Who doesn't hate taxes, tax accountants and tax lawyers, perhaps?
It would give a little comfort to know just what in the cornbread hell is going on with your taxes. Currently it is some strange thing we see each year, it is Greek to most.
I was a programmer 30 years ago, so I try to employ logic to solve problems. Here is an idea for consideration.
The government requires revenues, this is not rocket science. Revenues should not be painful to individuals or businesses. The tax code is so fractured and huge, it has become a joke. For those that have the means to pay experts to navigate the loop holes, they leave the original purpose of the code moot. Loopholes equal less revenue.
For my example I am using $50,000 for average income and $7.50 for minimum wage. This will not affect anything when the exact dollar figures are plugged in. In fact, each year new values will be calculated and plugged in each year. This is how easy it can be.
It's All Relative
Everything is relative, so a logical approach can simplify the task of raising revenues fairly.
Instead of numerous charts of numbers for ranges,rates,exclusions etc., hard coded into the tax law producing endless charts and tables, we can use values like Average Income and Minimum Wage ending most of the charts.
The Tax Code Should Be Relative to the Average Joe.
The anchor to my logic is Average Income and Minimum Wage.
Some lines do have to be drawn and definitions made.
Minimum Wage(MW) $7.50/hour Minimum Wage Annual Income $15k
Average Income(AI) $25/hour Average Wage Annual Income $50k
Capital Gains 15% for the 1st $500,000 (10x Average Inc)
and 25% above $500,000
Income Brackets and Rates
Bracket Annual Income
1. Poor less than .5 x Minimum Wage Income or $7.5k
2. Struggling 1.5 x MinWage Income or $22.5k
3. Comfortable 2 years of Average Income or $100k
4. Doing Well 5 years of Average Income or $250k
Rates so far :
1. Poor 0%
2. Struggling 12%
3. Comfortable 16%
4. Doing Well 20%
This covers 98% of the earners. We are all familiar with the top 2% starting at $250,000.
Bracket Annual Income
5. Almost Rich 10 years of Average Income = $500k
6. Rich 20 years of Average Income = $1 million
Rates
5. Almost Rich 24%
6. Rich 26%
Deductions and Capital Gains
Wipe almost all loopholes and deductions off the map and add back:
1. Mortgage deduction
2. Non-profit donations
(there are more deductions but I am keeping this simple for the example)
3. Capital Gains - the first 10 x Average Income ($500,000) taxed at 15%
All other Capital Gains taxed at 30%
You will notice that the second $500k only went up 2% from the first 500k, instead of 4% as the other tiers stepped. This makes the second $500k the sweet spot. This is done since the next step up in income involves minimum tax rates on AGI.
When you are earning 20 times the average income earner which is currently a million dollars, you are living light years beyond the average person. Taxing those luxury dollars will not impact that higher earner as it would someone making $50k, it is simple.
Taking from Buffet's advice on high income earners:
A minimum 30% tax on Americans making $1 million to $10 million regardless of how this income is generated. No loop holes as there is a minimum tax.
Over $10 million the minimum tax is 35%, that is the top rate.
The nice thing about using values like Average Income is that it is calculated from submitted data. We know the value for next tax season, oh boy!
Using multiples of this variable just seems like a natural way to go.
Really the only number that changes between tax seasons is the Average Annual Income and Minimum Wage.
If the Average Income was for instance 53,500. Then Cap gains would be Average Income x 10 or $535,000 at 15% above $535,000 25%
A 6th Grader Could Do This
This makes one wonder if minimum wage should be tied to Average Income instead of waiting to see IF the issue is even taken up in a given year.
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