Majority Favors A Flat Tax

A Rasmussen poll out yesterday reported that 64% of Americans believe that middle class taxpayers pay a higher percentage of their income in taxes than wealthy Americans.  But that's not the important part of the survey results.  My emphasis below.

Fifty-five percent (55%) of adults favor a tax system where everyone pays the same percentage of their income in taxes, up 10 points from last year at this time. Twenty-six percent  (26%) oppose such a system, and another 19% are undecided about it.

With a clear majority of adults in favor a flat tax, now is the time for tax reform.  I propose a 20-20 tax plan -- 20% with a $20,000 exemption.  The first $20,000 of taxable income would be exempted, with taxable income being total income minus any actual expenses incurred earning it.  A 20% tax rate would apply to the what's left.  So, taxable income of $20,000 or under would result in $0 income tax due.  A taxable income of $25,000 would result in a net of $5,000 subject to the 20% rate and $1,000 due in income taxes, which equates to an actual tax burden of 4.00% of total income.

Under that formula the tax bill for a someone with $100,000 of total income would come to 16.00% of income.  At $150,000 the percentage of taxes paid would be 17.33%.  As income rises the percentage of taxes paid rises, always getting closer but never reaching the maximum 20%. 

Let me point out that this is actually progressive, but in a smooth arc rather than in abrupt and sharp steps.  That means there are no arbitrary points along the income scale where there is reason to limit income in order to avoid paying taxes at a higher rate.  Once past the $20,000 exemption, every dollar is taxed at 20%.  The tax code would impose no arbitrary impediments to economic growth.

The tax code might also be used to do away with minimum wage laws and dramatically reduce the welfare bureaucracy if we adopt Milton Friedman's concept of a negative income tax.  Any working adult with an annual income below the level of the standard $20,000 exemption would receive the difference as a tax credit, so that no one would have an income less than $20,000 -- or whatever the exemption would be. 

I used 20% and $20,000 because 20-20 is kind of a catchy name, but the numbers don't matter so much as the concept.  We could cure a lot of ills with a simplified and sensible tax code.

Comments

[CaptDMO]

Any working adult with an annual income below the level of the standard $20,000 exemption would receive the difference as a tax credit, so that no one would have an income less than $20,000 -- or whatever the exemption would be.

I wonder how long it would take for an astonishing number of folk to "suddenly" appear-on-paper to "earn", and get by(get over), on less than $20,000. We're including the value of ALL employer/gub'mint/union "entitlements" right? If you build it, they will come.

Say....what brought about the perquisite of employer based "health" insurance anyway? Can I deduct 10% of my automotive fuel because it's a food product? Is "adult" 18, 21, the "health" insurance (and post-grad, for those not on the seven year plan)26?
Could a "sociologically corrected" IQ test for reasoning and comprehension justify discounted chronological age (like for big-city police/fire)?

[Tom Bowler]

As I understand it Cap, employer based health insurance began during World War II when the Roosevelt administration decided it would keep inflation under control by imposing wage and price controls, it being a wartime emergency, don't you know. Since companies were prevented from offering pay above an arbitrarily imposed legal maximum, they offered health insurance benefits instead. We've been screwed ever since.