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While no one wants to pay taxes, including me, we surely understand it takes funds to operate the federal government. That
said, the federal government must get smaller and back to more 'national issues' and stay out of state issues. Once this is
achieved, the federal funding required of citizens will decline. However, until then, we all have to fund the federal government.
But, what are Federal Income taxes for? They should have one purpose - to fund the federal government. Taxes should not be
a form of 'social equalization' or some kind of program encouragement by having tax exemptions or deductions based on the
number of children you have, how big your mortgage interest is, how much state income tax you pay, how much property tax you
pay, or whether you have two homes. There are currently discussions of various tax proposals. We think the 'Fair Tax', similar
to a sales tax, is not fair at all to lower income families, and we feel pretty much the same way about a 'Flat Tax' where
everyone pays the same tax rate. We primarily like simplicity and elimination of reams of rules, regulations, credits, deductions,
exemptions, etc. for making wrong choices, and tax loopholes. We should also demand that personal income taxes should only
be for financing federal government needs. You make money or a profit, you pay tax on ALL that you earn! And, even though
some don't particularly like the progressive tax rate concept, we believe that we all should agree that those most successful
in life from a monetary standpoint can and should pay more, percentage wise, than those less fortunate. So, we are proposing
a modified 'Flat Tax', with no deductions, loopholes, etc. just as the 'Fair Tax' and single level 'Flat Tax' proposals do.
We need to get 'social engineered' and 'industry specific' tax deductions, tax credits, and tax exemptions, etc. out of
the personal tax code. Keep it simple. Make money, pay tax on that money. Our program is called the Equitable Individual Income
Tax Plan where everyone pays on the same format with staged tax rates. The plan proposed DOES NOT CHANGE SOCIAL SECURITY AND
MEDICARE payroll deductions, which are different programs and will still be assessed on all workers as they are currently.
This Equitable Individual Income Tax Plan; is very simple and can be filed on a one-page 1040 form and one attachment, the
"Income Summary", which would list income (profit or Loss) from each source it is derived from. Obviously if you
have income from rental property, royalties, etc. there would be a form for detailing each of those sources based on regulations
for that specific activity. The final total income or loss, for each of those would go on the "Income Summary" sheet.
Every INDIVIDUAL earning money, and/or a net profit, in the United States must report their income/profit on the 1040 form
with the Income Summary attachment INDIVIDUALLY, no Joint returns, Head of Household returns, etc., just an INDIVIDUAL return
for yourself. Also, every CITIZEN of the United States earning money or a profit anywhere in the world must report all of
their income/profit on the 1040 and Income Summary attachment INDIVIDUALLY, no Joint returns, Head of Household returns, etc.,
just an INDIVIDUAL return for yourself. All income and/or profit is treated the same, no special rates. The Equitable Individual
Income Tax Plan is explained below. (the 1040 form was last printed when this proposed tax plan was updated in 2018)
Equitable Individual Income Tax Plan
A Multi-Level 'Simple Tax' (showing the tax amount if maximum is reached at each level):
0 - $18,000 = 0%
$18,001 - $36,000 = 6% (= maximum of $1,080 or ~ 3% of total income)
$36,001 - $72,000 = 11% of all between $36,000 - $72,000 (= max $3,960 plus earlier taxes, or ~ 7% of total income)
$72,001 - $144,000 = 17% of all between $72,000 - $144,000 (= max $12,240 plus earlier taxes, or ~ 12% of total income)
$144,001 - $288,000 = 24% of all between $144,000 - $288,000 (= max $34,560 plus earlier taxes, or ~ 18% of total
income)
$288,001 - $576,000 = 34% of all between $288,000 - $576,000 (= max $92,160 plus earlier taxes, or ~ 25% of total
income)
$576,001 - $1,152,000 = 41% of all between $576,000 - $1,152,000 (= max $236,160 plus earlier taxes, or ~ 33% of total
income)
>$1,152,001 = 50% of all above $1,152,000
Each person being compensated for work in the US, and for US citizens working anywhere in the world, pays based on every
type of his/her income from any source. Everyone having income would file their own one page 1040. No joint returns. For
joint accounts, the owners share income equally.
NO DEDUCTIONS - Geeze, some in Congress are again proposing a 'cap' on deductions of $50,000/year. Hell, almost 1/2
of American workers don't even make that much Gross Income. That shows how out of touch Congress actually is! Level the field
- NO DEDUCTIONS!
NO EXEMPTIONS
NO CREDITS
No more "tax free bonds", these type bonds will no longer be considered exempt from federal taxes (exemption
for existing bonds will be phased out)
Roth IRA type savings plans may be used (but with non-deductible contributions) and withdrawal rules be as now regulated,
and earnings be taxable upon distribution/ withdrawal until 15 years after the account is set up
Once we get the size and scope of government reduced and redirected and reduce the amount of time congress meets, and
expenses are lowered, I expect that these tax rate percentages will be reduced dramatically!
Capital gains, dividends, interest, etc. - everything will be taxed at the individual rates above (except inheritance,
which will be taxed at a flat 15% for all inheritance value each individual receives above $5 MM). For small businesses where
income now flows directly to the owner(s), they need to incorporate, so the corporate tax would apply if one choses to do
so.
When reductions in total taxes collected become possible, the rates at each level will be reduced proportionally (i.e.
a total 5% reduction in taxes, would equal the existing tax rate percentage at each level to be reduced to .95 x that current
tax rate percentage)
For a little more background on the genesis of some of the proposal above:
How many Americans Pay income tax?
It is estimated that 59.9% of American households paid taxes in 1922 and 40.1 % of American households paid no federal
individual income tax in 2022 according to data from Statista Research Department, Statista is a global data and business
intelligence platform. Only the very poorest should pay NO federal income tax! We believe that the tax paid should be graduated,
but paid by almost everyone.
What are the most Sacred tax deductions?
The Mortgage Interest Deduction
The Mortgage Interest deduction is probably the most Sacred US Federal Tax Deduction, and it sounds so reasonable to most
people. But, for most people, it is actually completely irrelevant. As Matthew Desmond, a sociologist at Harvard University,
explains in a New York Times Magazine essay, although about two-thirds of American households own a home, only one-quarter
of them actually claim the deduction on their taxes (probably due to the standard deduction). This fact has, along with others
discussed below, play a large role in wealth inequality in the US. Federal tax policy, which transfers a lot of tax savings
to the wealthiest homeowners, a bit less to middle-class homeowners, and practically nothing to poor homeowners and renters.
More than half of all low-income American families who rent, spend more than 50% of their income on housing costs, but get
no deduction anyway. In 2015, it is estimated that the federal government lost $71 billion due to the mortgage-interest deduction,
and households earning more than $100,000 receive almost 90 percent of the benefits. Since the value of the deduction goes
up as the cost of someone's mortgage increases, the policy essentially pays upper-middle-class and rich households to buy
larger and more expensive homes (and possibly even a second home) than they might otherwise buy. At the same time, because
national housing tax policy's benefits don't accumulate as much for lower cost homes, or none to renters, it makes it harder
for poor renters to join the class of homeowners. So, the wealthy definitely benefit most from this deduction! Eliminating
this tax deduction will not cause the housing market to fail and may bring some common sense to the size of some mortgages.
The Charitable Donation Deduction
The Charitable Donation deduction is probably the second most Sacred US Federal Tax Deduction. It is estimated that the
average itemized tax return includes $4,790 in charitable deductions, but that doesn't really tell the entire story. First,
not everyone who donates to charity can use the charitable deduction. To get the tax break, someone needs to itemize deductions
on their tax return. And, since about three-fourths of federal tax payers take the standard deduction, it's fair to say that
many donations go unclaimed for tax purposes, but the charitable donation was still made because people wanted to help that
cause, whatever it was, NOT for getting a tax deduction! Second, among taxpayers who itemize, charitable deductions vary widely
based on income. For example, the average itemizing taxpayer with adjusted gross income (AGI) of $80,000 claims a charitable
deduction of $3,040, while someone with an AGI of $800,000 is expected to claim $22,400 of contributions. Eliminating this
tax deduction, while possibly lowering some donations, will not cause charity contributions to stop.
State and Local Tax (SALT) Deduction
For the life of me I don't understand why should US citizens subsidize high income tax states and cities by giving their
taxpayers income tax deductions for the state and local income taxes they pay. These people chose to live in those states
and cities, many of those states and cities have budget problems, have programs other states and cities don't have, yet they
expect Americans elsewhere to help pay their way; by allowing state and local tax deductions. Under current law, some 30 percent
of taxpayers itemize their deductions, as opposed to the 70 percent who claim the standard deduction. Within the minority
of itemized deduction families, the big write offs are the mortgage interest deduction, the charitable contributions deduction,
and the deduction for state and local taxes paid. State and local taxes include state and local income taxes (and state and
local sales taxes in non-income tax states), as well as property taxes on homes.
According to the Office of Management and Budget (OMB), the SALT deduction reduces federal tax revenues by just under
$1.3 trillion over a decade. The Tax Foundation thinks it's closer to $1.8 trillion. Whatever the number, it's a huge revenue
impact that can't just be ignored if tax reform is going to happen. More than the numbers is the SALT's effect on the size
of government. When a New Jersey or a California is getting ready to raise taxes, they know that their citizens will get back
30 or 40 percent of the tax hike on their federal income tax returns thanks to this deduction. The SALT makes it easier for
blue states to stay blue and get even bluer.
The SALT is a bigger deal in some states than others.
It is estimated that about 45 percent of the benefit of the deduction goes to taxpayers with annual incomes over $200,000,
so most of the benefits are concentrated in states with more high-income households, especially those states with high taxes
and/or high housing prices. California and New York account for about 20% of US tax returns claiming the SALT deduction and
nearly one-third of the total tax deduction claimed. Over 50% of the US tax returns claiming the SALT deduction and almost
2/3 of the total federal tax deduction value comes from the top 10 high tax states.
There are other reasons. The SALT deduction is a significant federal subsidy to state and local governments. By lowering
the net cost of state and local taxes it allows those jurisdictions to levy higher taxes and provide more services than they
otherwise would. It also encourages states to use deductible taxes in place of non-deductible taxes, fees, and other charges.
And because taxpayers can deduct either sales or income taxes, it should lead states to levy one tax or the other but not
both. The deduction also encourages states to rely more heavily on progressive income taxes. Because high-income taxpayers
are more likely to itemize and the because their higher federal marginal tax rate increases the amount they save from each
dollar deducted, these states see a larger subsidy by having high-income residents pay a greater share of taxes.
Capital Gains Tax Rates
Personal Income from realized capital gains, while always concentrated at the top of the income distribution, has become
even more concentrated over the past 25 years. In 1979, households in the bottom 95% of the income distribution received about
20% of total capital gains income, while the richest 0.1% of households (about 81,000 households) received 36% of total capital
gains income. By 2005 (the latest data I could find from the IRS), the bottom 95% of the income distribution received only
about 10% of total capital gains income while the richest 0.1% (about 114,000 households) received 50%. By 2015 it is expected
that this disparity has continued to increase. Capital Gains have had favorable tax rates at some level since 1921, and that
special tax rate has overwhelmingly benefited to wealthiest of our population. Eliminating these special Capital Gains tax
rates will not cause people to stop investing in our country and it will help equalize tax policy for all taxpayers.
US Federally Tax-Free Municipal Bonds.
A smaller fraction of Americans own Federally Tax-Free Municipal Bonds today than 25 years ago (2.4% in 2013 vs. 4.6%
in 1989), and that ownership is much more heavily concentrated among the very wealthy (the top 0.5% of Americans by wealth
held 42.0% of all municipal bonds in 2013 vs. 23.8% in 1989), according to Brandeis Daniel Bergstresser and MITs Randolph
Cohen in a Hutchins Center working paper. Making all income from these bonds taxable became lawful under the South Carolina
v. Baker, 485 U.S. 505 (1988) decision, which was a United States Supreme Court case in which the Court ruled that section
310(b)(1) of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) allowing taxation of these bonds did not violate
the Tenth Amendment to the United States Constitution and essentially overruled a previous Supreme Court decision in the
Pollock v. Farmers' Loan & Trust Co. (1895) case.
A part of this revision of the Individual Income Tax code is to revise the individual tax rates every three years to match
the proposed Fiscal Responsibility Constitutional Amendment, which requires that the US Government spend no more than 19%
of our GDP. The proposed individual rates in the tax code would be adjusted by factoring each 'Flat Level' rate above by
the same percentage to reach the budget goal.
The new tax code would go into effect Jan 1, 2025, and the Fiscal Responsibility Amendment would be passed by September
30, 2025, providing that the maximum Government spending level of 19% of Gross Domestic Product would be reached within about
7 years, i.e. by September 30, 2032. This will be accomplished by reducing the spending for every sector/department of government
left after the eliminations and consolidation of the Cabinet Departments. NO EXCEPTIONS other than for Social Security payments
- they stay with the current payouts and COLA's. At that point, government spending will be capped at 19% of GDP and each
of the 'flat tax' levels will be adjusted accordingly to maintain a balanced budget and a less than 70% maximum total (not
privately held) national debt.
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