We, the undersigned, support the following principles governing fundamental tax reform and endorse the immediate implementation of the Purple Tax Plan. Principles of Tax Reform
- Our federal tax system is broken and needs fundamental reform.
- The new system should be simple, transparent, and efficient.
- The new system should improve incentives to work and save.
- The new system should operate with very low compliance cost.
- The new system should ensure that all Americans pay their fair share of taxes.
- The new system should ensure that our poorest citizens face very limited taxation.
- The new tax system should be progressive, with the rich paying a larger share of their resources.
The Purple Tax PlanThe Purple Sales Tax
- Replaces personal and corporate income taxes with 17.5% nominal (15% effective) federal retail sales tax.
- Taxes all consumption of final goods and services, including services from homes, boats, planes, and cars.
- Permits those in economic distress to defer taxes on housing services.
- Taxes consumption by governments, non-profits, and businesses as well as households.
- Taxes annual consumption above $5 K did abroad, including services from homes and other durables.
- Provides a monthly payment (demogrant) to all households based on family composition.
- Payment level is set to ensure that those at or below poverty line pay no sales tax on the net.
- Additional annual payment of $1,000 per child to offset the elimination of Child Tax Credit.
The Purple FICA Tax
- Exempts the first $40,000 of earnings from the employee portion of the FICA payroll tax.
- Eliminates the ceiling on FICA taxation.
- Subjects to FICA tax all income from ownership rights derived from businesses in which one works.
- Provides earnings subsidy to low-earning households in lieu of refund from Earned Income Tax Credit.
The Purple Inheritance Tax
- Eliminates the federal estate and gift tax.
- Taxes at a 15.0 percent rate the cumulative value, above $1 million, of all gifts and inheritances, received.
- The government makes tax deferral arrangements for receipt of illiquid gifts and inheritances.
- In transit to the new system, taxes at a 15.0 percent rate pensions and 401(k), regular IRA, and other tax-deferred retirement account assets on which future taxes are due.
- In transit to the new system, taxes businesses and individuals on unrealized capital gains, calculated as of the date of the reform, on existing asset holdings.
- Maintains the real purchasing power of Social Security benefits; increases in prices due to the retail sales tax will raise the CPI and lead to proportionately higher benefits due to the system’s CPI indexing.