Since we are rife with discussion lately about the nature of the Republican tax plan, I thought I'd break out an old post.
Consider a system of taxation wherein:
Everybody files as an individual (no joint filing)
The first $20,000 of income is exempted from taxation.
All payroll taxes are abolished (FICA et. al.).
All deductions from taxable income are abolished.
All of em ......... quit your whining ......... no exceptions!
The one and only, universal rate is 20%.
God himself only asked for 10%.
So, if you make $20,001.00, you pay 20 cents in taxes, or 0.001% of your total income in taxes.
If you are a couple, regardless of your status and each of you are making $20,001.00 a year, your total taxes will be 40 cents and your rate will still be 0.001%.
If you make $25,000, you pay $1000.00 in taxes or 4% of your total income in taxes.
Notice here that $1000,00 is more than 20 cents.
4% is more than 0.001%.
Let's say you make $50,000.00, you pay $6000.00 in taxes, or 12% of your total income.
$6000.00 is more than $1000.00 and way more that 20 cents.
12% is more than 4% and much, much higher than 0.001%.
Let's say you attain that magical number of $250,000 and are now "Rich".
You pay $46,000 in federal income taxes, or 18.4% of your total income.
Which is, I am sure you know by now, more than .......... etc.
How bout a cool million?
You pay $196,000 in federal income taxes, which represents 19.6% of your total income.
What if you are Tiger Woods and you used to make $80,000,000 a year?
Under this system you would have paid $15,996,000.00 in federal taxes or 19.9955% of you total income in taxes.
What I've described here is what is typically described as "The Flat Tax".
But, as far as I'm concerned, it ain't flat at all.
The more you make, the more you pay in taxes, which is as it should be if you're gonna tax income.
And ..... the more you make, the higher your tax rate.
Although, not by much and it does flatten out at the very top.
Still, it is "progressive".
The gravy here is that you can now fire your accountant.
(Sorry Doug, Willy, Loris. This isn't personal, and I still love you all very much) and most of the IRS.
And here is the most elegant part, regardless if you make $20,001.00 ... $25,000 ... $50,000 ... $250,000 ... a cool million ... or $80,000,000, you are secure in the knowledge that every single American anywhere in this glorious land who made the identical amount of income, paid the identical amount in federal income taxes, regardless of place of residence, fertility, charitable and religious proclivities or anything at all.
Now, wouldn't that be a nice feeling?
"This isn't enough income to fund the government." You might say.
The system we have now doesn't provide sufficient income to fund the government, nobody seems overly concerned about that.