An Excellent Tax (And Stimulus) Plan

In contrast to our “stimulus,” which is nothing more than log-rolling on a grand scale, there is an outstanding proposal in New Zealand.  Sir Roger Douglas (my favorite politician in any Labor party, due to his excellent reforms while Finance Minister in a previous Labor government in New Zealand) has proposed eliminating income taxes on the first $30,000 in income (or $50,000 for a household with one child; these values adjust upward at the rate of inflation, as well) and then having a 15% flat tax on all income after that, but with the proviso that individuals must purchase their own retirement, health care, and welfare insurance costs.  He’s suggesting this as dual-track legislation, so those who wish to stick with the current plan still could, but would have to pay more taxes.  In addition, corporate income taxes would be set at a flat rate of 15%.

This plan would be absolutely wonderful in the US, as long as we also eliminated payroll taxes and made it, say, $20,000 per adult and $10,000 per child in a household, so a family of 4 would be covered up to the $60,000 mark.  Dual-tracking would give individuals a low-risk chance to see how much better off private, long-term retirement strategies would be than historical Social Security returns (which, historically, have been lower than T-Bill rates and for my generation, will likely be negative…if we receive anything at all), would de-couple the federal government from the health care industry by making unnecessary both Medicare and Medicaid, and would help to solve the problem of entitlement spending in a politicially palatable way.

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