SIMPLIFY  THE  TAX  SYSTEM:
Something we can do now is to simplify the tax system Basically, make it a flat 17% on all income above the poverty level (including inheritance income, but excluding tax-derived benefits such a Social Security and Medicare, which are derived from taxes in the first place), eliminate corporate taxes which are simply passed on to consumers as a hidden sales tax, and eliminate all tax loop-holes and tax deductions.  The details are as follows:

A tax system based on a  17%  Flat Income Tax Percentage, where:
[01]   only personal types of income are taxed (e.g. wages, interest, dividends, inheritance, capital gains when liquidated, etc.);  corporations pay NO income tax, since corporate taxes are like  hidden sales taxes that are passed on to consumers, and all sales taxes are regressive;
[02] it is the ONE and ONLY federal tax that may apply to each tax payer;
[03] there is NO tax on income less than  N  times the established poverty level; there is tax ONLY on income that exceeds  N  times the established poverty level;
[04]    is a multiplier determined by the government, that could be higher, but never less than 1.0 ;  the poverty level for 1 person, married couple, family of  1, 2, . . . , TOTAL  dependents will be determined by a government agency, and is recalculated annually; 
[05] starting 01-January of each year,  no one starts paying any income tax until their annual income exceeds  N  times the established poverty level, and only on income above  N  times the established poverty level;  the total income to date will be maintained by the government (since some people may have multiple sources of income); employers determine tax to be paid (if any) based on the total income to date;  this greatly simplifies (if not eliminates) the annual income tax return;
[06] all income is taxed at the same tax percentage, including:  inheritance, gifts, payroll, wages, prizes, lotteries, gambling, etc.;  i.e. all money that exchanges ownership, that is not derived from taxes (such as Social Security and Medicare benefits);
[07] there is NO tax on Social Security, Medicare, or welfare benefits, since those are benefits derived from taxes; taxes on funds derived from taxes makes no sense;
[08] there are NO tax loop-holes, tax deductions, or upper-level income caps (i.e. such as the current regressive caps for Social Security taxes);
  [09] the purpose of the tax system and the welfare system should not overlap; it causes unnecessary complication which could lead to abuses of both systems;  charities, deductions, and subsidies merely serve to make the system ripe for abuse;
 
  The benefits of a Flat Income Tax Percentage which make it more fair is the:
  ® elimination of the graduated tax scale that forces the wealthy to pay higher percentages based on income;
  ® and the elimination of the tax loop-holes and deductions, which makes the tax system very complicated, and allows everyone (but the lower income groups) to reduce or avoid paying taxes, and allows too much tax evasion; over-complication leads to abuse;
® there are no high sales tax imposed on exported products;
® still allows for accounting for Social Security and Medicare; if necessary, those percentages can still appear on pay-roll statements; for example:  8% for Social Security, and 1% for Medicare; and the remaining 8% for federal income tax; tax payers would still file a 1040 tax return annually, but it would be to merely resolve any over-payment or tax due, which should be minor, since totals are tracked by computer;  tax payers would still (as now) receive a periodic Social Security and Medicare statement showing their contributions;
® everyone pays the same percentage (except the poor, who pay little or nothing); what could be more fair and require the least changes to the current tax system ? 
  ® NOTE:   The 17% flat tax rate was arrived at by dividing the total current federal tax revenues (about $2 trillion in 2004) by the U.S. GDP (about $11 trillion in 2004), and subtracting 1% (i.e. 18% - 1% = 17%).   The federal government should be able to reduce spending by 5.6% which accounts for that 1% reduction for the 17% Flat Income Tax Percentage.
 
For example, for  N  factor of 1.0  and a poverty level of $12K for a single person:

That is a
linear tax scale (i.e. flat 17%) on income above the poverty level (e.g. $12K for a single person), which is most fair (based on numerous polls), avoids the common argument that plague the more progressive tax systems (i.e. as being unfair by taxing higher income at increasingly higher tax rate percentages), and does not punish the poor, due to the low-income-exemption-level exemptionEveryone pays the same flat 17% on all income above the low-income-exemption-level. 
    
The Flat Income Tax Percentage system (above) would be better than what we have now, which is a severely abused, overly complicated, regressive, system, full of gaping tax loop holes, tax shelters, exceptions that are unfair and give rise to a multi-billion dollar industry just to calculate taxes,  mostly benefits the wealthiest, and is hardest on the poorestFor instance, consider the unfairness of taxing earned labor income at a higher income tax rate than capital gains?  Why not tax all things at the same flat rate?   

Also, any new tax system has the dilemma of the possible necessity to drag portions of the old tax system along too (i.e. Social Security, Medicare, Medicaid, etc.)

Also, here's a very interesting point.  One question about any tax system that is continually asked is
:

    Will everyone (excluding the poor) pay their fair (or equal) percentage of tax related to income ?

Interesting isnít it?  What does that tell you?   It seems many people still want the end result of any tax system to be that everyone pays their fair (or equal) percentage of income (excluding those below the poverty level, which would pay zero tax). 

So, if we are continually tasked with proving that any tax system, in the end, must fairly tax income the same percentage (excluding the poor who pay zero tax), then why not simply retain the income tax, except make it a flat tax rate of 17%, eliminate all loop-holes, deductions, subsidies,  which will also mean little or no changes for accounting for Income tax, Social Security tax, and Medicare tax.   

Thus, all income is taxed the same 17% (i.e. all income above  N   times the poverty level), no more abused loop holes, deductions, subsidies, or other clever over-complications designed to evade paying taxes.


States, counties, and cities should adopt a flat income percentage tax too, since all sales taxes are regressive:
® implement a similar state Flat Income Tax Percentage system similar to the system described above.
® eliminate all other taxes (e.g. sales tax, property tax);  sales taxes punishes the poor with out a low-income-exemption-level or rebate of some sort;

The problems with a national sales tax system:
® All sales taxes are regressive (i.e. as income decreases, the income tax percentage increases; as income increases, the income tax percentages decreases).  A Flat Income Tax Percentage would be far easier to monitor than a national sales tax because there are far fewer (in number) incomes than the billions of sales transactions in a consumption sales tax system.  There must be some way to accurately track taxes due and taxes paid.
® A Flat Income Tax Percentage would be fairer than a consumption sales tax system, because no sales tax system can prove that the tax burden will be evenly distributed (relative to income), and the middle-income-group may quite likely end up bearing most of the tax burden.  After all, while some say the wealthy spend more, it has not been proven that the wealthy spend enough to ensure that they bear a fair portion of the tax burden (relative to income).  All flat sales taxes are regressive unless everyone spends all of their income, in which case a flat sales tax is neutral.   No flat sales tax can ever be progressive. 
® A Flat Income Tax Percentage would not require vast changes.  One serious problem with a switch-over to a consumption sales tax system is that many people have savings and retirements that they have already paid income tax on, and they would now have to also pay a new consumption sales tax when they spend it, which means they will be taxed twice
® A Flat Income Tax Percentage would not require a reduction in salaries and incomes, which is essentially what would have to occur in a consumption sales tax system, because the theory behind the consumption sales tax system is that everything would cost less.  That is, the employers must cut employees wages, because no income taxes are being withheld, and the money has to come from somewhere.   So, if your salary is $50K a year today, but you take home $40K after income taxes, there should be a savings of $10K, and it must come from reducing your salary by $10K to $40K.  Theoretically, your take-home pay is the same as before, since you now keep 100% of your income. 
   
    Neutral, Progressive, and Regressive Taxes (click here to enlarge chart below):
   

Compare these tax systems . . . Which tax system do you prefer?

What is the objective in the design of a tax system? 
l fairness; a tax system that is neutral (i.e. neither regressive or progressive);
NEUTRAL Tax:   income tax is an equal percentage (e.g. 17%) of total income;
REGRESSIVE Tax:   the income tax percentage increases as income decreases;
PROGRESSIVE Tax:   the income tax percentage increases as income increaases;
l retains Social Security funding and accounting;
l retains Medicare funding and accounting;
l adequately integrates and/or replaces old systems with new systems;
l defines the tax collection methods (which already exist);
l has a sufficient probability of compliance (improved compliance may even result);
l does not increase tax evasion (all loop holes and shelters are eliminated);
l does not increase black markets (as would most certainly occur with a massive 30% sales tax);
l does not drive up the cost of all products and exports;
l does not contain hidden taxes (e.g. corporate income taxes that are merely passed on to consumers as regressive hidden sales taxes);
l does not tax the poor and truly needy;
l does not tax any income groups proportionally more/less than another;
l resolves the question of whether corporations should be taxed?
l allows for a smooth transition;
l does not double tax:  for example, with a national consumption sales tax plan,  money that has already been taxed would get taxed again when it is spent. 
 
Suggested Changes to Social Security and Medicare:
l Every individual, when eligible, receives the same benefits:    I   times times the poverty level;
l I  is a multiplier determined by the government, that is never less than 1.0 ;
l the poverty level will be determined by a government agency, and is recalculated annually;
l It does not matter if some pay more or less in a life-time;  the purpose of Social Security and Medicare should not simply be to hold your money and then give it back later.  The purpose is to provide the minimum required to survive on.  Any civilized society should be willing to do that much.  Otherwise, we are not civilized, and it is simply everyone for themselves, which could lead to anarchy, chaos, war, and survival of the strongest.  Also, people that have nothing to lose, and no way to improve their lot in life, can become dangerous to society.  No one is an island.  The benefits of a lawful, peaceful society are not free.  It is a small price to pay if it truly benefits society.


   
Compare 17% Income Tax System and  30% Sales Tax
Compare 17% Income Tax System and  Progressive Income Tax
10 Abuses (these did not all come about by mere coincidence over the last 30+ years) and the resulting economic conditions
The Problem and the Solution (account for the human factor)
CONGRESS' To-Do List (see what Congress has done since the NOV-2006 election)
Irresponsible Incumbents (what irresponsible incumbent politicians do while troops risk life and limb)
PROs and CONs (why to stop re-electing irresponsible incumbent politicians)
Interest on the National Debt (it will take 143 years to pay off the National Debt)
Excessive Debt and Money-Printing (Inflation, Debt, and the Federal Reserve)
Consider the Following Scenario (must we always learn the hard way?
Help Educate Others (peacefully force government to be responsible and accountable too!)
Solutions (common-sense, no-brainer reforms that politicians resist)
Help Educate Others (peacefully force government to be responsible and accountable too!)
Badly-Needed, Common-Sense Reforms
The Cheater's Philosophy (learn to recognize their manipulation)
Frequently Asked Questions
   

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