The Center for a Free Economy believes that the best tax system is one which is pro-growth and pro-family. The tax base should be focused on consumption, not investment. Tax rates should be low. The tax code should not pick winners and losers. Taxes on capital should not be higher than taxes on labor, as is unfortunately the case today. A pro-family tax policy is not opposed to a pro-growth tax policy.
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President Trump and congressional Democrats last month pledged to commit $2 trillion in infrastructure projects over the next decade. The slight problem they face? No one has any idea how to pay for it. Neither party wants to run up more debt. Republicans are opposed to higher taxes. Democrats are opposed to spending cuts. What to do One idea is for the Treasury Department to remove inflation from the capital gains tax, something legal scholars believe could be done by regulation. Known as “capital gains indexing,” the idea is simple: Instead of a capital gain being defined as what an asset is sold for minus what it is bought for, it could instead be defined as what an asset is sold for minus what it is bought for plus inflation since purchase. Take, for example, a home sold for $500,000 and purchased for $100,000. Under the current tax rules, the capital gain [...]
By Ryan Ellis It was reported today that Larry Kudlow will be named the new director of the National Economic Council at the White House. A longtime veteran of the supply side tax movement, Kudlow is expected to steer the West Wing and President Trump in a solidly pro-growth direction. There's one project that Kudlow needs to get to work on right away: indexing the basis of capital gains to inflation. This is a cause which has been close to his heart for many years. Just last August, Kudlow wrote an op-ed for CNBC urging President Trump to do this by executive order. In that op-ed he wrote: Former Treasury economist Gary Robbins estimates that indexing capital gains for inflation [in 2017] would, by 2025, create an additional 400,000 jobs, grow the U.S. capital stock by $1.1 trillion and boost GDP by roughly $500 billion. That all translates to an additional $3,600 for the average household...Capital [...]
by Ryan Ellis | August 08, 2018 In the past week, there has been a flurry of press accounts that President Trump has directed the Treasury Department to examine whether they have the power to let investors index cost basis to inflation when calculating capital gains. This has taken the press corps by surprise, but it is an issue that has been around a long time — dating all the way back to a 1992 memo (updated in 2012) by former Reagan assistant Attorney General Charles Cooper. The assertion Cooper and conservatives like Americans for Tax Reform, the National Taxpayers Union, the Club for Growth, and my own Center for a Free Economy are making is a simple one: “Cost” is not defined in the tax statute, and therefore the Treasury Department has the authority to define “cost” in a reasonable way. A levelheaded way to define the cost of an investment [...]
By Ryan Ellis This week, the U.S. Senate will consider their version of fundamental tax reform. A key area of debate here has been the treatment of non-corporate businesses--sole proprietorships, Subchapter-S companies, partnerships, and LLCs--compared to incorporated firms. Unlike corporations, these flow through businesses don't pay taxes themselves. Rather, the taxes "flow through" or "pass through" to the business owner, who pays taxes on the business profits at his own marginal income tax rate. Senator Ron Johnson (R-Wisc.) and others have raised the concern that the corporations are getting a better deal than the flow throughs. Below are some answers to this concern: The worst tax treatment for flow through firms is current law. Should tax reform fail, mature flow through firms will face taxation under current law. That means a federal income tax rate of 39.6 percent, plus either a self-employment or an investment income surtax of 3.8 percent, [...]
Independent Women's Forum today led a coalition of 33 freedom movement organizations and activists united against a new payroll tax and new paid leave entitlement program. "Everyone wants new parents to be able to have the time off they need to care for a new baby," explained IWF President Carrie Lukas, "But the wrong way to approach this issue is to have government take over and decide what kind of benefits are right for every single working woman and man. And that's exactly what a new paid leave entitlement program would do. Once government begins collecting a new payroll tax and promising a new stream of benefit payments for every qualified worker, then all existing compensation packages are affected. It won't matter if you've liked what your employer is providing or not. You'd be a part of a one-size-fits-all government system, which would create far more problems than it would [...]
Comedian Bill Burr this week went off on a totally not safe for work rant about Rep. Alexandria Ocasio-Cortez’s plan to impose a 70 percent tax rate on all income earned above $10 million. It’s hilarious and worth a listen, but do use earbuds for the sake of your more delicate neighbors. Burr makes a couple of good observations on the topic. First, he points out that no one should have to pay 70 percent of any of her income to the government. This is an important step conservatives often skip as we seek to dive right into policy arguments. As Arthur Brooks has famously pointed out, first you make a value alignment with your listener, then from that common value alignment you make a policy argument. Burr does that here simply and colorfully. Burr also helpfully uses an incarnational example to illustrate his point. He asks why the kid [...]