Tax code this, IRS that… fiscal cliff… blah, blah, blah. It seems every time you turn around you hear a politician saying something about taxes or an average citizen lamenting the complexities of our current tax code. Well, I have news for all of you: no one with the power to simplify the tax code actually cares about the tax code. If anyone REALLY wanted to fix the problem, it would have been done by now. Here’s my plan to simplify the tax code:
Ironically, the wealthy don’t seem to understand marginal tax rates… at all. And since so many wealthy, albeit perpetually ignorant, people demonize the notion of raising tax rates without a basic understanding of how marginal tax rates work, here’s an idea: wave goodbye to the marginal tax system… ALL income is taxable at the same rate, regardless of its source, including:
- Capital gains (including profits from the sale of real estate)
Problem solved. HUZZAH!
Standardizing and equalizing capital gains & dividend tax rates is very important. That means if an investment portfolio is valued at $100,000 on January 1st & it is valued at $105,000 come December 31st, that $5,000 is considered income and is taxed at the rate determined by the individual’s gross income. Simple. And fair.
Let’s say that person’s income from employment is $75,000. And let’s also say that person sold their home, making $11,000 on the sale. Add that $5,000 investment income and that individual’s taxable income would total $91,000 for the year. Simple. And fair.
The same tax rules and rates apply to everyone – even the wealthy. If an individual’s investment portfolio is valued $100,000,000 on January 1st & it is valued at $150,000,000 come December 31st, that $50,000,000 is taxed accordingly. Simple. And fair. It doesn’t get much simpler or more fair than that, does it?
Before we get into tax rates, let’s make another thing clear: hiding one’s money in financial institutions outside the United States is economic treason. As an American citizen, all liquid assets (read: checking, savings, money market, trusts, escrows, etc.) must be contained within American financial institutions. Period. No exceptions. End of story. Simple. And fair.
An American citizen is granted a lot of rights and privileges one would otherwise not have. Along with those rights and privileges come certain responsibilities and obligations… and economic patriotism is among those fundamental responsibilities and the single most important obligation of living in a civilized, democratic society.
When one is caught engaging in tax evasion, 100% of those financial assets will be confiscated by the federal government and any willing participant in the treasonous activity – from accountants to attorneys to the offending taxpayers themselves – will be prosecuted to the full extent of the law… Al Capone style. No immunity. No pardons. No exceptions. Simple. And fair.
Personal Tax Rates:
- $0 – $15,000 gross income – 0% tax rate
- $15,001 – $25,000 gross income – 5% tax rate
- $25,001 – $50,000 gross income – 10% tax rate
- $50,001 – $75,000 gross income – 15% tax rate
- $75,001 – $150,000 gross income – 25% tax rate
- $150,001 – $200,000 gross income – 30% tax rate
- $200,001 – $300,000 gross income – 35% tax rate
- $301,001 – $400,000 gross income – 40% tax rate
- $400,000+ gross income – $45% tax rate
Whatever tax bracket an individual’s gross income falls into, that’s the rate that is applicable to 100% of their taxable income (i.e. $25,000 = 5% tax rate; $25,001 = 10% tax rate; and so on) – again, no more marginal tax rates. Yes, if you make $500,000 per year, your tax rate is 45%. Get over it.
If this were the 1960s, you’d be paying a tax rate of more than 90%. Guess what: there were still PLENTY of rich people in the 1960s and those rich people never stopped getting richer. Suck it up.
“The needs of the many outweigh the needs of the few…”
“But that’s not fair, Alysson! Why should wealthy people PAY SO MUCH MORE than everyone else? You HATE success!” No, I don’t hate success. Here’s the deal: because the wealthy OWN SO MUCH MORE than everyone else, the should be responsible for a proportionate amount of the nation’s total tax liability. Simple. And fair.
Here’s what you need to understand: the top 5% control 72% of this nation’s wealth. Doesn’t it stand to reason, then, that the top 5% should be responsible for 72% of the nation’s total tax liability?
That makes sense, right? Of course it does… unless you’re among the 5% of America that can afford to fund the campaigns of political candidates who will set out on a propaganda campaign to convince 95% of the country to vote against their own self-interest and then pass legislation to further tip the scales in your favor.
While what qualifies as income must change, we can’t stop there. Our current tax code unapologetically and purposefully discriminates against single people and people with no children. Marriage is a choice. Having children is a choice. Neither warrant such systematic preferential treatment by the government in the form of lower tax liability. The truth is, those with children are more of a drain on the system than those without children.
How much does public education cost? Billions… and how much of that tax burden is paid by single people or people with no children? An argument can be made that those with children should actually pay higher federal and state taxes because of public education alone… but, since most people have kids, that’s a fairness argument that never gets introduced into the conversation.
That said, in order to simplify the tax code and make it more fair for ALL American taxpayers, single filing vs. married filing vs. married, filing separately vs. head of household must be abolished – every individual with gross income of $15,001 or more files a tax return individually regardless of marital status. Simple. And fair.
The ONLY deductions available:
- Mortgage interest deduction – only on primary residence, not applicable to investment properties – up to $25,000
- Dependent deduction limited to 3 dependents – $5,000 per dependent
- Continuing education deduction (self or dependents – tuition, books, room & board only) – up to $10,000
- Health insurance – up to $10,000
- Health care costs (including medical, dental and vision care) – up to $10,000
No matter what one’s taxable income winds up being, tax rate is determined by gross income. That means a person making $100,000 falls into the 25% tax bracket. That means they pay a tax rate of 25% on all taxable income. Now, let’s say that person qualifies for the following deductions:
- Mortgage interest deduction: $12,000
- Dependent deduction (spouse & 1 child): $10,000
- Health insurance deduction: $6,500
- Health care costs: $2,000
Bottom line: $100,000 income – $30,500 deductions = $69,500 taxable income x 25% tax rate = $17,375 tax liability
That’s it. Whether one’s income is a result of employment, self-employment, capital gains, dividends, etc. is completely irrelevant. No more Social Security tax… no more Medicare Tax… nothing. Your tax dollars go to the federal government and are dispersed into various programs, like Medicare and Social Security, accordingly. Simple. And fair.
Stop and think for a moment how much easier this system would make life for employers. If an employee was projected to make $50,000 for the year, the employer simply withholds 10% and hands it over to the federal government. Simple. And fair.
ALL businesses with one or more employees, regardless of gross revenue, must file a business tax return. Whether a business is a small business or a multi-national corporation is irrelevant. Tax rates are determined by gross revenue, leveling the playing field for all businesses, regardless of size or revenue.
If a self-employed individual with no employees wishes to take advantage of the business deductions available, he or she must file a business tax return in addition to a personal tax return. Simple. And fair.
Business Tax Rates:
- $0 – $50,000 gross revenue = 10% tax rate
- $50,001 – $200,000 gross revenue = 15% tax rate
- $200,001 – $300,000 gross revenue = 20% tax rate
- $300,001 – $1,000,000 gross revenue = 25% tax rate
- $1,000,001 – $2,000,000 – 30% tax rate
- $2,000,001+ – 35% tax rate
The ONLY deductions available:
- Executive compensation, including salary, bonuses, incentives & pension/retirement contributions – 25% deductible
- Executive health insurance (if on a different plan than employees) – 25% deductible
- Employee compensation, including payroll/salaries, commissions, bonuses, incentives, pension/retirement contributions, health/life/disability insurance – 100% deductible (EXCEPTION: any company that employs more than 10% of its workforce outside the United States may deduct 0% of its executive compensation, only 50% of its employee compensation and only for those employed in America)
- Business insurance (liability, accident/injury, worker’s compensation, short & long-term disability) – 100% deductible
- Rent, lease or purchase of office, warehouse, manufacturing, industrial or retail space – 100% deductible
- Rent, lease or purchase of anything tangible that is regularly used by customers (slot machines, self-serve POS, rental cars/trucks, etc.) or employees not at the executive level (office supplies, cleaning products, postage, furnishings, computers, software, phones, cars, trucks, forklifts, manufacturing equipment, raw materials, etc.) used to provide a service or produce a good – 100% deductible
- Fuel, including gasoline & diesel – 75% deductible (100% if 75% or more of fuel is consumed by hybrid/alternative fuel engines)
- Vehicle maintenance – 75% deductible (100% on hybrid/alternative fuel vehicles)
- Facility construction and maintenance – construction materials & building costs, OSHA/EPA compliance, HVAC/plumbing, janitorial services, repair/replacement of electrical systems/wiring, etc. – 100% deductible
- Electricity, 100% on-grid – 50% deductible
- Electricity, 50% or more grid-tie or off-grid – 100% deductible
- Off-grid/grid-tie solar or wind power system construction or maintenance – 100% deductible
- All other utilities (natural gas, water, communications, etc.) – 100% deductible
- Marketing/Advertising (tangibles – business cards, letterhead, etc., graphic design/branding services, billboards, websites, printed & digital advertising – including radio, television, internet-based) – 100% deductible
- Non-executive business travel expenses (transportation, accommodations and meals) – 100% deductible
- Executive business travel expenses (transportation, accommodations and meals) – 50% deductible
Let’s stop & think about this for a moment: businesses put more stress on every infrastructure system in the nation – roads, electrical grid, non-renewable resources, communications systems… everything. Why should they pay lower rates than individuals? Short answer: they shouldn’t. And if simplifying the tax code & leveling the playing field for everyone were actually the goal and politicians weren’t completely beholden to incredibly wealthy & powerful special interest groups, such a logical and rational conclusion about corporate/business tax rates would be accepted by all.
Why Are You Trying to Destroy the Economy, Alysson?
I can hear it now: “But, but, but… we can’t increase taxes on the “job creators” – they’ll just close up shop and go overseas.” 1) BULLSHIT. No they won’t. And everyone knows they won’t. They know it. Politicians know it. Anyone with half a brain knows it. And 2) GOOD RIDDANCE to the tiny number who do.
Under the new business tax code, companies who conduct business and generate profit by doing business in the United States, but do not employ people IN America, will be subject to huge fines and tariffs which would eat up at least 90% of the profits generated by selling products and/or services to American consumers. Again, problem solved. Simple. And fair.
We hear a lot about “shared sacrifice”, but what we need to call it what it is: economic patriotism. And it’s about time the individuals and companies who generate obscene amounts of wealth by doing business in America are expected to reinvest in the American economy and actively participate in rebuilding the middle class their unrepentant and unmitigated avarice have helped to destroy.
While we’re on the subject of job creation, let’s get real. Raising taxes, particularly in a progressive corporate tax structure, actually increases job creation. Why? Think about it…
If a business – large or small – can reduce its tax burden by hiring more employees (thus reducing their tax liability by increasing tax-deductible payroll, health insurance, etc.), investing in better working conditions, replacing outdated equipment, etc., that’s exactly what they’ll do.
Let’s say a small business is projected to show a net profit of $500,000 for the year. They can easily reduce their tax liability by 50% or more by hiring more employees, investing in new tools & equipment, building larger facilities, etc. and still be very profitable. In doing so, everyone benefits – the business owner, the employees and the economy as a whole. The more take-home pay a given employee makes, the more that employee will spend and thus the more the economy will grow as a result.
Simple concept, right? Duh. It’s not new. Fordism, named for automobile manufacturer Henry Ford, is based squarely on the principle of paying workers enough to buy the goods they make. That philosophy, and the unions that followed, built the American middle class. As the unions go, so goes the dream of working one’s way into the American middle class.
But in today’s American corpocracy an employee’s standard of living in never taken into consideration. Profit is the only motivation. That said, the tax code must make investing in improving the standard of living of a company’s employees and improving their work environment a profit/loss decision. We’ve tried the “just cut taxes” experiment. It failed. And it failed miserably. The proof is in our crumbling economy and unprecedented wealth inequality.
Insanity: doing the same thing over and over again and expecting different results. ~ Albert Einstein
If you’re a business owner whose gross revenues total $1.5 million, what would you find more appealing? Here are your choices:
- Pay 30% of $500,000 to the government; or
- Pay 30% of $250,000 to the government; or
- Pay 30% of $100,000 to the government?
Stupid question, right? Right. As a business owner, of course you’re going to do whatever you can to reduce your tax liability. The key is to limit the ways in which that tax liability can be decreased and to make investing in improving the standard of living of a company’s employees the easiest & most effective of those ways. Simple. And fair.
The same philosophy holds true of the exceptionally wealthy. If Mitt Romney, Sheldon Adelson, Donald Trump, et al. knew their wealth would be taxed at a higher rate if they just sat on it than if they invested it in small business startup loans, research & development for green energy, technology, manufacturing, etc., what do you suppose they’d do with all that money?
You see, the problem is that the tiny minority of people who control the vast majority of the wealth make more money with money than by starting businesses, employing the American workforce, manufacturing American-made products, providing needed services and fostering technological innovation.
Lets take a look at the Walton Family. The net worth of the Walton Family exceeds that of the bottom 40% of Americans combined. Yes… you read that right. Even though Walmart is one of the planet’s largest and most profitable corporations, generating more than $15 BILLION in pure profit each year, “Walmart Pads Their Payroll With Your Tax Dollars.” And with poorly-paid Walmart employees forced to rely on government assistance (like food stamps and Medicaid) to the tune of almost half a million dollars PER STORE, PER YEAR, Walmart is “America’s real ‘Welfare Queen’.”
The wealthy must be motivated to use their vast financial resources to boost manufacturing and technology development in the American private sector. And there is no more effective a mechanism to encourage the investment required to rebuild the American economy than taxation. The key is to tax that idle wealth at a high enough rate to motivate them to put that money back into the economy through direct investment in small business, rather than just sitting on it and watching it grow. Simple. And fair.
Then they have a choice… pay much higher tax rates on all their business and personal income (regardless of source – including capital gains) and a 10% tax on all liquid assets (read: idle cash) over $1,000,000 or reduce their tax liability by directly investing at least 50% of their fortunes in small businesses with gross revenues of $2,000,000 or less. What do you think they’ll do?
See… pretty simple, huh? Reducing taxes on the wealthy doesn’t lead to job creation. Raising their taxes does. After all, they’ll always find a way to avoid paying taxes. We must adopt a tax code that provides only one way to legally reduce their tax liability: by direct investment in small business and strengthening the American workforce and, by extension, actually creating desperately needed American jobs.
“Government is instituted for the common good; for the protection, safety, prosperity, and happiness of the people; and not for the profit, honor, or private interest of any one man, family, or class of men; therefore, the people alone have an incontestable, unalienable, and indefeasible right to institute government; and to reform, alter, or totally change the same, when their protection, safety, prosperity, and happiness require it.” ~ John Adams
It really CAN be that simple. It really IS that simple. Those with all the money, all the power and all the influence have convinced you it’s so complicated that you just can’t wrap your tiny brains around the inherent economic complexity of overhauling the tax code. SHENANIGANS!
This is America and our government was established by we the people, for we the people. We have permitted our elected officials to create a system so complicated and so corrupt that the average American can’t begin to understand it, let alone get a fair shake in it. That must end. And we must end it.
The good news? We built this system. We have the right to abolish it and rebuild an efficient, fair and effective tax system that doesn’t unfairly tip the scales in favor of those who control the vast majority of the resources and wield all the power & influence in our modern political system. It’s your right. It’s your obligation. It’s your responsibility.
If you truly care about the future of this nation and want to leave behind a system of government your children need not be ashamed of, the first and most important step is to stem the tide of growing income inequality and commit to rebuilding an economic system that truly provides a level playing field for every American – white collar and blue collar alike. Simple. And fair.
Now… go call your Congresspeople & Senators and demand they represent YOUR interests as individual citizens. The time is NOW!