The 10 biggest federal income tax breaks (and how much they cost)

[Mr.Phips]

The preferential treatment of dividends needs to be eliminated in any tax reform.  The double taxation argument is ridiculous and false.  It's like saying I am double taxed because my employer pays taxes on what they earn and then I get taxed on what they pay out to me.  And dividends are not even mandatory the way wages are, they are a perk.  Companies don't even HAVE to pay dividends.  They can reinvest their earnings back into the company if they choose.

This is one tax break that needs to go.  With itemized deductions, I would propose a $50,000 a year ceiling for individuals and $100,000 ceiling for couples exluding charitable contributions.  That way you don't see people like Mitt Romney getting to deduct $2,000,000 a year in state taxes.

These are two tax expenditures that need to be yanked from the tax code before we even think about lowering rates.

[Mr.Phips]

So then you just sell some stock in lieu of dividends, a policy Microsoft had. It never paid dividends for tax reasons. If folks wanted some cash, they just sold some stock - at capital gains rates. Plus it causes economically inefficient accretions of corporate cash. And with the corporate tax, to the extent it is not passed on in higher prices, it is a double tax. Ideally, the corporate tax should go away (and with the pass on of part of that cost in the form of higher prices, it is a regressive tax), and then, and only then,  tax dividends as ordinary income.

Then capital gains should also be taxed at ordinary rates.  I would favor lowering the corporate rate to something like a flat 13%, while taxing dividends and capital gains at ordinary rates.