In his tax reform plan, GOP presidential front-runner Donald Trump proposed repealing three different taxes: the death (estate) tax, the marriage penalty and the Alternative Minimum Tax. Not reducing the rates, mind you, not increasing the income threshold — but full repeal.
Targeting punitive, widely despised and counterproductive taxes for repeal is a bold way for presidential candidates to distinguish themselves from the herd.
As some of the other presidential candidates begin rolling out their tax reform plans, they may want to double down by putting even more taxes on the repeal table, such as:
• Cadillac tax. Currently getting the most repeal discussion is the "Cadillac tax." Even Democratic presidential candidate Hillary Clinton wants to repeal it.
Beginning in 2018, employers will have to pay a 40% excise tax on any amount spent on employees' health plan above $10,200 for an individual or $27,500 for a family.
The result is that employers will trim their health coverage by dropping benefits or raising deductibles in order to avoid the tax.
This tax, which was part of the Affordable Care Act, or ObamaCare, has become so objectionable that more than 40 Democrats who voted for ObamaCare are demanding repeal.
While most Republican presidential candidates say they want to repeal all of ObamaCare, they should go ahead and specifically highlight the Cadillac tax. It is at least one tax repeal that could get strong bipartisan support.
• Medicine cabinet tax. Prior to the passage of the Affordable Care Act, Americans could use funds in their tax-free Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs) and Flexible Spending Accounts (FSAs) to purchase most non-prescription and over-the-counter medicines. No more. If they buy those drugs now, they have to pay out of pocket, including any taxes.
That makes no sense. There has been a longstanding effort to encourage patients to replace brand-name drugs with generic or over-the-counter drugs whenever possible.
Allowing them to use their tax-free health accounts to buy those drugs, rather than paying out of pocket, creates a big financial incentive for them to do so.
• Tanning tax. Presidential candidates like to be seen as supporters of small businesses. Well, the 10% tax on indoor tanning services is a small-business issue.
The only reason why this tax was included in ObamaCare was to raise revenue — an estimated $2.7 billion over 10 years — so that the president could claim the legislation was "paid for."
But, as in so many instances, those revenues have fallen far short of the predictions.
Repealing this tax is a no-brainer. There's no political constituency in favor of hammering small businesses, especially tanning businesses. It was imposed because it was perceived as getting the least political resistance.
• Surtax on investment income. This 3.8% tax applies to investment income for high-income earners. That doesn't sound like much, but when added to other Obama administration tax increases, the tax rate on the highest earners' capital gains jumped from 15% in 2012 to 23.8% in 2013. And the tax rate on dividends exploded from 15% to 43.4%.
The problem is that dividend-paying stocks and funds are very popular, especially with retirees. The dividends provide some cash flow to meet their expenses. But a 43.8% tax rate will turn people away from those options — just as a 43.8% tax on any product or service would make people think twice about buying it.
• Medical device tax. Like the tanning tax, this tax was imposed only to raise revenue for ObamaCare, an estimated $30 billion. But as the population ages, more and more Americans are turning to medical devices such as artificial knees and hips, pacemakers, cardio defibrillators, artificial disks for spines, etc. So you might call this a tax on the elderly.
Ironically, at a time when the Obama administration wants to increase U.S. manufacturing jobs, the medical device tax targets manufacturing. As Sen. Amy Klobuchar, a Minnesota Democrat, says, "This is a tax on manufacturing, and I've always been in favor of eliminating it."
As the presidential campaign continues, we're going to have a national debate about tax reform. And one of the best ways to ignite that debate is to outline which taxes a candidate would like to repeal. The three tax repeals Trump proposed, plus these five, are a good place to start.