Are you tired of today's income taxes? Do you find them too complicated? How frustrated do you get by not being able to figure out how much you'll either owe or get back from the government until you've spent hours and maybe hundreds of dollars actually preparing your Form 1040?
Isn't there a better way to pay for all that government we get? One that's pretty transparent and doesn't load up on special tax breaks for politically connected people? One that can fairly apply income taxes across the full spectrum of the nation's income earners?
Here at Political Calculations, we don't know if your way might be better, much less just what your way might be, but we can put the tools in your hands that you can use to build a brand new income tax code from scratch!
But more than that, we can also show you how successful your new income tax system might be in collecting money compared to today's system, at least, for 2005-06, right along with working out how much your tax bill would be under your system so you can compare your actual tax bill with your proposed option.
And it all starts below....
Designing Your Tax Brackets
Previously, we showed that all you need to define a progressive tax rate schedule like the U.S. has today is just three points of data, which effectively define the following:
- The lowest tax rate and the maximum income level at which it applies.
- An intermediate "target" tax rate and income level that defines the transition between a steep progressive rate of taxation beginning at the first point and a less steep rate, which continues up to...
- The maximum tax rate and the income level above which it applies.
We've selected default data to show off some of the tool's capabilities. Yes, we can handle negative income tax rates to benefit those with low incomes! Yes, we can handle a perfectly progressive income tax system, with incrementally increasing rates that apply with increasing incomes up to a maximum level (just leave the middle "target" tax rate blank!) And we can handle even more! Just enter your ideal progressive tax rate structure into the first table below.
Of course, a progressive income tax rate structure is nice, but what if you want an easy way to explore a flat tax? Or maybe you'd like to see what would happen if you set up a taxable income cap like Social Security has? Then again, you might be the kind of person who would like to impose a super high income tax rate or surtax for those who earn super high incomes. Sure, you could play with the numbers you enter for the progressive tax rate data table above to get these effects, but wouldn't it be really nice if you had a super easy way to check out these possibilities?
If any of the above describes you, we have a solution for you. The "Super Tax" data table below the progressive tax data table will let you set up a special tax rate that will override part or all of the progressive rate tax table above so you can explore these possibilities! For example, if you enter $0 for the income level where your "super" tax rate begins, you'll have a flat tax system for whatever tax rate you enter! Alternatively, you could set the tax rate to 0% and the income level greater than $0, setting up a Social Security-style taxable income cap. Or set that super high tax rate that only applies to people earning super high incomes, while keeping your progressive tax rate structure in place.
Speaking of which, if you'd rather just stick to the progressive tax rate structure you've outlined in the first table, just leave the data entry field in the "Super" tax data table blank. It's all up to you!
Some Fun Numbers With Our Default Data
For 2005-06, for which we modeled the household adjusted gross income distribution, exemptions per tax return and compared your plan against the results of the tax rates in effect in that time, the minimum wage was $5.15 per hour. Someone earning minimum wage and working full time for a full year would make $10,712. Try that number and adjust the number of individuals represented on a return with an eye to the following table outlining the income thresholds for poverty for 2006:
| Poverty Income Thresholds for 2006 | ||
|---|---|---|
| Number of Individuals in Household | Single | Married |
| 1 | $10,348 | N/A |
| 2 | $13,696 | $13,314 |
| 3 | $16,004 | $15,992 |
| 4 | N/A | $20,163 |
So, not only did our default data fill the U.S. Treasury with the nearly the same amount of the taxpayer's cash as did the current tax code did from personal income taxes, our version of the tax code would virtually eliminate poverty for all working people. When you consider that the government will spend 4% of GDP in any given year, or rather, about half what it collected in 2006 in personal income taxes to fail to achieve the same goal, shouldn't we be considering re-doing the tax code along the lines that we've proposed?
- posted by Ironman at 2:05 PM | Permalink | |
