric ton of each of the seven main pollutants (CO, CO2, HFCs, PFCs, SF6, Nitrous Oxide
and Methane) up to the amount equal to the estimated total produced in the US in 2004. Any
company or farm needing to purchase rights after this limit is passed may do so at the fixed cost
of $31 per ton if they are unable to buy the rights on the open market. The price will be adjusted
each year by the trailing 12-month PPI, but the amounts allowed at auction will not change.
Emissions rights must be purchased for all commercial and industrial emitters. In the case of
transportation, all car-, truck- and other vehicle-makers as well as airlines will be sold their rights
at a fixed price of $21 per ton to cover transportation pollution. How they pass on these costs to
the consumer is up to them. As a reward for producing more fuel-efficient vehicles, however, the
EPA will update the amount of pollution emissions to reflect changes in output and hence how
much they are required to purchase each year. The costs will be divided up based on output of
pollutants for each vehicle-producer's most recent year fleet of new vehicles, a further incentive
for producing less-polluting vehicles. Likewise, the airlines will divide up their allotment based not
only on miles logged the prior year but also the estimated per-mile emissions from their particular
respective fleets, thereby encouraging them to use less-polluting, well-maintained fleets of
aircraft. Airlines may trade for pollution rights on the open market if they need more or fewer
based on changes in fuel efficiency, miles flown, etc.
All existing pollution restrictions for the seven main pollutants will be lifted for industry: they may
pollute as much as they can afford. Likewise, there will be no more CAFE standards for
carmakers. A company that produces zero- or low-emission vehicles would obviously face far
lower costs. That said, if pollution rises despite these measures, Congress might deem it
necessary to raise the price per metric ton of pollution by more than the PPI, though this should
be offset by a reduction in the corporate tax to make it revenue-neutral. Congress may also deem
it necessary to rasie the reserve price of some pollutants more than others. Pollution rights may
also be traded on the open market throughout the year. In those cases, the prices will be marketdriven and the seller may keep the proceeds, subject to normal corporate or personal income tax
rates. If the prices of polluting cause industry to turn to methods that produce as much pollution
but with different contaminants, Congress should add these new contaminants to the auction list
at the appropriate price and amounts allowed.
Christopher J. Hughey, American citizen individual not associated with any organization
for this purpose
Date of submission: 22 March 2004
Contact info: cjhughey@yahoo.com
PREAMBLE
Replace all current federal taxes with the revenue streams listed below. Note these
replace all current taxes: for example, there would be no more separate SS, FICA or
Medicare payroll deductions for individuals or payroll taxes for businesses. The
only revenue streams not replaced here are routine service, permit,
application charges, etc. already in place for government services and which
account for roughly 5% of government revenue.
The philosophy here is simple: our economy is driven by essentially three sources of
income - salaries, corporate and property/rental profits, and returns on investments - and
our government should be supported in the same proportion as these three sources
support the overall economy.
Are the percentages below accurate? I seriously doubt it. I have gotten as close as I can
with my limited skills, but it would take experts such as those at the CBO, OMB or GAO
to get more exact figures, but even they would never be able to get it completely right.
Only enactment and then tweaking in subsequent years would get the percentages right.
But I am certain of four things: 1) the thresholds; 2) the deductions; 3) the need for
automatic CPI and PPI adjustments; and 4) most important of all, the underlying
philosophy of supporting the government in the same proportions we support the
economy. The only adjustment I have made is to shoot for about $100B less in personal
income tax revenue than would be proportionate because I feel quite certain that most of
the pollution rights costs would be passed directly to consumers through higher utility
and transportation costs and this must be offset. So take the tax rates with a grain of salt
and focus rather on the overall structure. Revenue target: $2 trillion (2005 dollars).
1. A tax rate of 30% applicable only to all income over $35,000.00 (2005 dollars) per
annum per person. A rate of 15% would apply to all income over $17,500 and up
to $35,000.00 per annum and 7.5% for income at or below $17,500. These rates apply to
wages, lottery and other gambling winnings, and inheritances. In the case of inheritances,
however, the first $200,000.00 will be exempt. There will be NO deductions except for a)
IRAs and other approved savings plans; b) daycare costs and higher-education tuition up
to $11,350.00 (2005 dollars) per student; c) a maximum of $10,000.00 in primaryresidence mortgage interest; d) $2500 per minor dependant; e) charitable donations; and
f) up to $2000 in out-of-pocket healthcare expenses per person per family. All thresholds
will be adjusted automatically every year by the 12-month trailing CPI, with the
exception of the primary-residence mortgage interest deduction, which will be adjusted
by the yearly percentage change in the average price for a new home, and the healthcare
deduction, which must be adjusted by healthcare inflation rates. Guardians must take
either the standard per-minor deduction or the tuition deduction, but not both. For
married couples, the income thresholds will simply be doubled for those filing jointly. In
other words, a family with one bread-winner earning $70,000 per year with the couple
filing jointly would pay a lower rate than a single person earning that same amount.
2. A national sales and consumption tax of 25% on selected items, including but not
necessarily limited to all tobacco and alcoholic products; homes selling for more
than three times the average price for their respective communities (only on the amount
over that threshold); private cars, trucks and RVs selling for more than $40,000.00 (2005
dollars and applied only to the value above the threshold and applicable to the MSRP for
the vehicle and any added options or the actual price paid, whichever is higher, and
exempting all vehicles with an overall MPG-rating of 35 or higher); all jewelry; private
boats; private airplanes; non-commercial recreational vehicles such as snowmobiles, jetskis, etc; non-essential personal services (e.g. domestic help, elective cosmetic surgeries
not covered by insurance, spa services, etc); individual home furnishings priced above
$2500.00 (2005 dollars and only on the value above the threshold). Every year, all price
thresholds will be revised automatically by the trailing 12-month CPI. The object of this
tax is not to discourage or encourage any type of behavior. It is simply a means of
collecting revenue from those most able to contribute. Congress must occasionally review
and adjust these levels as the price increases of many luxury goods do not stay in line
with the overall CPI.
3. Capital gains and dividend tax: flat 21% on the net gain for everyone, with no
exemptions except charitable donations.
4. Corporations and those receiving rental income or other proprietors' income such as
farm income will pay a rate of 21% on profits, applied to all profits, foreign and
domestic, of companies incorporated in the US and on US profits of foreign corporations.
Corporate income is defined as all profit minus inventory valuation plus capital
consumption adjustment. No deductions of any kind except for charity and dividend
payouts. Also, no amount over one million 2005 dollars for any individual employee's
compensation may be considered as a business expense when calculating profit. Personal
income tax rates will apply in cases of frivolous incorporation. Clear guidelines will be
established to help the IRS in determining justifiable incorporation. In the case of
individuals with no employees, for example, the corporation must provide more than 75%
of that individual's income. Finally, to help small the dwindling number of small-scale
farmers, the first $30,000.00 (2005 dollars) in privately-held farm profit will be taxexempt, except in those cases in which the filing entity is owned by a larger corporate
entity whose taxable income exceeds 100,000 (2005 dollars).
5. The second source of corporate taxation revenue will be a yearly sale of greenhousegas and CO pollution rights. The price will be set by auction, but with a reserve price of
$25 (2005 dollars) per metric ton of each of the seven main pollutants (CO, CO2, HFCs,
PFCs, SF6, Nitrous Oxide and Methane) up to the amount equal to the estimated total
produced in the US in 2004. Any company or farm needing to purchase rights after this
limit is reached must buy such rights on the open market from other polluters. The price
will be automatically adjusted each year by the trailing 12-month PPI, but the amounts
allowed at auction will not change. That said, if pollution rises despite these measures,
Congress might deem it necessary to raise the price per metric ton of pollution by more
than the PPI, though this should be offset by a reduction in the corporate tax to make it
revenue-neutral. If the prices of polluting cause industry to turn to methods that produce
as much pollution but with different contaminants, Congress should add these new
contaminants to the auction list at the appropriate price and amounts allowed. Congress
may also deem it necessary to raise the reserve price of some pollutants more than others.
Emissions rights must be purchased for all commercial and industrial emitters. In the case
of transportation, all car-, truck- and other vehicle-makers and airlines will be sold their
rights at a fixed price of $25 per ton to cover transportation pollution. The amount of
pollution rights they must purchase will be calculated by simply dividing the prior year’s
total transportation pollution by each company’s prior year new-car fleet estimated
emissions (based on vehicles sold and their MPG). Likewise, the airlines will divide up
their allotment based not only on miles logged the prior year but also the estimated permile emissions from their particular respective fleets, thereby encouraging them to use
less-polluting, well-maintained fleets of aircraft. Airlines may trade for pollution rights
on the open market if they need more or fewer based on changes in fuel efficiency, miles
flown, etc.
All existing pollution restrictions for the seven main pollutants will be lifted for industry:
they may pollute as much as they can afford. Likewise, there will be no more CAFE
standards for carmakers: if they choose, they may produce nothing but SUVs, but the
costs would soon become atmospheric. A company that produces zero-emissions vehicles
would obviously face far lower costs.