Taxes: Flat vs Consumption

TAXES:

Flat (modified) vs Consumption

Why I rejected the consumption tax and how that set me on my quest for a better tax option!

Why I reject the consumption tax;

1. It requires that people deny themselves things they want in order to avoid paying an unfair percentage of their income in taxes.
2. In our consumer nation, it cuts into commerce. It encourages people not to make purchases.
3. It will result in large, underground markets. Rich people know how to buy stuff without paying taxes
4. A basic consumption tax results in a serious imbalance percentage of income vs taxes paid.
5. It will require taxation of the internet and all purchases made there on. As people migrate towards purchasing groceries and everything on the internet, that will become a disaster.

I added this graph because it tells me something. The top 4.5% of income earners pay an effective income tax of 23% (ish) They also pay 75% of all taxes. That means, in order for a 23% "Fair Tax" to fund the government, it would require that every person now funding the government would have to spend every penny they bring in on new products, in order to fund the government. Okay? No investments. No saving. Spend every penny consuming. That is crazy.

It is possible this discrepancy would be made up by the taxation of criminals and people who get paid cash under the table.

There are more reasons that I don't even know yet, but you can see why I think a consumption tax is a bad idea.

This chart also tells me that 15% flat tax isn't enough.

Now, let me explain my tax plan. A simple, modified flat tax;

The Basic Plan

We start with a 15% flat tax. Add to that, a standard deduction of $25,000. Now, simply put, that means anyone who makes $25,000 or less would get a full refund on their taxes. If you make $50,000 you get half of what you have paid in a return. Removes the tax burden of the working poor and reduces the taxes on the lower middle and middle class significantly.

15% is an actual slight bump up, or no change, in percent paid by those making $30,000 - $200,000 (based on the chart above) Very slight, but slight. It is, as I have mentioned, less than what the top earners in america pay. That poses a problem. For now, I am staying with 15% (so I don't have to rewrite this whole thing)

Economic Stimulus Built In

We return the money in two checks. One at the end of November and one at the end of May. That money is then spent. Either it is spent for Christmas and Summer vacations (strengthening family ties) or it is used to pay the growing heating bills and catch up on past bills. Or, it is used to buy health insurance.

Corporate/Business Tax

Now, if we put the same numbers into our corporate tax, with the same refund built in, it becomes tax relief for new business start-ups and entrepreneurs.

The End Of Tax Forms

This tax plan is so simple, there is no need to pay people to figure it out. This will save Americans billions of dollars. We can reduce the IRS down to a minimum, end the fear of the government.