Forum Post: New Income Tax Plan
Posted 12 years ago on Nov. 6, 2011, 3:43 p.m. EST by MortgagedTent
(121)
This content is user submitted and not an official statement
The current income tax bracket system is unfair, antiquated, and overly complicated. I propose a simple new formula-based system as follows:
Income Tax = [(Income^1.1)*0.1]-4500
Its so simple is beautiful. To verbalize the math, we raise the salary by the exponent 1.1, take 10% of that, and subtract $4,500 dollars.
Heres what the results look like Income/Current Tax Rate/New Tax Rate $5,000/10%/-57% $15,000/15%/-0.5% $25,000/15%/14.7% $35,000/25%/17.0% $45,000/25%/20.3% $55,000/25%/22.5% $65,000/25%/24.1% $75,000/25%/24.8% $85,000/28%/26.4% $95,000/28%/27.3% $125,000/28%/29.1% $150,000/28%/30.3% $200,000/33%/31.9% $250,000/33%/33.1% $300,000/33%/34.0% $400,000/35%/35.3% $500,000/35%/36.3% $750,000/35%/38.1% $1,000,000/35%/39.4% $1,500,000/35%/41.2% $2,000,000/35%/42.5% $3,000,000/35%/44.3% $5,000,000/35%/46.7% $10,000,000/35%/50.1% $20,000,000/35%/53.7% $50,000,000/35%/58.9%
-As you can see, the largest beneficiaries of this proposal system are the part-time workers struggling to make ends meet at the bottom of the income pyramid.
-Fittingly, the system doesn't betray our 90-99 percenters as there tax rates remain largely stable. The equivalent point occurs just below $250,000 and the real penalties don't kick until the $700,000 income range (which corresponds nicely with the top 1%). The people in this range tend to job creators who have worked hard and skillfully to achieve there salary - so I believe we are keeping with the ideals that made our capitalist incentivism so successful in the first place.
-The extreme rich, particularly those at the bottom end of the 1%, are really 'footing' the bill here, with their tax rates rising to the 50-59% range. I feel this is well justified and doesn't represent a paradyme shift in our economic system - staying true to capitalism, but providing a fairer system of wealth distribution.
-Another beautiful aspect of this system is that it actually produces significantly more net tax revenue for the Federal Government than the old system. Combined with better spending initiatives, it could do much help eliminate the national debt - which is going to kill our country if we don't deal with it now.
-Finally, the system eliminates the peculiar staircase pattern of the current 10/15/25/28/33/35% system, whereby making $34,500 might be much better than making $35,000.
If you have any questions please let me know.
While I disagree with raising the tax rate just because someone makes 700K (and just fyi I'm nowhere close to that), I appreciate that you have taken the time to develop a tax system that is much more conservative in terms of increase and much more realistic. I don't feel the tax system is the real problem with our economy, though, and I don't think our problems will be solved by just raising it. I think the real issue is that the government needs to become more responsible in the way it spends our tax money. I think spending trillions on Iraq and Afghanistan could have been put to better use. I think large corporations who manage to escape even a 30% tax rate is a problem. The other huge issue is the fact that the housing crisis, foreclosures, people taking out mortgages they couldn't afford, predatory lenders, etc significantly affected the economy, jobs, etc.
I agree with your other points, but Individuals need to pay a larger percentage based on earning. The system in this country is set up so those with more to start with will have an easier time making more. Meaning that someone with $100k will have a harder time turning that into $200k than a person with $5 million will turning it into $5.1 million. Since the entire economy follows this structure, and the government (in theory, this is another forum topic) is there to protect the interests and rights of its citizens it stands to reason that more of those resources go to those who have the mot at stake. It also stands to reason that those earning more are benefited more by federal infrastructure, using more highway and energy, both things that are federally funded. @ryan_cozzens
Good points, both of them. Relating to your first point, there's the 'disposable income' issue - The household earning 90,000 must spend at the least half of that just to subsist as an upper middle class American household. After luxury goods purchases, savings for children's college, and mortgage payments theirs ussually nothing left for investment (which of course get taxed at a much lower rate).
Yes, the Fed should go back to policing the financial system rather than figuring out ways for the banks to profit from public and national debt.
Neither do I, thats why I authored a basic corporate tax plan that effectively taxes corporations based on the percentage of US-based payroll. This income tax is realistic and would still produce a great re-distrubution of money from the very tip of the economic pyramid to the bottom. I agree with you that spending is the more important side of the government balance sheet but I'm trying to take on the issues in peices, otherwise its just overwhelming. Everything you say I am in agreement with. But income tax is still a major area that needs to be tweaked.
I think your plan is very reasonable and well thought out. I understand you're trying to discuss this issue in parts - makes sense. I believe that the more reasonable the solution is, the greater chance that the majority of Americans will support it.
Absolutely. We can't pretend to represent the 99 percent and then sell out 49%. We're not trying to wreck America - were trying to make it better.
Need more people like you on this forum.
Need more discussions like this on the forum!
I think your real problem with this is going to come from the fact that income has very little to do with wealth disparity. Most of that delta comes from Capital Gains and there's so much extant already that it would take years for a deleveraging of it to have lasting impact on the economy.
Now if you wanted to link capital gains to the same formula, cap maximum salary (including bonuses, benefits, comission, and everything else) of individuals in a corporation to say 20x the minimum salary of the company (for comparison most of europe and Japan are below 15x we are at something like 250x) and double or triple the minimum wage?...
Then we'd be getting somewhere.
I was hoping someone would go there. I think the capital gains tax should be removed from the system and make all personal income part of the income tax, regardless of how it is acquired. The corporate tax should be made equal to the income tax of an individual applied to a corporation's profit, including capital gains, subsidies and other entitlements. I also think the best way for the government to provide healthcare would be to allow businesses who provide healthcare coverage to use that as a tax deduction, but that's a different thread.
Making 34,500 is never better than making $35,000. Remember that we have an incrementally tiered tax system--you pay one tax rate on everything made in tier 1, then you only pay tier 2 tax rates on things made ABOVE the tier 1 cut off, and so on...
Yes, someone clarified this for me. I should edit that part.
If you think under the current system that making $34,500 might be better than making $35,000 then you do not understand how tiering works.
Other than that comment, I think this system would be fine thoughit is not clear if you still allow deductions for anything. If not then I think it would negatively impact 1099ers?
Please explain then. I'm trying to do my best here with no accounting experience.
Oh - the way the tiers work is say the tax rate is 10% up to $34,999 and 20% starting at $35,000. If you made $34,999 all income is taxed 10%. If you made $35,000 the $34,999 is taxed at 10% and $1 is taxed 20%. So it is never worse to make that extra dollar.
much too complicated!
There are a huge number of great COMPLICATED ideas that will garner GREAT OPPOSITION.
In an ideal country full of great idealistic philosophers, these would be easy to implement. We need to be realistic & pick an issue that is simple - that is popular -
that 83% of Americans agree on -
that 56% of TP agree on -
that will bring together the people in OWS with the people outside of OWS.
Everybody wins!
Our only goal should be to pass a constitutional amendment to counter Supreme Court decisions Citizens United (2010) & Buckley v. Valeo (1976), that enable unlimited amounts of anonymous money to flood into our political system.
“Corporations and organizations are not a persons & have no personhood rights”
and
“money is not free speech”.
We don’t have to explain or persuade people to accept our position – we have to persuade them to ACT based on their own position. Pursuing this goal will prove to the world that we, at OWS, are a serious realistic Movement, with serious realistic goals. Achieving this goal will make virtually every other goal – jobs, taxes, infrastructure, Medicare – much easier to achieve –
by disarming our greatest enemy – GREED.
THE SUCCESS STORY OF THE AMENDING PROCESS The Prohibition movement started as a disjointed effort by conservative teetotalers who thought the consumption of alcohol was immoral. They ransacked saloons and garnered press coverage here and there for a few years. Then they began to gain support from the liberals because many considered alcohol partially responsible for spousal and child abuse, among other social ills. This odd alliance, after many years of failing to influence change consistently across jurisdictions, decided to concentrate on one issue nationally—a constitutional amendment. They pressured all politicians on every level to sign a pledge to support the amendment. Any who did not, they defeated easily at the ballot box since they controlled a huge number of liberal, and conservative and independent swing votes in every election. By being a single-issue constituency attacking from all sides of the political spectrum, they very quickly amassed enough votes (2/3) to pass the amendment in Congress. And, within just 17 months, they were successful in getting ¾ of the state legislatures to ratify the constitutional amendment into law. (Others were ratified even faster: Eight —took less than a year. The 26th, granting 18-year-olds the right to vote, took just three months and eight days.)
If they could tie the left and right into a success -
WHY CAN'T WE??????????
I feel that we should stay with this simple text to overturn CU:
”corporations are not people” and “money is not free speech”
for four simple reasons and one – not so simple:
1
83% of Americans have already opposed CU in the ABC/Washington post poll and the above
IS THEIR POSITION ALREADY.
2
We don’t have to work to convince people on the validity of our position.
3
Simple is almost always better.
4
This simple Amendment is REQUIRED to overturn CU.
And all other electoral reform can be passed through the normal legislative process.
5
OWS and these pages are chock full of ( mostly ) excellent ideas to improve our country.
All of them have strong advocates – and some have strong opposition.
None of them has been “pre-approved” by 83% of Americans !
Pursuing this goal – without additional specifics is exactly what Americans want.
What do we want? Look at that almost endless list of demands – goals - aims.
Tax the rich. End the Fed. Jobs for all, Medicare for all. So easy to state! Can you imagine how hard it would be to formulate a “sales pitch” for any of these to convince your Republican friends to vote for any of them?
83% of Americans have ALREADY “voted” against CU. And 76% of the Rs did too.
All we have to do ask Americans is to pressure their representatives – by letters - emails – petitions.
Wanna take your family on vacation?
Convince the 7 year old and the 10 year old to go to Mt Rushmore.
Then try to convince them to go to Disneyland.
Prioritizing this goal will introduce us to the world – not as a bunch of hippie radical anarchist socialist commie rabblerousers – but as a responsible, mature movement that is fighting for what America wants.
I feel that using the tactics of the NRA, the AARP an the TP – who all represent a minority – who have successfully used their voting power to achieve their minority goals - plus the Prohibition Amendment tactics – bringing all sides together - is a straight path for us to success that cannot fail to enable us to create and complete one MAJORITY task.
I believe the campaign funding issue is the primary glue binding all disgruntled Amercians together (TP & OWS included). But the dialogue does'nt stop there. We have a deficit thats killing us. We have lost our manufacturing base. We have a crippling educational system. We have unfair taxing practices. We have pointless wars and huge military budgets. We have an all-powerful international banking apparatus (or cartel). I think most every American would agree that all of these are big problems.
You are probably correct - but we have to start somewhere - why not start with something most Americans ( via the ABC POLL ) have already "voted" on and is simple to address. The real solution I describe is a couple of sentences.
All of your - good - concepts would need volumes to fix.
They do NEED fixing - but first - simple is easier and better.
I really like the idea of this, although I am having a hard time with the math. But you have exactly the right Idea.
I'd prefer to have posted a graph so people could visualize it better but they have no attachment feature in these forums for some reason.
I am working on the framework of two separate amendments, one to remove private money from campaigns and one to equalize and limit the power of lobbyists. If your on Twitter @ryan_cozzens follow me, I'll do the same, if we can get as many as possible on board with concrete ideas we can mobilize and make them reality. I am planning on a tour of the OWS and Tea party hotspots during campaign season next spring.
I'm not on Twitter. But I'd love to help you. That is really the issue of primarily importance no matter who you ask. I LOVE the idea. I'll send you a PM.
Use YUDU.com or google docs. Then link. http://free.yudu.com/
Thanks carrie
The poor shouldn't pay taxes at all, every tax they pay makes it harder for them to meet their minimum requirements, and hence, is unethical.
Yep. Notice that the $0 income people would receive a credit of $4,500. Anyone earning less than $16,000 pays no tax. So yes - we agree.
Anybody making over $100,000.00 a year should be paying at least 50% of their salary to federal income tax. We need this money to provide free health care and rent subsidization to our less fortunate inner city residents. We need to provide money for more teachers and administrators. We also need to provide for the people that are making the arts their life's work.
You can't be for real.
a family of four making $100,000 living in the tri state area are certainly not rich and taxing them at 50% is ridiculous. Part of the problem in our tax system is that the tax rates are not regionalized. Meaning a family of four making $100K in South Carolina (which is a right to work state) will be far better off than that same family living in New Jersey. That's the problem with set rates of taxation. New Jersey has the highest personal income tax, 7% sales tax and the highest property taxes, so for me, your 50% would be a reason to leave
Then move to South Carolina and protest there.
typical liberal.....you just don't get it...maybe you feel you will never make over $100K and, you know what, you probably won't. My husband and I will keep working our asses off and making more and more money and I will fight every step of the way to keep as much as it as I possibly can to pass along to my children, while you keep whining...
Check out LetsGetTheFactsStraight.com
How about we return to the constitution and END THE IRS
Because then we'll be invaded by Djibouti.
So you tax a family of 6 the same as a family of 2?
Good question happy! I'm surprised you actually used your brain for once. The numbers are listed for single reporters. I have not modified any of the family deduction benefits as, from what I can see, I think they are very fair.
I will ignore your insults unlike I did last night. What other current deductions would you keep?
That tax code is so complicated that I could'nt possible evualate them in their entirety. I would defer to someone on this who is more familar (any CPA's out there?). My goal was just to provide a nice template that would be realistic and not choke the capitalist system - but yet still provide much relief for the low income end.
I do taxes and investments. I don't work for a big greedy bank anymore :). I would want to keep the charitable deduction to incentivize giving to charity. Also, understand that the current system has "marginal" rates. You pay the rate on each bracket of income as you go up. (10% on the first $X, 15% on the next $X, etc). Hope that helps.
It does clarify it. Thanks HB. You're not such a bad guy after all. I had the impression you were on here just to cause trouble.
I agree with the overall premise of state-subsidized charitable donations, particularly in that they bypass the inevitable and horrible government inefficiencies. I do worry about expatriation of capital though. So many charities are international and the huge outfow greatly weakens the USD. Both Bill Gates and Warren Buffet for instance, plan to expatriate over $100 billion between the two of them. There's not the same 'patriotism' among the super elite as there is for the rest of us whose sons are called to fight abroad. The wealthier one gets, the more transparent borders become. I think full deductions should only apply to charities deploying capital in the US. Sending money abroad is like killing money. Economically speaking, it's a sin. Whereas money donated to US-based charity achieves great velocity as it climbs its way all the way up the system.
Great thoughts. I completely agree. It's great to see you thinking of solutions vs. simply complaining. Keep up the good work and I thank you sons for their service.
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Thank god the Zeitgeist people are contributing.to this dialogue