Tax Policy and Fairness - Final Summary

In previous posts, Cogport provided history and proposals on Tax Policy.  This issue affects both the Economy and Government Funding.

This report will summarize Proposals and the effects on the future.

Payroll Tax 

Used to fund Social Security and Medicare.  These Benefits need serious reform as they currently comprise 38% of the Federal Budget. 

Total Federal Cost of these programs in 2024 are projected as $ 2.4 Trillion.

The Payroll Taxes in 2024 are projected at $ 1.6 Trillion.

The difference is funded by the Social Security Reserve Fund.  This fund is projected to run out of cash in less than 10 Years.

A reform is necessary for future fiscal balance.  That is a topic of its own which Cogport will address in future posts.

Personal Income Tax

Approximately 42% of filers paid no federal income tax.

In 2022, Personal Tax Burdens were distributed as follows:

The Total paid to the IRS in Personal Taxes was $ 1.54 Trillion.   

Approximately 164Million tax returns were filed.

The First 42% of Tax Filers paid No Tax.

The Top 1% of Tax Filers paid over 30% of the Total.

The Top 4.5 % of Filers (Incomes over $200,000) paid over 60% of the Total.

It is evident that high income earners already pay a majority of Personal Income Tax.  Proposals to make the tax bracket rates even higher would be a disincentive. 

Cogport concluded that the current Personal Tax system is Fair and does not require Major Reform.  At some point, highly progressive taxes on the rich become confiscatory and counterproductive.

Cogport proposes that the current Personal Tax brackets should not be changed.

Capital Gains

Cogport supports the premise that Capital Gains policy should conserve incentive for long term investment stability and encourage entrepreneurs in new business. 

However, there comes a point where the incentive becomes unfair.

Those who achieve the highest wealth acquire it mostly from Capital Gains in their investments in Stocks and Business Ownership.  The Current Policy is a huge tax break for the wealthy, especially the ultra-wealthy.

In Part 7 of this Series, Cogport proposed Capital Gains Tax Reform based on the following:

Increase the number of brackets and make Capital Gains Tax more Progressive.

Under the Plan presented in Part 7 of this Series, the effect would be as follows:

With Projected Capital Gains in 2024, this Proposal would increase Federal Revenue by about $ 210 Billion.

Advantages:

• Significant Reduction in Federal Deficit.

• Creates Fairness in the Tax System since it eliminates part of the advantage previously targeted to the Wealthy.

• Preserves incentive for Long Term Investment.

It is a Fair System that requires the ultra-wealthy to give up some of their tax advantage without discouraging investment.

Corporate Tax

In Part 8 of this Series, Cogport proposed Corporate Tax Reform based on the following:

Reinstate Progressive tax brackets and increase the top tax rate to 25%.  (Before 2017 the top rate was 35%, now it is 22%)

This would rollback much of the windfall received by Major Corporations in the 2017 Tax Act. It is a Fair System that requires them to pay for the cost and services incurred by the Federal Government to support Corporations.

With Projected Corporate Income in 2024, this Proposal would increase Federal Revenue by about $ 138 Billion.

Summary

The sum of Revenue Increases that would reduce the Federal Deficit:

Capital Gains Tax                                      $ 210 Billion

Corporate Tax                                            $ 138 Billion

TOTAL                                                        $ 348 Billion

That is a significant start towards the goal of achieving a Balanced Budget.

With a Deficit of $ 1.7 Trillion in 2023, there is much more policy to be addressed on the Spending side of the Equation.  Cogport will also address this in future posts.

David Hollaender                                                    October 24, 2024

Cogport.com