I see the merit in a consumption tax as opposed to the current income tax… However I also see the merit in any tax as opposed to the current tax system.
Here is one for you to think about.
A relatively large non-taxable base, it can be any number but let’s say $30,000 for a couple. (plus $5K per kid). This income is not taxed and is considered the earners 100%. Now anything over $30,000 is taxed a certain amount… for ease lets say 20%. Absolutely positively no loopholes. Now what is the result:
For ease we will consider a couple no kids making:
$10,000 pays NO TAX
$20,000 pays NO TAX
$30,000 pays NO TAX (see the poor pay no tax)
$40,000 pays 5% TAX i.e. $2,000 (20% OF $10,000)
$50,000 pays 8% TAX i.e. $4,000 (20% of $20,000)
$75,000 pays 12%TAX i.e. $9,000 (20% of $45,000)
$100,000 pays 14%TAX i.e. $14,000 (20% OF $70,000)
$200,000 pays 17%TAX i.e. $34,000 (20% of $170,000)
$400,000 pays 18.5%TAX i.e. $74,000 (20% of $370,000)
$1,000,000 pays 19.4%TAX i.e.$194,000 (20% of $970,000)
Such a smooth curve of tax rates get rid of potential problems associated with the tax bracket system…for example : taking home less money when you make more money because you made it into the next bracket.
This is basically the flat tax system with a large tax free base. Unfortunately when you call it a flat tax it gets demonized. I think we should call it the Graduated Tax or the Perfectly fair tax.
Numbers are subject to change but the basic fairness of the system remains intact. And talk about political legs. Dems say they are for the poor. This Conservative system says POOR pay Nothing in Taxes. There must be a large minimum salary which cannot be touched by the govt. as means of providing the basic necessities and a comfortable and free life.