Apple — as of July 2015 — was sitting on $203 billion in cash.
A minimum wage single worker in California employed fulltime is paying $1,180 in federal taxes.
PG&E between 2008 and 2010 netted $4.8 billion in profit but didn’t pay a cent in federal income tax.
Those are just three reasons why Ben Carson’s flat tax rate proposal deserves serious consideration.
Carson’s plan is simple, clean and straightforward. It includes no tax shelters, no tax credits, and no deductions and eliminates the ability of industrious tax lawyers to devise and/or find loopholes.
A 14.9 percent tax rate would apply to all personal and corporate income. Personal income is taxed only once — when it is initially earned. Personal taxes against capital gains, interest and dividends would be eliminated.
It would have one other key provision — income only above 150 percent of the federal poverty level will be subject to a 14.9 percent federal income tax. That would exclude any income less than $36,375 from being subject to taxation for a family of four, $15,930 for a family of two or $11,170 for individuals.
Apple is holding 90 percent of its cash offshore. There are several reasons but the driving force is trying to minimize financial hits from the federal tax code.
Under Carson’s plan, the single Californian working full-time making the state minimum wage of $10 an hour that grosses $20,400 a year would be taxed only on $2,900 and pay a federal tax of $432.10. That’s opposed to the current tax code that taxes them on $10,250 of income for a federal tax bill of $1,080. That is almost a 30 cent per hour pay raise.
PG&E under Carson’s plan would have paid $715 million in taxes on the $4.8 billion in profit between 2008 and 2010 — not a penny less nor a dime more. Its taxes under the existing tax code for those three years would have been $1.7 billion.
But in case you haven’t noticed no big corporation pays 35 percent in taxes as federal tax tables dictate. That’s because they take advantage of a host of deductions and loopholes. And — in the case of PG&E being able to zero out their taxes for three years while at the same time pocketing $1 billion in tax refunds — they often sweet talk Congress into tax credits.
It also means that if Carson’s flat tax was in place today, PG&E’s final fine for killing eight people and injuring 30 others in the San Bruno natural gas line explosion would come 100 percent out of their profits instead of being taken as a tax deduction against their tax liability. In other words the current tax system with its intricate web of deductions, loopholes, and such actually allows reckless corporation that are slapped with fines for endangering people and the environment to simply pass the fines onto the back of taxpayers by reducing their corporate tax liability.
Such a flat tax also has the advantage of generating jobs.
People would put their money to work by re-investing without having to worry about being subject to capital gains taxes of 20 percent. Carson’s treatment of corporate capital gains at 14.9 percent would also further enhance job generation.
The architects of Carson’s plans peg job generation from the flat tax at 5.3 million. That would mean more opportunities for upward mobility so that minimum wage workers don’t have to push to be paid $15 an hour at McDonald’s but instead can find gainful employment elsewhere.
A rough look at the mortgage deduction — the biggest advantage in the tax code for working and middle class families — shows Carson’s 14.9 percent flat tax a virtual wash.
By eliminating tax credits and tax deductions, American taxpayers and business alike will be driven to make financial decisions purely on whether they make sense for them and not due to tax advantages. It would essentially end social engineering via the tax code.
If someone wants to spend $80,000 to buy a Tesla they wouldn’t get a $7,500 federal tax credit to do so.
If PG&E invests in infrastructure to allow them to keep making money— or making more money, they won’t get a tax credit to do so.
Instead taxpayers will all pay 14.9 percent on all income that exceeds the threshold of 150 percent above the federal poverty line that varies based on household size. At the same time businesses will pay 14.9 percent on profits.
There will be no convoluted tax rules put in place to help various segments of the population and business world beat the taxman.
The bottom line would mean the only way business could make money would be to put it to work instead of trying to engineer a tax loophole.
And for those people that think the mortgage deduction is critical for house sales should consider this: Canada does not allow mortgage interest deduction for homeowners yet they have a higher rate of homeownership — 70 percent — compared to 65 percent in the United States.
The American Dream can only grow and spread to people on the lower rings if free enterprise and investment are encouraged and everyone pays their fair share of taxes to support the infrastructure needed to make it happen.
What better way than to encourage firms such as Apple to invest its billions to create jobs, allow the working poor to be given breathing room and the chance to advance, and making sure firms like PG&E pay their fair share of taxes.