Strategic Tax Reform Incentivizing Valuable Employment-STRIVE
Tax Reform for corporations, capital gains, dividends and proposals to improve governance
1A. Lower corp. income tax rate 1st 100,000 of taxable income 15% above that 24%. U.S. has highest
central government corp. tax rate in industrialized world. Canada’s Fraser Institute’s “Economic
Freedom of the World” 2010 ratings reported that U.S. dropped 12 spots in two years from 6th to 18th.
http://www.economicfreedom.org/2012/09/18/economic-freedom-of-the-world-2012-annual-report/
Canada’s lowered corp. tax rate has improved their economy. In the 2012 Index of Economic Freedom,
www.heritage.org/index/ranking Canada is 6th and the U.S. is 10th. Canada added 140,500 jobs for
March and April 2012 while the U.S. added 211,000. A few examples of corporate tax rate trends:
www.oecd.org/tax/taxpolicyanalysis/oecdtaxdatabase.htm#C_CorporateCaptial
2012
1997
2012/1997 average state/province taxes
Canada
15.0%/26.1
28.0%/42.94
11.1/13.8
France
34.4%
41.7%
Germany
15.0%/30.2
45.0%/56.8
14.4/16.3
Ireland
12.5%
36.0%
Italy
27.5%
53.2%
Japan
30.00%/39.5
37.5%/50
11.6/12.3
United Kingdom 24.0%
31.0%
United States 35.0%/39.1
35.0%/39.45
6.4/6.85
1B. Lower capital gains rate from 15% down to 14% for 2013 and enact predetermined capital gains
changes to provide business planning targets. When capital gains rates are cut substantially or
scheduled to be raised it frees up locked in capital. Clinton’s 1997 capital gains tax cut from 28% to 20%
resulted in 1998 capital gains realized of 195 billion higher than in 1996. George W. Bush’s capital gains
rate cut from 20% to 15% resulted in the U.S. collecting 53 billion more tax revenue than predicted by
the CBO. In 1986 realized capital gains were 179 billion more than in 1987 due to the capital gains rate
being scheduled to rise from 20% to 28%. Large swings in capital gains rates increase risk of economic
bubbles. Raising capital gain rates substantially keeps needed capital tied up waiting for favorable tax
treatment. Predetermined rate changes will reduce economic bubbles and relatively low rates will
provide adequate amounts of capital to fund our next great ideas. Maximum capital gains rate by year:
2013 14%, 2014 15%, 2015 16%, 2016 17%, 2017 18%, 2018 19%, 2019 20%
2020 18%, 2021 19%, 2022 20%, 2023 18%, then 19%, 20%, 18%, 19% etc.
1C. Maintain tax treatment of dividends at same rate as long term capital gains but have 20% federal
income tax withholding from all dividends withheld at source even for tax deferred or retirement
accounts. Taxes collected on tax deferred accounts must be used to pay down national debt.
Top tax rate both corporate and individual on dividends with S.T.R.I.V.E. will be 42.79%.
S.T.R.I.V.E.
2013 after Bush tax cuts expire
Profit to be paid out as dividends
1,000,000
1,000,000
Federal & State Corp. tax 30.4%
-304,000
39.1% -391,000
Dividends paid
696,000
609,000
Taxes (includes ACA 3.8% tax) 17.8%
-123,888
43.4% -264,306
Net after tax
572,112
344,694
striveforamerica@gmail.com 703-764-0829 Blog: http://striveforamerica.wordpress.com
Gerald R. Geddes C.P.A., 9695 Main St. Suite C, Fairfax, VA 22031 fax 703-764-0830
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Strategic Tax Reform Incentivizing Valuable Employment-STRIVE
Tax deferred accounts may elect to pass through dividends and taxes withheld currently not subject to
early withdrawal penalty or segregate taxed funds to avoid double taxation upon final distribution.
1D. REDUCE CONFLICT OF INTEREST FOR AUDITORS Eight year term limits for auditors. Set up SEC
publicly traded company funding mechanism so that auditors are paid 35% directly from the
corporations they are auditing, 35% from a SEC funding pool with the last 30% paid from general
government revenues and 5% to fund SEC oversight. The 35% paid by the audited company will provide
an incentive to have an efficient audit but will allow the auditors to concisely disclose more of the
business’ questionable practices without fear of economic ruin. Enron was a scandal hidden in plain
sight, John R. Emshwiller, a Wall Street Journal reporter uncovered it from looking at the company’s
financial statements and interviewing officers at Enron. This provision will improve financial reporting
which will allow us to scale back anti-competitive provisions of Sarbanes Oxley and Dodd-Frank.
1E. Repeal code section 162(m) that generally limits to $1,000,000 the tax deduction for annual
compensation paid to an executive officer of a publicly traded corporation. This “unconstitutional”
Clinton era provision led to stock option fraud such as Enron, Micro Strategy, Adelphia Communications
and WorldCom and to reduced tax collected because executive wages were converted to capital gains.
1F. Reduce deficit by collecting taxes from foreign income of U.S. based multinational corporations
Eliminate permanent deferral of U.S. taxation on unrepatriated income of Corporations and carried
interest from hedge funds and private equity firms of U.S. citizens by phasing in a maximum deferral of
ten years. Apple showed deferred U.S. taxes as of 9/2010 of $4,300,000,000. Lowering our corporate
tax rate takes away an irrational incentive to never bring investment dollars back into the U.S. but ten
year deferral allows capital to move around world freely with time to plan to pay the tax.
1G. Repeal section 199 Domestic Production Activities Deduction. These provisions are complicated and
economically suspect. Low corp. tax rates will solve the problem that this legislation addressed.
1H. Tax rate of personal service corporations tax rate reduced from 35% to 24%. Medical practices: sic
codes 8010 Offices & clinics of medical doctors, to not be considered personal service corporations to
provide tax incentive with goal of retaining Drs. and getting more talented young people to become Drs.
1I. Repeal 2.3% medical device tax. This will have disastrous effect of reducing medical innovation. G. H.
W. Bush’s luxury tax killed shipbuilding in the U.S. and provided net less tax revenue for government.
1J. Raise 2014 threshold of employers required to provide health insurance from 50 employees to 99.
U.S. is in danger of going from 40 to 58 hour work week with no overtime as companies cut hours to
max of 29 hours per week to avoid Affordable Care Act. 600,000 new part time jobs September 2012.
1K. Claw-back 2% reduction of social security withheld on government employees wages for years 2011
and 2012 on 2012 tax return when adjusted gross income above $250,000 for married filing joint and
$200,000 for all other filers.
striveforamerica@gmail.com 703-764-0829 Blog: http://striveforamerica.wordpress.com
Gerald R. Geddes C.P.A., 9695 Main St. Suite C, Fairfax, VA 22031 fax 703-764-0830
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