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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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 [...]
by Ryan Ellis 2020 Democratic presidential candidate Sen. Kamala Harris, D-Calif., on Monday tweeted out that the middle class got their taxes raised under President Trump’s signature Tax Cuts and Jobs Act. Her rationale? That preliminary reports from the IRS indicate that refunds are down very slightly on a very small sample of tax returns e-filed so far. This is an absurd, bad faith statement on at least two levels. The first problem is that a tax refund’s size has nothing to with whether or not one’s tax liability went up or down. Tax refunds are the product of overpaying the IRS, and therefore giving them an interest-free loan all year until you file your taxes and get your own money back. That number can go up or down every year for any number of reasons—for example, the IRS lowered the amount of tax withheld from paychecks in 2018 to account for the [...]
By Ryan Ellis The Senate Finance Committee this week held a hearing on the initial impacts of the Tax Cuts and Jobs Act of 2017. Helpfully, Congress' non-partisan Joint Committee on Taxation provided some tables to show the effects the new tax reform law will have on the tax landscape. In particular, JCT's analysis of itemized deductions stands out. Taxpayers can choose between taking a "standard deduction" ($12,000 for singles and $24,000 for married couples under the new tax law) and totaling together "itemized deductions" (mostly mortgage interest, charitable contributions, and up to $10,000 of state and local taxes). The tax law doubled the standard deduction to these current levels, and curtailed greatly the formerly-unlimited state and local tax deduction. As a result, the middle class will abandon itemizing in droves: As seen above, families making between $50,000 and $200,000 (a pretty good proxy for the middle class) sees a [...]