Stopeck: 'Transparent Tax will save our economy'

Editor’s note: Virginia-Highland retired lawyer Howard Stopeck, 73, is set to face incumbent U.S. Rep. John Lewis for the District 5 congressional seat in November. A Republican, Stopeck made an unsuccessful bid for Congress in 1984. The 5th Congressional District represents a diverse swath of metro Atlanta that stretches from Buckhead to Forest Park and Decatur to Sandtown.

I am Howard Stopeck, Republican nominee, United States House of Representatives, Fifth District of Georgia. Click www.GoWithSto.com to see who and what I am. If we think alike, I ask for your support. With your support, here’s some of what I’ll get done in Congress:

• 13% personal tax-cut in the Transparent Tax that I designed.
• 16% personal flat tax with $25,000 household exemption.
• 30% decrease in middle-class lifetime taxes.
• Double corporate tax makes up shortfall and increase profits.
• Create good paying free market jobs.
• American firms will stay here.
• Foreign firms will come here.
• Abolish all tax incentive loopholes and special interests.
• Abolish all tax avoidance.
• Care for the poor, more than just keep them alive.

 Click here to view a short video

Economists: See how the Transparent Tax will save our economy with an equitable, efficient, simple, revenue neutral tax to replace our current tax and undisputable statistics.

I ask you to forward this to everyone you know, even people who don’t live in the Fifth District, so they’ll see who and what I am and the laws I’ll enact that affect everyone’s wallet (and I think you will find it entertaining).

TRANSPARENT TAX TM designed by Howard Stopeck for Congress (gowithsto.com) Georgia 5th District.  Statistics by *Prof. Laurence Kotlikoff, Boston University economist

Calculation of Tax Rates Under the Transparent Tax. The Transparent Tax is a plain, simple, efficient, and revenue neutral tax reform. It has two features.  First, it replaces the current personal income tax and payroll taxes with a 16% tax on all married household personal income above $25,000. To ensure it maintains assistance to the working poor, it retains a single tax credit, the Earned Income Tax Credit. This new flat-rate, personal income tax provides households, as a group, with a 13% tax cut compared to the current system.  This loss in revenue is made up via a doubling in corporate tax revenues. Second, the Transparent Tax replaces the current corporate income tax with a 28 percent tax levied on corporate taxable income in excess of $1 million.  Corporate taxable income is measured according to the National Income and Product Account (NIPA) measure, which differs from the current definition primarily with respect to the treatment of depreciation. Transparent Tax provides for economic, rather than accelerated depreciation. In addition, each year’s total corporate income, no matter whether earned at home or abroad, is taxed. There is no deferral of foreign-source corporate income for tax purposes.

Calculating the 16% Tax Rate on Total Personal Income Under the Transparent Tax: The estimated 16% tax on personal income was derived as follows. Total personal income and social insurance receipts payroll taxes in 2011 is $1.910 trillion. (Table B80, 2012 Economic Report of the President). 2011 corp tax revenues were $181 billion. The Transparent Tax raises corporate tax revenues to $500 billion and lowers taxes on households by same amount, namely $319 billion ($500 billion - $181 billion). The revenue target, ignoring cost of Earned Income Tax Credit, for 16% flat personal income tax, is thus, $1.910 trillion less $319 billion or $1.591 trillion. Adding $59 billion for Earned Income Tax Credit (http://money.cnn.com/2012/04/12/pf/taxes/earned-income-tax-credit/index.htm) produces final targeted revenue of $1.650 trillion. According to table B27 2012 Economic Report of the President, 2011 national income, measured at producer prices (excluding taxes on production and imports less subsidies net of business transfer payments), totaled $12.486 trillion. According to 2009 (latest available year) IRS Statistics of Income (http://www.irs.gov/pub/irs-soi/09in21id.xls), 140.5 million tax returns were filed in 2009.  Providing each of these married tax returns with a $25,000 exemption comes to $1.4027 trillion. Providing each of these single tax returns with a $15,000 exemption comes to $1.266 trillion. In combination, these exemptions reduce tax base by $2.668 trillion.  Subtracting $2.668 trillion from $12.486 trillion generates a tax base of $9.818 trillion. But this figure must be increased by $391 billion to account for married households earning less than $25,000 for whom the excess of the $25,000 over their income would not be refundable.  This produces a final tax base of $10.209 trillion. Taxing this base at 16.16% produces the targeted $1.65 trillion revenue. Note that unlike the current personal income tax, personal income under The Transparent Tax is defined to accord with the measure of national income measured at producer prices.  In particular, this means all corporate income will be imputed to households and subject to taxation at the personal level regardless of what share of corp profits are paid out as dividends as opposed to held by the corp as retained earnings.  Since FICA tax is eliminated under the Transparent Tax, workers receive their full pre-tax wage and all of it will be subject to 16% tax rate. 

Calculating 28% Tax Rate on Total Corporate Income Under Transparent Tax.  The 28% corp tax rate is designed to generate an additional $250 billion in revenue, which exactly offsets the reduced revenue to be collected from households under personal income tax. Corp profits are reported in Table B28 of the 2012 Economic Report of the President. Determination of 28% tax rate needed to achieve a doubling of corporate tax revenues was based on 2011 data. Table 5-Returns of Active Corporations, IRS 2008 Statistics of Income (http://www.irs.gov/pub/irs-soi/08co05ccr.xls) was used to determine the share of total corporate income that would be subject to taxation after exemption of first $1 million of corporate income. Specifically, the table was used to calculate average taxable income per return at different ranges of gross business receipts. If average net income per return in a particular receipts range-category was less than $1 million, all taxable income in the range-category was assumed to avoid taxation under The Transparent Tax. For range-categories who average net income per return exceeded $1 million, a calculation was made of average net income in excess of $1 million in the range-category. This amount was then multiplied by the total number of returns in the range-category to determine total taxable net income under The Transparent Tax in the range-category. Summing these amounts and dividing by total net income provided the estimated share of NIPA-measured corporate profits 91 percent - will be subject to Transparent Tax. Multiplying this share by NIPA-measured corp profits (estimate for 2011 of $1.953 trillion) provided the corp tax base for The Transparent Tax. Multiplying this tax base by .281 produces the targeted revenue of $500 billion. 

Corporate Total Receipts: Amount from which the 28% corp flat income tax is assessed is total receipts or income [Business receipts, interest, interest on govt obligations, rents, royalties, net S-T capital gain less net LT loss, net L-T capital gain less net ST loss, net gain, non-capital assets, other receipts], less total expenses [cost of goods, compensation of officers, salaries and wages, rent of business property, taxes paid, interest paid, amortization, depreciation, advertising, pension profit-sharing, stock annuity, employee benefit program], less $1 million exemption, or zero tax if exemption exceeds total receipts. 

Corporate Profit: Defined by National Income and Product Accounts as inventory valuation and capital consumption adjustments is net current-production income of organizations treated as corporations in NIPA's, consisting of all entities required to file Federal corp tax returns, including mutual financial institutions and cooperatives subject to Federal income tax; private noninsured pension funds; nonprofit institutions that primarily serve business; Federal Reserve banks; and federally sponsored credit agencies. With several differences, this income is measured as receipts less expenses as defined in Federal tax law. Among these differences: Receipts exclude capital gains and dividends received, expenses exclude depletion and capital losses and losses resulting from bad debts, inventory withdrawals are valued at replacement cost, and depreciation is on a consistent accounting basis and is valued at replacement cost using depreciation profiles based on empirical evidence on used-asset prices that generally suggest a geometric pattern of price declines. Because national income is defined as income of U.S. residents, its profits component includes income earned abroad by U.S. corp and excludes income earned in the U.S. by the rest of the world. (See "inventory valuation adjustment" and "capital consumption adjustment.")

Calculating the present value of lifetime taxes of poor and middle income households by renowned Boston University economist, Prof. Laurence Kotlikoff, esplanner.com financial planning software. Couples are from Georgia, 40 years old, have 8 and 12 year old children, work to 67, live to 100.

• Poor Households: Each spouse earns $15,000, $50,000 mtge. no retirement or checking, $700mo rent. Lifetime tax under current tax = $61,462; under Transparent Tax = negative $2,207; under 9-9-9 = $176,104 [triple their tax]. [Annual: $30,000 less $25,000 household exemption = $5,000 x 16% = $800 tax, less $5,112 Earned Income Tax Credit = $4,312 refund to poor and no FICA.]
• Middle-Class Households: Couple earn $100,000 work to 66, each spouse has $100,000 401(k), contributes $1,500 to 401(k) with $1,500 match, paying off $150,000 mtge. and house expenses. Middle-class lifetime taxes under current tax = $498,121; under Transparent Tax = $347,157 [30% middle-class tax decrease]; under 9-9-9 = $638,732 [27% tax increase].

*Laurence J. Kotlikoff, William Fairfield Warren Professor, Boston University Professor of Economics, Boston University is Fellow of  American Academy of Arts and Sciences, a Fellow of Econometric Society, Research Associate National Bureau of Economic Research, President Economic Security Planning, Inc., specializing in financial planning software, columnist for Bloomberg, columnist for Forbes, blogger for The Economist. He e HE received his B.A. in Economics from University of Pennsylvania in 1973 and his Ph.D. in Economics from Harvard University in 1977. From 1977 through 1983 he served on faculties of economics of University of California, Los Angeles and Yale University. In 1981-82 he was a Senior Economist with President's Council of Economic Advisers. He is author or co-author of 14 books and hundreds of professional journal articles. His most recent books are Jimmy Stewart Is Dead (forthcoming 2/22/2010, John Wiley and Sons, Spend ‘Til the End, co-authored with Scott Burns, Simon & Schuster, The Healthcare Fix (MIT Press), and Coming Generational Storm (co-authored with Scott Burns, MIT Press). He publishes extensively in newspapers, and magazines on issues of financial reform, personal finance, taxes, Social Security, healthcare, deficits, generational accounting, pensions, saving, and insurance. He served as a consultant to the International Monetary Fund, the World Bank, the Harvard Institute for International Development, the Organization for Economic Cooperation and Development, the Swedish Ministry of Finance, the Norwegian Ministry of Finance, the Bank of Italy, the Bank of Japan, the Bank of England, Govt of Russia, Govt of Ukraine, Govt of Bolivia, Govt of Bulgaria, Treasury of New Zealand, the Office of Management and Budget, the U.S. Dept of Education, the U.S. Dept of Labor, the Joint Committee on Taxation, Commonwealth of MA, American Council of Life Insurance, Merrill Lynch, Fidelity Investments, AT&T, AON Corp., major U.S. corporations. He provided expert testimony on numerous occasions to committees of Congress including the Senate Finance Committee, the House Ways and Means Committee, and the Joint Economic Committee.

Howard Stopeck for Congress, Fifth District of Georgia, gowithsto.com