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Lets be honest, our tax system in the United States is overly complicated. It is over 80,000 pages long. If you took the same tax information to five different tax preparers you would come up with five different tax returns. The system needs change to make it easier, fairer and more equitable for all taxpayers and businesses. Below is an outline that describes the major features of the tax plan that would replace the current tax code, if I were President of the United States.
Individual and Corporate Income Taxes
While I do not agree with the income tax, it is a part of our system and we should use it to the best of our ability to help pay for the government we have today and in the future. The design of this is to tax both individuals and businesses fairly and equitably. Both benefit from our society and both need to contribute taxes based on their levels of wealth and success, because those who do better can help out those who might be struggling.
- General Principles: Taxes will be levied against individuals (not couples) and any for profit business in the same fashion. The government will tax the income/revenue of an individual and/or business with a flat tax rate that goes up based on the amount of you/it earns. Dividends, rents, and other forms of non-hourly or salary income will be counted as revenue for individuals and businesses.
- Taxes & Welfare: All income earned below the poverty line shall be non-taxable until filing. At that point, every tax filer below the poverty line would pay a small set amount of money in income taxes (Section #3.A). This does not mean cannot businesses will not assess and deduct income taxes to people who work for them below the poverty line, but it does mean that if they are earning below the poverty line, determined by local factors, they will receive a tax refund of all taxes deducted from their paycheck for the past fiscal year. Also, welfare and state assistance programs that provide cash assistance to individuals will be counted as part of an individual’s income when determining taxes.
- Individual Progressive Flat Tax Levels: The tax percentage levied against anindividualwill be determined by the amount of income they earned from all sources (gross taxable income), minus the allowable income reductions (Section #4). Individuals tax level can never be lower than one level below their tax level based on their gross taxable income).
- Level A (Below Poverty Line): Only individuals with gross taxable income below the poverty line are able to be taxed at this level. At filing each individual with earned income will be required to pay $100/year which can be deducted from any possible tax refund or paid directly by the individual to the federal tax agency.
- Level B (Up to 150% of Poverty Line): 5% of net taxable income.
- Level C (Up to 200% of Poverty Line): 10% of net taxable income.
- Level D (Up to 250% of Poverty Line): 15% of net taxable income.
- Level E (Up to 300% of Poverty Line): 20% of net taxable income
- Level F (Up to 350% of Poverty Line): 25% of net taxable income.
- These levels can continue at a predictable basis up to 50% of net taxable income.
- Individual Taxable Revenue Reductions: There will be no tax credits or deductions other than those listed below. Individualsare encouraged toprovide for themselves responsible benefits. Any money that an individual spends on providing these responsible benefits will lower their tax revenue burden and their possible taxes.
- Retirement Savings: Money saved by an individual for their eventual retirement will be deducted from their gross taxable revenue. The limits on such contributions will be capped at 15% of an individual’s gross annual pay. Individuals may allot more money to said accounts but they will not be allowed to deduct that money from their total taxable income. The individual must provide receipts of deposits/withdrawals into approved retirement accounts during from the previous fiscal year.
- Health & Medical Care: The money that individuals spend on providing for the health and medical care of themselves and/or their dependants will be deducted from their taxable revenues. They must provide receipts of money spent on providing health insurance and anything necessary to provide medical care for yourself or your dependents for the previous fiscal year.
- Education & Training: Any money spent by an individual educating themselves or their dependants can be deducted from their gross taxable revenue. This may be limited according to law on a per person basis. Individuals must provide receipts of money spent during this year on education, including; tuition, books, fees, supplies, etc. Money allotted to specialized educational accounts will be included in this part of the policy.
- Debt Retirement: Debt is a wealth killer and individuals that retire and stay out of debt deserve a small reward for doing so. First, there will be a one time set taxable revenue reduction for any debt retired by the individual or corporation during the fiscal year. Also a small taxable revenue reduction will be given to all individuals and businesses who do not take on any debt.
- Business Progressive Flat Tax Levels: The tax percentage levied against an individual business according will be determined by the amount of revenue they earned from all sources (gross taxable income), minus the allowable income reductions (Section #6). Individuals tax level can never be lower than one level below their tax level based on their gross taxable income. I am not sure what the different levels should be in terms of amounts of earned gross and net taxable revenue, but for each level the percentage that they pay should increase by no more than five percent for each level and start at 5% for the businesses with the smallest amount of net taxable revenue.
- Business Tax Revenue Reductions: Corporations being large entities thatemploy people to work for them, toprovide goods and/or services, have a few other deductions that they can make toreduce their revenue taxable burden. These are benefits provided to their employees for the social and productive good of their employees.
- Retirement Savings: Any money paid by a business to assist and provide their employees with a retirement will be be deducted from their gross taxable revenue for the fiscal year. This amount will be capped at 15% of the individual’s gross taxable income. The retirement savings paid by the business must be money that individuals can take with them if and when they leave the business. Expenses involved with old school type of defined benefit pensions can be included too under specific guidelines income.
- Health & Medical Care Expenses: Any money paid by the business to provide for their employees health and/or medical care expenses will be deducted from their gross taxable revenue for the fiscal year. This includes health insurance premiums, providing health care workers at their place of business and any expenses meant to assist their employees lead healthy and productive lives.
- Education & Training Expenses: Any money paid by the business to train their employees or continue their education, either in house or at an outside school and/or training site will be deducted from their gross taxable revenue. This may be limited according to law on a per person basis. Businesses must provide receipts of money spent during this year on education, including; tuition, books, fees, supplies, etc.
- Sick and Vacation Pay: Companies that provide their employees with paid time off for sick and vacation days, can deduct that money from their taxable revenue. Employees must take these days or be credited the daily wage during the fiscal to be granted the tax reduction in the business’ taxable revenue.
- Living Wages: Businesses that provide their employees with a living wage, according to local conditions, can deduct those wages from their taxable revenue.
- Automatic Withholding: Business may still require that individuals sign up for automatic withholding of the their wages to pay their taxes throughout the fiscal year. This will be determined by estimating their gross annual wage based on their weekly or monthly wage for the entire year. Individuals will then have their that percentage of their gross earned income withheld and sent to the federal tax agency.
- Annual Tax Filing: Anyindividual and/or business that earned income or revenue from any source throughout the fiscal yearwill be required to file a tax return with the federal tax agency using the basic steps below.
- First they report any and all sources of income and revenue for the fiscal year. This will be called their gross taxable income/revenue (GTIR). Businesses, banks, and other places that have given this money are required to provide documentation of all money earned by the individual as income.
- Next, they report any deductions to their GTIR based on the qualifications under Sections #4 and #6. This amount will be deducted from their GTIR and called their Net Taxable Income/Revenue (NTIR).
- Using their NTIR individuals and business will determine their tax percentage rate using information from the federal tax agency. They multiply their NTIR by this rate and that number is the amount of taxes that they owe to the federal government as income tax.
- They will thenenter into the form the total amount of taxes that have already been withheld from their paychecks throughout the year. Business may send their own estimated taxes throughout the year, just likeindividuals can have money withheld from their paychecks throughout the year.
- If the the amount of taxes withheld is less than the required amount to pay, individuals and business must make a plan to pay the additional taxes within the next twelve months.
- If the amount of taxes withheld is more than the required amount to pay, individuals and businesses must make a plan to pay the additional taxes within the next twelve months.
Capital Gains Taxes
Many people make a living and earn money not from income from a business in which they are employed, but by the buying and selling of different assets. Capital Gains Taxes are to ensure that these individuals and businesses are taxed fairly and equitably in our system for the benefits of our society as well.
- Definition: Capital gains taxes are assessed at the sale of any property or asset. Assets can include but are not limited too; land with our without fixtures on them, stocks, bonds, businesses or companies, patents, copyrights, trademarks, and any other property or asset that can be owned by an individual or business.
- Assessment Model: Capital Gains Taxes are paid at that time of the sale out of the proceeds of that sale. Capital gains taxes are only assessed on the sale of property or asset when there is a profit made from the original purchase price.
- Progressive Tax Rate & Limits: Capital gains taxes also assessed according to a progressive rate, but at a flat percentage rate depending on the amount of profit of the asset sold. The amount of taxes assessed in the sale of an asset cannot exceed 50% of the profit.
I believe that every nation is entitled to tax the goods coming from other countries into its own borders to be sold by to its citizens. It provides those countries with incentives to make products useful to the rest of the world and they are allowed to profit by it. We should move and lead a system that is not based on special relationships and treat all countries as equally as possible in our trade taxes.
- Export taxes are forbidden by the U.S. Constitution and would require a constitutional amendment to change. I do not support that change because it punishes our nations manufacturers from selling their goods overseas.
- Repeal all former special trade relationships with other nations replaced with the tax system below.
- Any material goods or services imported from any other nation of the world would be assessed a progressive flat tax based on the level of purchased price. This would be similar to the progressive levels set in the Income and Capital Gains tax system above.
- Import tax sanctions would be used against nations that are currently involved in actions that they United States does not agree with and are not in line with their principles. Congress, with Presidential approval, would authorize such changes to the import tax rates.
These are taxes on individual items like cigarettes, alcohol, gasoline, etc. I have no plan to fundamentally alter this system within the tax code. It probably needs some reforms but I am ignorant of changes I would make to this system.
Estate (Death) Taxes:
In principle I am against the estate tax, but practically it has some value. Andrew Carnegie was in support of some form of estate tax to ensure that the vast wealth of individuals does not go into the hands of those who do not know how to manage for the betterment of society. This is why he suggested it, but preferred that wealthy individuals manage their money in their life so that it can benefit others; either their families or the common good of other people. This is the value of the estate tax, but there are some problems with it as it stands now and in the future regardless of possible reforms.
The main problem is that most smart people know legal and beneficial ways around paying the estate tax. For example, a person who understands the tax code can give gifts to their family or organizations out of their wealth for years before they die., lowering their amount of possible inherited wealth. Then when they die their level of wealth is low enough that it is not taxable. This practice is not necessarily bad. It allows for their wealth to be distributed according to their wishes and to people who can use it while they are alive.
With all this in mind, there should probably be some form of estate tax, to deter the super wealthy from hoarding wealth within the families for generations. The total assets of a family should be taxed upon the death and before it is distributed to the inheritors. I am not sure at what wealth levels or tax rates should be used to determine this tax and would leave it to Congress to determine it in the best interest of their constituents.
Our tax system is hugely complicated, unfair and inequitable to individuals and businesses. It needs reforms so that all individuals and businesses that benefit from our society, constitution and government, pay something into the system that provides the safety and commerce to all the people in our nation. There are plenty of other options to simplify our system. This is mine. I would love to have more discussion and debate on this topic. Please feel free to ask question, comment, and raise your concerns about this plan below.
Questions? Comments? Concerns? Class dismissed!