Washington will not solve the Fiscal Cliff during the lame duck session of Congress. Rather, they’ll pass a stop-gap measure raising the debt ceiling and more importantly giving themselves more time to pass revenue-positive tax reform, consisting of broadening the tax base and lowering marginal tax rates. As now structured the Cliff mixes about $4 in tax hikes for each $1 in spending cuts; minimally, it must be balanced.
Tag Archives: marginal tax rates
No More Taxing
Romney’s proposal works. Cutting tax rates by 20% costs $181 billion. Eliminating the AMT and taxes on interest, dividends and capital gains for couples with incomes below $200,000, and singles below $100,000, costs $38 billion. Filers with AGIs over $100,000 took $636 billion in itemized deductions, which taxed at 30% raises $191 billion, $28 billion less than the lost revenue. But lower rates boost tax revenues and the gap disappears!
Big Taxes, No Money
Tax rates on dividends will rise from 15% up to 43.4% on 1/1/13 if the Bush tax cuts aren’t extended. Due to behavioral changes, it won’t raise much in taxes. Firms will immediately use money planned for dividends for share buybacks. Some firms will borrow (at today’s low rates) to make one extra-large dividend distribution prior to 1/1/13, and some money will get spent buying other firms in tax-free transactions.