Given all the rhetoric about spending and what not over the recent debt ceiling rise debate, I thought that I would put forth two ideas I have to fix the tax code. Both of them are fairly simple to implement and for the individual taxpayers to understand. Here they are.
Tax Plan 1-The Tea Party Tax Plan:
This plan eliminates all taxes, federal, state and local, no income tax, so sales tax, no property tax, even the ‘death’ tax is gone. It cuts out all fees and regulation costs. The individual and businesses are able to keep 100% of what they earn.
With this tax plan, there will be no government interference with your money or how you choose to spend it. There will no longer be government funded programs or expenditures that you will not support. Everything that happens will depend on the individual. If you want your children educated, then do it yourself or hire someone who is qualified. If the road in front of your house needs repairing, it is up to you. If your house catches fire, hopefully some of your neighbors will have hoses. And also hopefully, they will have dug wells so they have access to water. Everything is now in the individuals hands, no more government waste to be concerned with. With this plan, businesses will play on a truly level playing field because all of those pesky regulators will be gone. There will be no more hampering of progress by such agencies as the FDA, the EPA or even the SEC. With this tax plan America will see a future like they have never even conceived of.
Tax Plan 2-The Moderate Plan
This plan is not quite so conservative as the previous, but I think it presents a great many possibilities for simplification of the tax code and an over all reduction of the tax rates.
All income is tallied up at the end of the year and a single rate is paid on that total sum. Whether the income came from payroll, bonuses, capital gains, inheritance, royalties, free lance work, it doesn’t matter, any kind of income is treated the same. At the end of the year, all sources of income are added up, the deductions are subtracted and then the appropriate tax rate is applied to the net income. Businesses after subtracting the cost of running the business will pay on the profits they have made.
Deductions will be adjusted as well. Charitable contributions will be greatly reduced, no accounting more than 10% reduction of the total taxable income. Contributions will also work on a sliding scale. For instance: If your net income is $30,000 and you give away $3,000, then that amount will be the full ten percent off your taxable income. If on the other hand, someone makes$300,000 and donates $30,000, that will only add up to a 4-5% reduction. This includes businesses. Gone are the days when multibillion dollar corporations have no taxes to pay because of these contributions and other loopholes.
Because all income will be treated at one rate, not special rates for capital gains, another for hedge fund manages yet another for inheritances, the total tax rate will be much lower. Even though I am no economist (and they would have to do some tinkering with numbers to figure out the details), I think the maximum tax rate would be somewhere between 25-30%, much lower than it is now over all.
Those people at the lowest end of the income brackets will pay little to no federal taxes and I mean even up to that family making $30,000. The ideal situation is that they are spared the tax burden so they can then start saving and building wealth themselves. It will empower those lower and middle class incomes to become a larger part of the whole through savings.
I myself prefer the latter plan over the former. There has been a vast redistribution of wealth in this country, as some have claimed, but it is not the poor and middle class who are seeing this shift. Rather, it is the wealthiest in the nation, but that will be addressed in another post.