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The Purple Tax Plan

We, the undersigned, support the following principles governing fundamental tax reform and endorse immediate implementation of the Purple Tax Plan.

Principles of Tax Reform

  1. Our federal tax system is broken and needs fundamental reform.
  2. The new system should be simple, transparent, and efficient.
  3. The new system should improve incentives to work and save.
  4. The new system should operate with very low compliance cost.
  5. The new system should ensure that all Americans pay their fair share of taxes.
  6. The new system should ensure that our poorest citizens face very limited taxation.
  7. The new tax system should be progressive, with the rich paying a larger share of their resources.

The Purple Tax Plan

The Purple Sales Tax

  1. Replaces personal and corporate income taxes with 17.5% nominal (15% effective) federal retail sales tax.
  2. Taxes all consumption of final goods and services, including services from homes, boats, planes, and cars.
  3. Permits those in economic distress to defer taxes on housing services.
  4. Taxes consumption by governments, non-profits, and businesses as well as households.
  5. Taxes annual consumption above $5 K done abroad, including services from homes and other durables.
  6. Provides a monthly payment (demogrant) to all households based on family composition.
  7. Payment level is set to ensure that those at or below poverty line pay no sales tax on net.
  8. Additional annual payment of $1,000 per child to offset elimination of Child Tax Credit.

The Purple FICA Tax

  1. Exempts the first $40,000 of earnings from the employee portion of the FICA payroll tax.
  2. Eliminates the ceiling on FICA taxation.
  3. Subjects to FICA tax all income from ownership rights derived from businesses in which one works.
  4. Provides earnings subsidy to low-earning households in lieu of refund from Earned Income Tax Credit.

The Purple Inheritance Tax

  1. Eliminates the federal estate and gift tax.
  2. Taxes at a 15.0 percent rate the cumulative value, above $1 million, of all gifts and inheritances received.
  3. Government makes tax deferral arrangements for receipt of illiquid gifts and inheritances.

Transition Rules

  1. In transiting 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.
  2. In transiting to the new system, taxes businesses and individuals on unrealized capital gains, calculated as of the date of the reform, on existing asset holdings.
  3. 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.