Suggestions for President Obama & the Republicans on Tax Reform

white house                 gop

 

Today, I was watching CNBC while eating lunch. The President talked to business leaders about issuing facing America. One issue was corporate tax reform which to me doesn’t make sense, when 70% of economic growth comes from consumer spending. U.S. corporations have so much cash that they are buying back shares instead of expanding their businesses. Giving them more cash by lower taxes will not lead to more economic growth.

On the other hand, student debt is crippling the American economy, young people are putting off starting a family and buying their first home. Middle class families are also suffering with additional debt because they make too much income to get government aid for their kids but not enough to pay tuition fees. Interest payments on debt doesn’t create jobs or economic growth.

Any tax policies that increase student aid, lower interest rates on student loans or larger tax deductions will put more cash into young people’s pockets. Family formations leads to spending and economic growth. The problem is the government still has large annual deficits, so how can they pay for these changes.

I have two suggestions:

  1. Increase the tax on corporate stock options, fat cat executives’ pay low capital gains tax on options. Image making a million dollars in stock options and only paying tax on half of it. Hold the options for over a year and pay the lower long-term tax rate. These same executives take company cash to buy back shares to artificially increase the price of their stock.
  2. Mortgage interest deductibility has to have a limit. U.S. tax payers are bankrolling the cost of mansions and second homes. Imagine that a yacht is classified as a second home and is eligible for mortgage interest deductibility.

The outstanding student debt levels in the U.S. is over 1.2 trillion dollars and still climbing! It is time for the 1% to help give the next generation the opportunity to succeed!

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