> The problem I have with the tax simplification folks is that they're generally disingenuous about the fact that they're proposing moving from a progressive to a much flatter tax code. Or at least ignorant about the differences.
Whole heartedly agree. Simplification and flatter tax code should be separate discussions, with separate conclusions.
1. IRS determines the median for personal income (total household income divided by household size), and publishes it no later than January 1.
2. Your taxable income is your household income minus the published median from #1 times the number of people in your household. If this is less than or equal to zero, pay no tax.
3. Those with positive taxable income pay x% of that amount as tax, with x set according to the requirements of the previous year's budget, but not to exceed a statutory limit of y%.
If you take the median income as a proxy for spending, this tax thus approximates a flat tax on the annual increase in household wealth.
The thing is, you can greatly simplify the tax code and still have progressive tax brackets. Looking up the total amount due in the back of the tax booklet (or more realistically having software calculate the total due) is the easy part of doing one's taxes.
Cut out the various deductions and credits and additions to income etc. to make things simple. Then calculating tax due becomes a simple table lookup or addition of amounts from multiple tables. 3rd grade math. We don't need to set a single universal x% tax rate to make things easy.
Consider that the only reason we have "tax brackets" is because many people apparently cannot be relied upon to calculate the results of an intractably complex polynomial function such as f(x) = 0.40x - c or a choice function like MAX( f(x), 0 ).
Whole heartedly agree. Simplification and flatter tax code should be separate discussions, with separate conclusions.