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Originally Posted by Rupert Pupkin
I think a combination of some type of flat tax and national sales tax could work.
Here is what my idea would be. We could have a national sales tax of around 5%. There would be no income tax for people in low tax brackets. So if you only make $30,000 a year, you would pay no income tax. The only tax you would pay would be the sales tax. So even if that person spent the entire $30,000 that they made, that means that they would only be paying a 5% tax on that. That's not too bad.
For people making $100,000 a year, you could make them pay a 10% flat income tax in addition to the 5% sales tax. For anyone who makes over $200,000 a year, you could give them a flat-tax of about 20%.
The most important thing would be to get rid of all of these tax right-offs. I've read some stories about some really rich people that pay practically no taxes because of all kinds of tax right-offs and tax shelters. We could have a flat-tax where you can't write anything off. If a person makes $1 million, they would have to pay $200,000(20%) in income tax and there would be no way to get around it.
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I agree the tax code could be simplified and many loopholes should be closed (most having to do with corporate welfare), but how would you handle taxing dividends? The big problem with the flat tax proposals (besides the fact that it would effectively raise taxes on the poor and middle class because the wealthy would be the ones most benefiting from a flat tax) is that dividends are excluded from taxation. Which would permit the super-rich to live tax-free.
In my opinion, one needs to look at who is proposing a tax reform to figure out who would most benefit. Flat tax seems to be a pet of the super-rich. Wonder why? Because it will cost them less money and shift the burden onto the poor and middle-class.
Interestingly, the Earned Income Tax Credit is pretty popular with both parties because it's an efficient, inexpensive way to get a little extra money into the hands of working families. More effective than raising the minimum wage, because most minimum wage workers are teenagers.
The main reform that urgently needs fixing is the alternative minimum tax. Raise the threshold, already! (not that I'm anywhere near the threshold. Sigh...)