Unexpectedly Intriguing!
February 14, 2017

Honk If You Hate the IRS - Source: Real Clear Markets Like lots of Americans, President Donald Trump hates the hassles involved with filing and paying personal income taxes. But unlike lots of Americans, he's in a position where he is going to exercise some influence over the issue.

But why should he have all the fun?

When it comes to making personal income taxes easy, not much comes close to the flat tax, where we've made it possible for you to develop your own hypothetical personal income tax system for the entire United States. All you need to do is set the tax rate and enter the value for an individual tax credit into our tool below, and we'll figure out how well your personal income tax plan would mean for both you and the country if the U.S. Congress went along with it! [If you're accessing this article on a site that republishes our RSS news feed, please click here to access a working version on our site.]


Flat Tax Data
Input Data Values
Flat Income Tax Rate [%]
Value of One Individual Tax Credit [$]
Your Household's Tax Data
Your Household's Total Money Income [$]
Number of Individuals Covered on Your Tax Return

How Well Would You Do With Your Flat Tax?
Calculated Results Values
Your Basic Income Tax, Before Tax Credits
Your Tax Credits
Do You Owe, Or Will You Get a Refund?
Amount of Taxes You Owe, Or...
Amount of Your Refund
Your Effective Income Tax Rate and After Tax Income
Your Effective Income Tax Rate (After Tax Credits)
Your After Tax Income

We put your personal results first, but since our tool is also about seeing what your flat income tax scenario would mean for the country, we've also figured out how much money the U.S. government would collect through your plan and compared it to what it actually did collect in the 2010 tax year. Why 2010? Two reasons: first, we had the nation's income distribution data for that year right at our fingertips, and second, because in many ways, the economy of that year qualifies as having been in a moderate recession, with job losses continuing well into the year as millions of Americans continued to experience elevated levels of unemployment from job losses that occurred in the severe recession years of 2008 and 2009.

In years with strong economic growth, it's easy for a government to rack up lots of revenue from the taxes it imposes, but the real fiscal test of any tax system is how it performs when times are tough, which can put the solvency of fiscally-strained governments at risk. Even in the United States (just ask California or Illinois)!

How Well Would the Federal Government Do With Your Flat Tax?
Estimated Results Values
Aggregate Total Money Income
Aggregate Income Taxes, Before Tax Credits
Aggregate Total Tax Credits
How Much Money Would the Government Collect?
Estimated Results With Your Flat Tax Actual Income Tax
Aggregate Income Taxes, After All Tax Credits
... as a Percent of GDP

If you've run the tool with our default data, you've found that we've nearly matched the U.S. government's actual personal income tax collections without much straining.

But maybe the better question is would President Trump go along with such a simple flat tax plan, considering that what he proposed during the campaign was so different. Not that proposal means much at this point other than that the President will indeed seek to cut taxes, because with Trump, many of his proposals are more often than not just the opening bid for a big negotiation.

One last thing. The U.S. already has, for all practical purposes, a flat tax of 35%, where the rate is set that high to account for all the games that U.S. politicians have played with the tax code over the years at the behest of their most influential donors and their desire to buy lots of votes through popular tax deductions, exemptions, credits and eligibility for various welfare benefits. Regardless of how much income you have, that works out to be the average effective marginal tax rate that people across the entire income spectrum pay.

Since we're in for a negotiation, we might as well know where we stand today so we know if the deal that's offered is a good one!

About the Tool

We used our model of the 2010 aggregate distribution of household total money income for the U.S. in generating the "how would the federal government do with your flat tax?" portion of the tool, along with the U.S. GDP and the IRS' count of the number of exemptions reported on tax forms for 2010.

The rest was just simple math! (Trust us - you should see how the IRS does quadratic equations!)

Data Sources

White House Office of Management and Budget. Budget of the United States Government: Historical Tables Fiscal Year 2012. Table 2.1 - Receipts by Source: 1934-2016. [Excel Spreadsheet]. 14 February 2011. Accessed 28 September 2011.

Bureau of Economic Analysis. National Income and Product Account Tables. Table 1.1.5 Gross Domestic Product for 2010. [Online Application]. Accessed 13 February 2017.

Internal Revenue Service. Selected Income and Tax Items for Selected Years (in Current and Constant Dollars). Individual Complete Report (Publication 1304), Table A, 1990-2010. [Excel Spreadsheet]. Accessed 13 February 2017.

Image Credit: RealClearMarkets.




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