A two-point plan for real economic recovery
One part of this plan is a MASSIVE streamlining of government to reduce bureaucratic overlap, agency bloat, excessive regulations, and even phase out some agencies. Just this streamline could cut the Federal budget 40% or more.
IMHO...
Tax proposals from wealthy guys like Steve Forbes always seem to have some great points along with something like removing all tax on capital gains and interest income.
Such an “investment haven” scheme would produce huge swings of capital, as paper corporations would be set up to funnel invesments through. It would start out nice for our economy - and make a windfall for those wealthy guys. Then comes the aftermath, the unintended consequences. Look at poor Switzerland, an investment haven with a nice solid government balance sheet. It very much relies on what amounts to an export business. Now that other nations are drowning in debt, the Swiss franc is strengthening to the point where it is hurting it’s export businesses. I’m not saying that such a situation specifically would be the unintended consequences if America became an investment haven, just that there is quite a bit to digest with complete elimination or even large reductions to capital gains tax rates, and it’s undboubtedly prudent to avoid slanting the tax code too far in favor of individuals or corporations. The consequences, of course, can also veer into political side as well as economic.
I seem to notice that a truly balanced approach to things financial seems to minimize the effect of downturns. If we truly taxed all income at the same rate - suddenly I don’t have anything to gain by making moves like incorporating myself and not taking any W-2 income, etc. Suddenly business decisions are made on the business merits, not to foster my tax avoidance efforts.
Regardless of whether a person is rich or poor, an income tax scheme - if it is to be fair - needs to simply say that if a person earns $1.00, they pay x cents in tax.
If one person earns that dollar investing, another earns it as a royalty from their book, another from selling ice cream, same rate.
The one exception that probably will continue to make sense is long-term capital gains. Of course, this is for a very simple reason: to provide enough of a bargain to investors to make it worth their while to invest for the long haul and not try to carve gains out of extreme price volatility. While a large part of it’s effect is to artificially boost the stock market, it also serves nicely to dampen wild market swings.
Long term capital gains is also, IMHO, an attractive yet largely forgotten idea to encourage ma and pa kettle to invest and hold onto their investments. It makes a person feel good to know that if they buy stock in a corporation (public OR PRIVATE) and hold onto it until they retire, they can pay tax on the gains at a discounted rate. They helped society by investing in that business, the government gives them a break when they’re old. Of course, most people are invested via funds today anyway and have completely forgotten about the idea that holding onto the same stock for 20 years gives them a tax deferral on that gain.