Arguments abound about the nature of our tax system. I too have found myself in several different camps when it comes to changes that need to be made so that the system is fair to everyone without stifling investment. I see the pros and cons of each suggestion and have come to the conclusion that there is NO perfect system for government to raise the funds necessary to provide the services required of it.
Therefore, rather than “throwing out the baby with the bath water,” I have come up with a simpler income tax method, one that is relatively fair to everyone. It recognizes that everyone should be able to afford a basic living that provides for food, shelter, clothing, medical care, and the incentive to work harder to get ahead. For individuals, it reduces the standard tax form to one page, ONE PAGE. Of course, there will be others who will have a more involved return, but those people will have a more diverse income.
I’m the first to acknowledge that I don’t have all the answers, but the more complicated that the income tax system is, the more that average people feel cheated by the system. Why should people with higher incomes have more deductions and “tax shelters” available to them? The simple answer is that they shouldn’t. Creating a simple tax form with no loopholes makes it fair for all. It is my humble opinion that all income, regardless of the source, should be treated the same. I understand that there have been times when investment tax credits were a good idea, but those kinds of incentives should be short term only. Why should people receiving oil and gas royalties be entitled to a depletion allowance? The idea that the land is losing value is ridiculous. What’s under the land may not be as valuable because the oil or gas is gone, but the soil is still there. It has always been a “tax bonus” for the wealthy, giving them tax free income. We might as well give people owning mountain land a tax credit for the wind that flows across it and generates electricity using a windmill. No, everyone should pay taxes based on all income, regardless of its source.
I propose a simple, one-page tax form. Let the IRS spend its time verifying income. We don’t need thousands of tax experts; we need auditors who make sure that people simply report all of their income. Arguing over deductions and credits and forms is a waste of time. We can debate the rates, but the basic form should be agreeable to all.
SAMPLE PROPOSED INDIVIDUAL INCOME TAX RETURN
Name _____________ Address ________________________
Social Security Number ____________________ Birth date _____________ Age ______
1. Interest and Dividends ________
2. Rents and Royalties ________
3. Capital Gains on stocks/assets ________
4. Gambling Winnings (net of losses) ________
5. Prizes ________
6. Miscellaneous ________
7. Sub-total (add lines 1 thru 6) ________
8.Social Security on non-W-2 income (line 7 times .07) _(_____)_
9. Others earnings after Social Security (line 7 minus line 8 ________
10. W-2 earnings ________
TOTAL TAXABLE INCOME (add lines 9 and 10) ________
Taxes (Apply total taxable income to the following chart):
11. $0 to $25,000 TAX EXEMPT _$ 0.00_
12. $25,001 to $45,000 X .10 ________
13. $45,001 to $75,000 X .15 _________
14. $75,001 to $115,000 X .20 _________
15. $115,001 to $165,000 X .25 _________
16. $165,001 to $200,000 X .28 _________
17. $200,001 and ABOVE X .30 _________
18. Social Security from line 8 above _________
19. TOTAL TAXES OWED (add lines 11-18) ___________
20. Less: Taxes withheld(W-2’s, 1099’s, etc.) _(________)_
21. TAXES DUE (subtract line 20 from line 19) ____________
(If line 20 is greater than line 19, you have a refund due to you!
Signature______________________ Date ________
I have eliminated all deductions that exist under the current system, partly because theyare inherently unfair to most Americans who can’t take advantage of them. In addition, it is unfair to ask other taxpayers to subsidize people who choose to get married or have children. My intent is to have each individual file a tax return if that person has any taxable income. Whether any tax is owed or not is irrelevant in my mind; the information is important.
I understand that there will be considerable discussion about charitable donations. People can donate their after-tax income in any manner that they desire. I can do the same. If charitable donations continue to be a tax deduction, it means that tax rates are higher to cover for those donations. I see it as being no different than a pacifist who objects to his tax money being used to fund war. That circumstance, unfortunately, is a necessary evil of government. However, by eliminating donations as a tax deductions, no one can claim that tax money is being used to support a church or other “charity” for which that person is opposed. Those who believe that donations will drop if they aren’t a tax deduction think very little of the American heart. Americans will always do the right thing. The fact is that donations are limited on current tax returns. Putting more money in every taxpayer’s pocket will inevitably lead to more donations, not fewer.
(Gifts received are subject to 10% tax rate and filed on separate return.)
Tax returns and any payments are due by April 15. Interest is due on all amounts due by the taxpayer at the rate of 5%. Interest is due to the taxpayer on any refunds at the rate of 5%. If the withholding brackets are done correctly, and quarterly deposits, if required, are timely, interest should about even out. I believe that it’s only fair to be paid interest if we can be charged interest. Penalties should remain the same.
Corporate tax forms remain the same, but rates will change…
Corporate tax returns will remain basically the same, though I believe that the tax rate should be a flat 30% with no accelerated depreciation allowed. While I’m repulsed by the salaries being paid executives, that is the responsibility of stockholders and Boards of Directors. Those executives will be paying much more of their compensation in income taxes that they have in the past using the new tax returns. None of their compensation will be exempt from social security and income tax, so they will be contributing more than in the past. Deferred compensation is prohibited. Executives are not special people. No longer will there be millionaires paying no taxes or less than their secretaries!
Corporations will be required to declare what their primary source of income is so that all other income is taxed separately. For example, if XYZ corporation is a retail store, then that income directly attributable to retail sales will be taxed at a flat 25% rate. All other income, whether interest, dividends, capital gains, or income from investments in either domestic or international companies will be taxed at a 30% rate. Any losses from those “non-primary” sources will not be deductible from their primary income; those losses will be totaled into the “non-primary” income, and the net income will be taxed at 30%. Again, a loss cannot be used to offset primary income subject to tax. The effect of this is to insure a Minimum Tax on all corporate earnings. No corporation will be allowed to operate without paying taxes. EXCESSIVE executive compensation will no longer be tolerated. In addition, there will no longer be any “investment tax credits” unless newly passed by Congress and endorsed by the sitting President.
Individuals will no longer be allowed to incorporate themselves for protection from taxes or lawsuits. Limited Liability Corporations will no longer exist either. Sub-chapter S corporations will no longer exist. Any such entity will be given three years to dissolve itself into either partnership or individual businesses. Privately-owned corporations will eventually cease to exist. Creative accounting used to avoid taxes will be subject to penalties in additional to normal taxes required.
While I realize that these proposals will be hard for the wealthy, those who earn a living preparing taxes, and those who work creating loopholes or devising ways to avoid taxes, the benefits to all Americans will far outweigh the “burden” which will certainly be claimed by the aforementioned group.
To this I reply, “Let them eat cake!”