Large scale tax reform is what is needed. Right now taxation is a bit of a nursery rhyme. Here a tax, there a tax, everywhere a tax tax. The average American has no choice but to pay the tax. Wealthier Americans can afford lawyers to find holes in the tax code to avoid the taxes, and businesses hire lobbyists to shape the tax code in their favor. The tax friendly politicians on the left and right have no problem with this. The left even uses it as an opportunity to bash the wealthy. The wealthy aren’t the problem; the tax code is the problem.
Every year there are calls from and on Washington DC to raise the gas tax, or taxes on investment income. Right now there are loopholes upon loopholes for every different type of business in the USA. The system is preferential and divisive. It enables politicians to bash and demonize large groups of Americans while allowing some companies to get away with hardly paying any taxes at all.
Before I explain how I would do it, I want to first say that I do not like a consumption tax because it places the burden of collection on business owners, which raises their costs. It also gives the government the power to raise the prices of all goods and services with the stroke of a pen, which is too much power in my opinion.
The first thing I will address as part of my tax plan is low income earners. Minimum wage (and slightly above) earners, need to be protected from federal taxation. I believe this because their money should be going elsewhere, to their families. The federal minimum wage is $7.25/hr. This number worked out for 40 hour weeks, over a year comes to $15,080. I would multiply that by 2 and declare that the first $30,160 earned by every American should be tax exempt. If you make less than that, there is no reason to file.
I would tax every dollar earned in all forms of income above $30,160 at 25%.Every American, regardless of how they earn their income, whether it is through investment, salary, or other earnings pays the same rate. No loopholes.
Some people say the wealthy should pay more in taxes, and they will. Someone who earns 1.5 million dollars (regardless of how they earned it) would pay $367,460 in taxes to the federal government; plus more to their state government and local city government. Someone earning only $50,000 would pay only $4,960 to the federal government. Once again: No loopholes, and no deductions.
Combined with this, I would lower the corporate tax rate to 25% as well, something that almost all politicians could agree on. Even POTUS has suggested lowering it.
A system like this would be very simple, and it’s something that anyone with a high school diploma can understand. Best of all, it wouldn’t require a CPA or tax firm!
One form that looked like this:
It would also put more money back in the hands of the average Americans that need it most. It’s simple, and in operations management simplification and standardization is the key to efficiency and profit.