Is America ready for a flat / fair Tax
Currently many Americans pay as much as 33% or more in cumulative taxes because tax rates vary for each individual based on income brackets, exemptions and a complex system of IRS codes. This proposal would create a single flat rate tax fixed at 17% that would be the same rate for all Americans. Most Americans would see this as a reduction in tax rate. The national average is currently 22%.
Advantages: the 17% flat tax would replace the existing tax system and proposes the following:
- Individuals would be initially taxed at a flat rate of 20%, falling to 17% after two years.
- It would significantly reduce the tax rate for many Americans.
- It would eliminate double taxation.
- It would simplify tax preparation. Corporate and individuals would be able to file their returns on a ten-line postcard-size tax form.
- It would encourage savings. Individuals would no longer pay tax on income from savings, capital gains, and interest income.
- It would provide a strong boost to capital formation and thereby stimulate the economy.
- It would reduce IRS staff and overhead and streamline tax preparation.
- Corporations would be allowed to expense all their investments--no more complex depreciations.
- It is a progressive tax with a flat rate on taxable income, however, the more an individual saves or invests, the lower his taxable income becomes, thus lowering his total tax payment.
- Taxable income is defined as total income minus savings and investments minus a threshold income. The typical family threshold income is $36,800.
- This would mean that nearly half of all households would pay no federal income tax under this plan.
- It would reduce the cost of compliance from $593 Billion to an estimated $50 billion per year.
- It is a simple tax that levies the same tax rate to all Americans regardless of taxable income, while reducing or eliminating income taxes for low income families.
- It would not eliminate the IRS, but would reduce its role.
- It would eliminate deductions for mortgage interest payments, a drawback for homeowners.
- It would eliminate deductions for charitable donations.
- Corporations could deduct all wages and salaries, but benefits like social security, health or life insurance would no longer be tax exempt.
- Corporations would no longer be able to deduct interest payments on debt.
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