Monday, December 8, 2008

A Tax Simplification Plan

I've noticed, folks, that most conservatives tend to favor a flat income-tax. They feel that the more "successful" people in a society shouldn't be singled out in such a manner. They also feel that to do so acts as a major disincentive for economic growth - 1) in that it stifles an individual's motivation to succeed and 2) in that it feeds the growth of the federal government...................................................Liberals, they, on the other hand, tend to argue for a more graduated form of taxation (those on the higher end of the income spectrum having to pay a higher percentage of their income - in the form of taxes - to the government). They feel that these people, because they MAKE and Have more money, CAN and SHOULD pay a higher percentage. Some in fact have gone as far as to say that their doing so is a "patriotic" duty..................................................How 'bout this for a compromise, folks? We agree, conceptually, to the idea of a flat tax (20-30%, whatever the rate that would be revenue neutral). But, BUT, we make the first $30-50,000 of income that a person makes tax free. And then we make for no deductions/exemptions - zero, nada. You just pay a certain percentage of your income in taxes, and that's it. As for capital gains, interest, and dividends, you pay the same rate for those, as well (though, yes, I'd advocate that these be adjusted for inflation).........................................................You see what I'm saying about a compromise here? It's a flat tax, yes, but it has a liberal exemption for those on the lower end of the income scale. And so, too, it gets rid of all those nasty exemptions that have a tendency to benefit the richest amongst us. Add to that, it totally simplifies the tax code big time. What do you think?


Voltron said...

I've always favored going to a sales tax type of system.

People who make more money buy more (and more expensive) things and would naturally pay more.

Of course the necessities like food and medicine would be charged at a lower rate and waivers could be granted in poverty cases.

You would before ANY other plan have to abolish the current tax system though or else in the future we'd just end up with both.

Anonymous said...

What your proposing sounds reasonable and i'm not strongly against it............but I would prefer a hybrid system that is a combination of what you and Voltron are proposing.

For example I think it should be sales tax based at the same rate for everyone with food bought in the grocery store or basically ANY non prepared food tax free as well as medications/medical supplies being tax free............the other component would be a 5% flat tax for those earning $250,000-1 million and a 10% flat tax for those earning over 1 million.

getting rid of the IRS and the BS over complicated tax system we currently have could be good if done fairly1

Will "take no prisoners" Hart said...

I think we're working toward something here. The stregth of Voltron's position is that it gets rid of the IRS. The only problem I have is that a sales tax tends to be regressive. Wealthy people WILL spend more but it will be a smaller percentage of their income. Making food, medicine, and clothing under a certain amount exempt is a strong step in the right direction. And a flat tax on the wealthy is a way to introduce equitability (as long as it doesn't continually inch upward).

Stella said...

Yeah, we're in great shape in California. We're dealing with almost 8% unemployment and Ahnold's been threatening to tax doctor's visits. Food and medicine should not be taxed; I am not sure I agree about clothes.

I always thought a graduated tax would work. Each bracket pays a certain tax percentage. Joe Biden defends no taxes for (what's left of) the middle class and calls taxation a "patriotic duty."

Anonymous is right: a graduated tax would also rid America of the IRS—no more loopholes: just, "here's what you earn, here's what you pay." I'd probably take your 5% and 10% suggestion, and bring it up to 10% and 15%. I'd even welcome a 10% tax: it's less than most middle class people pay now.

A great 2005 article from the Rockridge Institute provides sound reasons why taxes are patriotic.

Great post, Will.