Here is a link to the Rand Paul tax plan.
https://randpaul.com/rand-pauls-fair-and-flat-tax-op-ed
For me, this is how it breaks down:
For my business, which is a small C Corp:
- the tax rate is 40%.
- Compare this to what google, HP, and GE pay by playing tax games and moving production offshore - essentially 0%.
- The plan would have both my small company, and GE paying 14% - seems reasonable to me.
- 40% is such a high number, that it just isn't viable.
Personal Income
- Most workers pay 6.5% into social security (payroll tax) and the employer also pays in 6.5%.
- Since I am considered self-employed, I pay both sides (13%)
- On top of this, I pay income tax to the Federal government, plus others. For better or worse, this number has not been all that much lately, but hopefully will rise by making more money
- If your income is $10 million in payroll / similar, the payroll tax only affects the first $100 - 200K, and people end up spending enormous effort to keep their income "appearing low" with deductions, foundations, trusts, etc.
- The Paul plan would make this "total" 14% for everyone. Again, this is a reasonable number.
Romney got in trouble with his election over the tax issue. He was complaining that lower income people paid very little income tax, but he would not acknowledge how much they pay in payroll tax. (he paid zero since he didn't take his income as payroll and it was defined as capital gains).
If instead of selling "hardware / software" products like I do currently, I worked for a hedge fund or stock broker, my income would be considered capital gains, so the tax rate is much lower, just because I work on wall street and sell the "right" product. Seems unfair to tax one kind of income differently than another. Like the saying, a dollar is a dollar.
Partnerships, LLCs, and similar structures
- More of less, these are just artificial tax constructions focused on one or two industries and complicates the tax code.
- In my simple mind, all we need are C corps and personal income categories, the rest of the versions can be eliminated.
- The accounting in a C corp is much more straight forward and "honest" than some of these strange LLC and partnership arrangements. That is one reason I like them.
Personally, I think the ideal tax system is a retail sales tax (not VAT - which is perhaps the worst possible system), but that is really unlikely to happen. The reason I like it, is that it removes the unfair competitive advantage that imports have over local production.
EDITED: 2 Feb 2016 21:04 by HARRYN