Chapter 22 · pp. 691–716 ·
William L. Walton, Stephen Moore, David R. Burton
What this chapter is about
This chapter is about tax and money. It wants two income tax rates instead of many. It wants the tax on firms cut. It wants to undo tax rises from a recent law. It also wants it to take a bigger vote in Congress to raise taxes at all.
The document says “should”Who acts: Treasury, CongressHow: legislationp. 696 in the PDF
What the document says
“The Treasury should work with Congress to simplify the tax code by enacting a simple two-rate individual tax system of 15 percent and 30 percent that eliminates most deductions, credits and exclusions.”
The chapter says the 30 percent bracket should begin at or near the Social Security wage base, so that income and payroll tax together act as a nearly flat tax on wage income above the standard deduction. It separately asks that capital gains and qualified dividends be taxed at 15 percent, that capital expenditure be expensed immediately and that capital gains be indexed for inflation.
What the document actually says
“The Treasury should work with Congress to simplify the tax code by enacting a simple two-rate individual tax system of 15 percent and 30 percent that eliminates most deductions, credits and exclusions.”
That sentence, in plain words
Replace the tax bands with just two. One at 15 percent and one at 30. Drop most write-offs.
What this is about
Income tax now has several bands. The book wants only two. Most special write-offs would go. A higher earner would pay 30 percent.
The document says “should”Who acts: CongressHow: legislationp. 696 in the PDF
What the document says
“The corporate income tax rate should be reduced to 18 percent.”
The chapter calls the corporate income tax the most damaging tax in the system and says its primary economic burden falls on workers because capital is more mobile than labor.
What the document actually says
“The corporate income tax rate should be reduced to 18 percent.”
That sentence, in plain words
Cut the tax on company profits to 18 percent.
What this is about
Firms pay tax on their profits. The book says that tax hurts workers most. It wants the rate cut to 18 percent.
The document says “should”Who acts: CongressHow: legislationp. 696 in the PDF
What the document says
“intermediate tax reform should repeal all tax increases that were passed as part of the Inflation Reduction Act”
The chapter names the book minimum tax, the stock buyback excise tax, the coal excise tax, the reinstated Superfund tax, and excise taxes on drug manufacturers tied to Medicare price controls. It separately asks for full repeal of the subsidies in the same law, including what it describes as dozens of credits and tax breaks for green energy companies.
What the document actually says
“intermediate tax reform should repeal all tax increases that were passed as part of the Inflation Reduction Act”
That sentence, in plain words
Undo the tax rises in that law. Undo its green energy breaks too.
What this is about
A 2022 law raised some taxes. It also gave breaks to green energy firms. The book wants both undone.
The document says “should”Who acts: CongressHow: legislationp. 696 in the PDF
What the document says
“All taxpayers should be allowed to contribute up to $15,000 (adjusted for inflation) of post-tax earnings into Universal Savings”
The chapter proposes accounts holding up to $15,000 a year of post-tax earnings, indexed for inflation, whose gains would be untaxed and withdrawable at any time, and which would be flexible enough to hold investments such as a closely held business.
What the document actually says
“All taxpayers should be allowed to contribute up to $15,000 (adjusted for inflation) of post-tax earnings into Universal Savings”
That sentence, in plain words
Let anyone put up to $15,000 a year into a savings account. It would come from pay already taxed.
What this is about
You pay tax on money you earn. Then tax again on what it earns. The book wants an account where the second tax does not apply.
The document says “should”Who acts: CongressHow: legislationp. 697 in the PDF
What the document says
“The estate and gift tax should be reduced to no higher than 20 percent”
The chapter also asks that the 2017 law's temporary rise in the exemption, from $5.5 million to $12.9 million adjusted for inflation, be made permanent. It groups this with proposals to raise the business loss limitation to at least $500,000, allow full carryforward of net operating losses, and eliminate the net investment income surtax and the base erosion anti-abuse tax.
What the document actually says
“The estate and gift tax should be reduced to no higher than 20 percent”
That sentence, in plain words
Cut the tax on money left when someone dies. Take it to 20 percent at most.
What this is about
When a rich person dies, some of the estate is taxed. The book says that rate should fall. It also wants more of an estate left untaxed.
The document says “should”Who acts: CongressHow: legislationp. 697 in the PDF
What the document says
“The individual state and local tax deduction, which was temporarily capped at $10,000, should be fully repealed.”
The chapter groups this with permanently repealing deductions the 2017 law temporarily suspended, naming the bicycle commuting exclusion, non-military moving expenses and miscellaneous itemized deductions, and with repealing deductions for educational expenses and special business preferences.
What the document actually says
“The individual state and local tax deduction, which was temporarily capped at $10,000, should be fully repealed.”
That sentence, in plain words
You can deduct state and local tax from your federal bill. That should end.
What this is about
People can subtract state taxes from their federal tax. A recent law limited that to $10,000. The book wants it removed entirely.
The document says “should”Who acts: Congress, TreasuryHow: legislationp. 697 in the PDF
What the document says
“the next Administration should set a meaningful cap (no higher than $12,000 per year per full-time equivalent employee—and preferably lower) on untaxed benefits”
The chapter frames this as reducing the tax bias against wages relative to benefits. It says benefit expenses other than tax-deferred retirement contributions should count toward the limit, including shared benefits such as employee gym facilities, that the cap should not be indexed to inflation, and that employers should be denied deductions for health insurance and other benefits provided to dependents aged 23 or older.
What the document actually says
“the next Administration should set a meaningful cap (no higher than $12,000 per year per full-time equivalent employee—and preferably lower) on untaxed benefits”
That sentence, in plain words
Set a limit on tax-free job perks. No more than $12,000 a year per worker.
What this is about
Some job perks are not taxed, like health cover. The book says that favors perks over pay. It wants a cap on how much can go untaxed.
The document says “should”Who acts: Congress, TreasuryHow: legislationp. 698 in the PDF
What the document says
“Treasury should support legislation instituting a three-fifths vote threshold in the U.S. House and the Senate to raise income or corporate tax rates”
The chapter describes this as creating a wall of protection for the new rate structure and notes that many states have such a requirement.
What the document actually says
“Treasury should support legislation instituting a three-fifths vote threshold in the U.S. House and the Senate to raise income or corporate tax rates”
That sentence, in plain words
Make it harder to raise taxes. Three fifths of each house would have to agree.
What this is about
Congress raises taxes by a simple majority now. The book wants three fifths to be needed. That would make a rise much harder.
The document says “should”Who acts: President, CongressHow: legislationp. 698 in the PDF
What the document says
“The U.S. should end its financial support and withdraw from the OECD.”
The chapter argues that tax competition between states and countries is a positive force for liberty and limited government, that the push for a global minimum corporate tax is an attempt to create a global tax cartel, and that the United States should not outsource its tax policy to international organizations. It notes that the United States provides about one-fifth of the organization's funding.
What the document actually says
“The U.S. should end its financial support and withdraw from the OECD.”
That sentence, in plain words
Stop paying into the OECD. Then leave it.
What this is about
The OECD is a club of rich countries. It has pushed a shared minimum tax on firms. The book says America should stop funding it and leave.
The document says “should”Who acts: Treasury, CongressHow: legislationp. 699 in the PDF
What the document says
“This massive increase in the scope and breadth of information reporting should be unequivocally opposed.”
The proposal in question would require reporting on business and personal accounts with more than $600, with banks collecting taxpayer identification numbers and filing a revised form for all affected payees.
What the document actually says
“This massive increase in the scope and breadth of information reporting should be unequivocally opposed.”
That sentence, in plain words
One plan would report far more bank accounts. The book says fight it flat out.
What this is about
A plan would have banks report many more accounts to the tax office. It would start at $600. The book is firmly against it.
The document says “is necessary”Who acts: President, CongressHow: legislationp. 699 in the PDF
What the document says
“there is a need to increase the number of Presidential appointments subject to Senate confirmation, and not subject to Senate confirmation, at the IRS”
The chapter names the Deputy Commissioner for Services and Enforcement, the Deputy Commissioner for Operations Support, the National Taxpayer Advocate and the Commissioner of the Wage and Investment division among the posts it would change, and asks for an oversight board of private sector IT experts with authority to conduct contemporaneous oversight.
What the document actually says
“there is a need to increase the number of Presidential appointments subject to Senate confirmation, and not subject to Senate confirmation, at the IRS”
That sentence, in plain words
The tax office needs more posts filled by the president.
What this is about
Most tax office bosses are career staff. The book wants more of them picked by the president. It says that would make the agency answer for its work.
The document says “should”Who acts: CongressHow: legislationp. 700 in the PDF
What the document says
“Congress should provide the Office of the Taxpayer Advocate with greater resources”
The chapter says legal protections for taxpayer rights and privacy remain inadequate, and asks that interest on overpayments match interest on underpayments rather than the government receiving a higher rate, that the time limit for suing over improper collection be extended, that the Tax Court's jurisdiction be expanded, and that the penalty structure be rationalized with the most punitive penalties reduced.
What the document actually says
“Congress should provide the Office of the Taxpayer Advocate with greater resources”
That sentence, in plain words
Give the office that helps taxpayers more money to work with.
What this is about
One office helps people the tax agency has treated wrongly. The book says it needs more staff and money.
The chapter's tax proposals, both what it calls intermediate reform and its structural proposals, plus its recommendations on the IRS, taxpayer rights and international tax.
The chapter's treatment of financial sanctions, terrorism financing, the mint and the bureau of engraving, and its extended discussion of fundamental tax reform options such as a consumption base.
The chapter distinguishes intermediate reform from fundamental reform and says the Administration should do the first and then pursue the second. Proposals here are the intermediate ones unless the entry says otherwise.
