Herman Cain caught in BOLD debate LIE!!!

[Texas Contrarian]

Originally Posted by Jackie S

Solution: Treat all income as the same, whether it was "earned" or not.
Take away all loopholes. Period. If you are in the 37 percent bracket, write a check.

I don't think that would work very well, for the reasons outlined in my previous post -- especially if you applied the high rates sought by liberals today, or for that matter even if you kept the top bracket rate at 35%. That's high enough to produce serious distortive effects on capital gains and dividend taxation.

It seems to me that a better solution would be something along the lines of the Simpson-Bowles recommendations, as their plan broadens the base while keeping rates low -- and greatly simplifying the code.

To the issue of costs of compliance, I ran across this explanation today by Princeton's Uwe Reinhardt:

http://economix.blogs.nytimes.com/20.../?ref=business

He makes some very interesting points.

We need a tax code that looks like it was designed on purpose, not some monstrosity that's been junked up with more and more crap every year for the last 25 years.

[TexTushHog]

CaptMidnight, you can get rid of the "holding forever" issue by eliminating the step up in basis at the time of death, no?

And Cain's plan still exacerbated the problem posed by Buffett's situation because he also eliminates the inheritance tax. My heirs could inherit my portfolio and pay no tax on the accrued gains or the value of their windfall if I choose to leave it to them rather than charity (as I certainly intend to do, unless it much, much larger than I anticipate).

[Texas Contrarian]

Originally Posted by TexTushHog

CaptMidnight, you can get rid of the "holding forever" issue by eliminating the step up in basis at the time of death, no?

If no one sells any of the subject assets, it doesn't matter whether or not the basis is stepped-up.

In Buffett's case, for instance, the assets are owned by a holding company, which survives in perpetuity. As I understand it, he intends to give almost all his shares to chartitable organizations (primarily the Gates foundation).

[CuteOldGuy]

The step up in basis at death is due to the entire estate being subject to the estate tax at its market value. The property is taxed before the credit is applied, so the step up in basis is perfectly reasonable. The tax code itself is unreasonable, but in an atmosphere of unreasonablility, the step up makes sense. Savvy?