My plan would be pretty simple and would work best on income, but would be doable on a consumption base as well with a few minor adjustments. In so designing taxes, I consider that essentially, in a society, the purpose of taxation is to raise money for services that virtually everyone paying that tax receives virtually the same benefits from the use of thsoe taxes. The purpose of taxation is ONLY to raise funds, not for social engineering or benefits or penalteis, which if deemed necessary can be performed by plans funded by taxes rather than directly implemented through taxes, and the pain of taxation should be spread as evenly through the population as possible.
To this end, I’ve devised what I call a utility based tax system. Essentially, the idea is that the value of money isn’t the same for each person. If we use a flat tax percentage, while everyone is technically paying the same amount and so one might argue the pain of the tax is the same, in reality it’s not. For someone making $30k, losing 15% of that in taxation is going to affect their standard of living more than someone making $300k. So the idea is to adjust tax rates based on that. I don’t have a specific formula off the top of my head, but I do know that studies have generally shown that the value of money grows logarithmically. Thus, the most fair way to tax everyone with equal pain is to have a flat tax rate on that value, by establishing the rate and adjusting it based on utility.
Basically, this gives us a progressive tax system, but it would be based on actual economic data on the value of money to the people being taxed. But to give an example of how this would work, I threw together a quick formula that eyeballs some numbers that are good enough to this point [utility = ln(inc * 0.00015) and utility(base)/utility(inc) to normalize]. Let’s run with 30k as median income and give them base utility tax rate of 12%. Based on my quick formula, to someone making 20k, a dollar is work about 1.37 to what it’s worth someone making 30k, so they pay 8.8%, but to someone making 50k it’s worth 0.75 so they pay 16.1% and if you make 200k you pay 27.1%. Obviously, it needs more than 10 minutes of me playing with the numbers, but I think the basic idea comes across. I’m sure that an economist who specializes on this sort of thing could figure out a much more solid way of modelling this value.
Now, when congress institutes a tax hike or a tax cut, it automatically hits everyone. Yes, richer people get more from a tax cut, but they also take more from a tax hike. But the key point is, since it’s adjusted based on utility, everyone should feel roughly the same impact and can know roughly what their conversion rate is so they know how to respond to a certain amount of a tax change.
That all said, the base tax rate isn’t just an arbitrary number, it is specifically chosen to exactly, or as nearly as reasonably possible, balance the budget. To this end, every bill and every expenditure must provide a budget and that is added to the budget, and the rate is more or less a ratio of government budget to income. If they over tax a bit one year, the extra money is applied to the following year’s budget and thus the next year gets a slightly lower rate. If there’s a shortfall, it’s added to the next year’s budget and there’s a coresponding increase. As a result, we’d never never sustain a long term budget shortfall or surplus.
The other benefit is that every single government program could be directly correlated to how it affects each individual’s taxes. If the government wants to spend more money, they HAVE to raise taxes. If they want to cut taxes they HAVE to cut spending. And each person can see how much of their taxes goes toward defense or social security or education or whatever and take that into account when politicians talk about policy. And if politicians are talking about creating a new program or cutting an existing one, each person can see exactly how much it will cost them or what they’ll gain and better decide if it’s worth it.
And as I mentioned, if we decide we want to give bonuses to home owners or whatever, it needs to be done after taxes. Charge them the same rate, then have a government program that calcuates what it would cost and sends a check to those people. Then everyone can see how much it costs us to engage in that social engineering and if we still want it.
So we all get to have a single number we can relate to, it’s easy to calculate exactly how much we owe, so it’s simple to deduct from payroll and do our taxes, and it’s easy to understand how the government’s spending affects our taxes to better understand policy.
TLDR: It would be a progressive tax system based on the utility of money. The base rate is roughly a ratio of government cost to taxable income and automatically rolls in surplusses and shortfalls from year to year. Every government program must account directly for it’s cost and is easily reportable to the public for discussion on policy as how much it affects the base rate. And doing your taxes would be as simple as plugging your income into the formula and getting your rate; you’d spend more time filling in your personal identifying information than you would actually doing your taxes.