Tempe, AZ (PRWEB) November 19, 2015 -- While proposing a Flat Tax has a lot of appeal on the surface, Tax-Free Wealth Author Tom Wheelwright raises 5 unintended economic consequences of flat tax proposals being discussed by Presidential Candidates Dr. Ben Carson, Ted Cruz, Rand Paul, and more (2016 Presidential Candidates on Taxes Ballotpedia summary). Many candidates have overlooked how a flat tax can negatively impact the economy if tax incentives that allow for higher tax rates are repealed.
CPA and CEO of ProVision Wealth Tom Wheelwright emphasizes that the current tax law is a series of incentives for business owners and investors. If a flat tax is adopted, Wheelwright predicts these 5 unintended economic consequences on the US economy:
1. Oil and Gas prices would go up.
2. Low Income Housing investments would drop significantly.
3. Small Business growth would slow for startups.
4. Clean Energy adoption for wind and solar would be halted.
5. Research and Development for US technology would slow significantly.
Impact 1 - Oil and Gas prices would go up.
Most of America is enjoying the lowest prices at the pump in the past two decades. Manufacturing, transportation, tourism and other industries benefit from these low prices. If the tax incentives for oil and gas drilling were repealed in order to reduce rates to 15% or 20%, independent oil producers who are keeping the prices down thru fracking in the Balkan oil fields in North Dakota and West Texas would quickly run out of financing. Why? Simply because investors would stop putting money into the risky business of drilling and recovering oil and gas.
A simple parallel is what happened to the real estate industry when real estate incentives were removed for doctors, lawyers and other high-income individuals in President Reagan’s tax reform. Most will recall that shortly after the 1986 tax act was passed, within a couple of years, the savings and loan crisis occurred. Most historians now attribute the crisis to the 1986 change in tax law for real estate investors.
Impact 2 – Low Income Housing investments would drop significantly.
Investors in low-income housing receive many tax benefits for investing in this industry. There are tax credits as well as tax deductions. Arguably the only reason anyone would ever invest in low-income housing is because of the tax benefits associated with it. If these tax benefits disappeared, the likely result would be a steep drop in low-income housing built in the U.S.
Impact 3 – Small Business growth would slow for startups.
The main reason people decide to start their home-based business is for the tax breaks. How many times has Congress passed legislation granting special deductions to small business as stimulation for more small businesses being created and expanded? The likely outcome of the elimination of the tax benefits for business would be fewer business startups. Essentially, the tax benefits for an employee would be the same as those for a business owner, even though the risk of owning a business is considerably higher.
Impact 4 – Clean Energy adoption for wind and solar would be halted.
With a flat tax, all of the Clean Energy tax incentives are eliminated. There are currently credits, deductions and other incentives for wind, solar and hydroelectric energy. Many people would stop buying solar panels, electric cars and windmills if there were no tax credits.
Impact 5 – Research and Development for US technology would slow significantly.
Research and Development tax credits are vital to technology and innovations. These deductions are significant incentives for pharmaceutical companies to develop new drugs, for medical device companies to develop new ways to help sick and injured people, for aerospace engineers to develop new airplane technology and for technology in general. The U.S. is not the leader in tax benefits for technology now. France and many other countries have better tax incentives than the U.S. and are attracting innovators as a result. Without R&D tax incentives in the U.S., innovations would slow significantly.
The fact is, people hate paying taxes and are driven to take action when tax benefits are available. If tax rates are simply lowered, people are much more likely to invest in the US economy. While watching the Presidential Candidates propose flat taxes, consider these unintended economic consequences. All tax reform has consequences, and not all of those consequences are intended.
Liz Kelly, Goody PR, 310-987-7207
Tom Wheelwright, Author of Tax-Free Wealth, CPA and CEO of ProVision Wealth (Tempe, Arizona), is a leading tax and wealth expert, speaker, and a Rich Dad Advisor/Speaker for Robert Kiyosaki, who wrote Rich Dad Poor Dad. He is best known for making taxes fun, easy and understandable, and specializes in helping entrepreneurs and investors build wealth through practical and strategic ways that permanently reduce taxes. He is the Founder of WealthStrategyU, and has been featured in Accounting Today, Investors Business Daily, Deseret News National, Go Banking Rates, and as a guest on the ABC Radio News, AM870 The Answer, Real Estate Guys Radio Show, Money Radio 1510 Business for Breakfast, AZTV Morning Scramble and more. http://taxfreewealthadvisor.com
Liz Kelly, Goody PR, http://goodypr.com, +1 (310) 987-7207, [email protected]
SOURCE Goody PR