Tuesday, January 31, 2012

Tiered Flat Tax - the Solution?

It's that time of year again when all good little citizens pick up their tax forms, their pencils, their speed dials or their online tax filing alternatives, trying to understand all the changes in the laws and make sure they don't miss a single deduction. The tax code is cumbersome, complicated, and filled with little loop holes that either thrill you when you find them or devastate you when you learned you missed one after you turned in your forms. It also means a healthy return for some, paid back by the government for taxes collected, but without interest on the amount the government got to use all year that really belonged to you. Of course, interest was a bigger issue when there really was some.

This brings me to a thought process: simpler is better, or so they say. In that spirit I think we safely could strip the tax code down to basics. If you earn, you pay. I think the flat tax idea, bandied about for so long and usually shot down with flaming arrows, deserves a modified look. I would suggest that we adopt it, but not straight across the board at one rate. Instead, make it tiered, as follows (only a suggestion):
Income under $10,000 pays a flat 10%
Income 10,000-49,999 pays a flat 15%
Income 50,000-249,999 pays a flat 20%
Income at $250,000 and above pays a flat 25%

All sources of income should be lumped together and subject to the tax. There should be no deductions and no exemptions (with charitable donations a debatable point), and therefore no need for cumbersome tax forms and multitudinous expert help. Just simple math. This may cause accountants, tax consultants, and the employees at the IRS a little concern, but I am sure they will still be needed, perhaps in monitoring how Congress spends all that revenue.

You may ask, why should I pay more just because I earn more? Why should someone pay more who earns less? I believe that we all have an obligation to the society in which we live, to help that society take care of all its citizens. If that society has provided you with a healthier income -- be it through hard work, sound investment, inheritance, or luck -- you should and must pay a higher share to run that very society.

Besides, 75% of a million bucks is still a lot more than 90% of $10,000. And remember that if our society breaks down, you will have nothing. The so-called one percent needs to understand that they need the other 99% a lot more than the 99% needs them -- to make things, buy things, build things, rent things. If the one percent should ever falter, there are plenty who would replace them.

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