Help me write a simple, just, tax law for US government consideration

Object is to have a reasonably just / fair tax law, simple enough to fit on both side of a standard 8.5x11inch page, except the progressive tax tables.
Note all “social engineering” and “special benefits” of the existing US tax code are absent from the less than two page draft I post below. If, for example, Congress deems it desirable to encourage marriage, home ownership, savings for old age, etc. that is to be done OUTSIDE of the tax code, via specific legislation, hopefully with “sun shine” expiration limits to force re-examination of the continued desirability of these “special," but discriminatory, benefits.
I await your suggestions for improvements, especially critical comments noting oversight and problems. Now I begin initial draft of new one sheet tax code and its definitions, introduction, etc.

PURPOSE, PRINCIPLES and DEFINITIONS:
Taxes, T, are collected to help pay government expenses. Taxes are only part of means for doing so. Part of government expenses are obtained from trade Duties, D; Bonds, B; Gifts, G; and Charges, C such as revenue from sale of postal stamps and other fees charged for government services to specific individuals and corporations. I.e. Government Revenue, R of T+D+B+G+C is available for authorized expenditures.

Government expenditures of three types of can be authorized: Operational, O, and Investment, I, and Security, S, which includes all military cost plus law enforcement expense, except for law enforcement salaries, which are O type expenses. Operation expenses cannot be paid from B nor can S expenses, unless a state of war has been declared and expenditures for it authorized. Thus, to the extent D+G +C does not cover O+Sp (Sp is peace time security expenses), then T must be collected. Note: Sw is the exceptional expenses associated with declared war, in excess of the recent Sp. I.e. S = Sp +Sw, if any.

US corporations pay no taxes, T, but must distribute all profits from US operations to US residents or citizens subject to tax laws; Except, part or all of corporate profits may be retained on the company books as assets for expansion, adverse conditions, operational capital, etc.; however, these sums can be retained for a maximum of 10 years. For example, any funds retained, in 2010, must be distributed to qualified individuals subject to US tax laws, typically as dividends, (not to other corporations) or expended for corporate purposes before first day of 2019. Any funds retained longer than this period become gift revenue, G, to the US Treasury, which must be transfer to the Treasury within six month to avoid 20% annually applied penalty.
Foreign corporations with revenue from US sources, in excess of ten thousand times the prior year’s US minimum wage must establish a US corporate subsidiary, subject to these same rules and make any required distribution to US residents or citizens subject to US taxes, or directly to the US treasury, if there are no US share holders, etc. to receive these distributions. If paid to the Treasury, usually after being retained for the maximum allowed 10 years, they are legally gifts, (G revenue) received by the Treasury, which must be transfer to the Treasury within six month to avoid 20% annually applied penalty.

Individuals, US residents and non-resident US citizens are subject to the US tax laws, and pay taxes in accordance with two progressive tax tables, one related to their income and the other to their accumulated net worth, which must be declared annually to the IRS. Increments of net worth, in excess of income, require explanation and documentation of the cause also to be filed with the tax return sent to IRS. Net worth increments not reported and confirmed real by judicial process are subject to confiscation by the Treasury.

Income is ANY money received, except monetary gifts, plus the fair market value of all services or assets received; however only the net income is taxed. I.e. payments made directly related to the income received reduce that income. For example, if dental service of fair market value X are received and Y is paid for them, then the dentist has income of Y and the recipient of the service has a monetary gift of (X-Y). Likewise the income when some asset, such as a stock, is sold is reduced by the cost of acquiring and selling it.
Inheritance & Gifts: Transfer of wealth upon death is subject to taxation only via the receiving individual’s taxation on the corresponding increase of their net worth. (Inheritance and gifts are the most common reasons why net worth increments may exceed income.) Monetary gifts are not income; they only directly add to the recipient’s net worth. The social security number of the donor of monetary gifts totally more than 100 times the prior year’s minimum wage in any one year must be reported to the IRS with that tax return.

Deductibility of Gifts:Half of all annual monetary gifts to IRS qualified non-individuals (usually charities or political organizations) up to 100 times the prior year’s minimum wage may be used to reduce total of your income. Monetary gifts to IRS qualified non-individuals in excess of that amount reduce income progressively less in accordance with the “Gift Deduction” table.
Gifts, monetary or otherwise, to individuals or non-IRS qualified organization provide no reduction in the donor’s income, but do reduce net worth of the donor and thus reduce the annual taxes upon donor’s net worth.
Non-monetary gifts, such as property, received by qualified organizations and corporations are not subject to the “10 year” maximum retention rule, but if liquidated, the proceeds do become subject to this rule.

”Qualified” Gifts Receivers: The IRS may qualify only US corporation and organizations, which are subject to the “10 year” maximum retention rule on all monetary gifts received and are not primarily religious in nature and purpose (Separation of Church and State). Religious organization may obtain IRS qualification, if they would otherwise qualify, for truly independently operating charities, schools etc. that do not discriminate based on their religious beliefs, including atheism, among those served.

TAX COMPUTATION:
After reduction of income in accordance with the “Gift Deduction” table below, your income component of taxes is given by function I(i) where i is your gift-reduced income received during this tax period (normally one calander year for most people).
I(i) = ….. or most individuals may use the “Income Tax” table below to simplify the computation.
Your wealth component of your taxes is given by the function W(w) where w is your net worth at the end of the prior year. Note w must be reported in your tax return filed.
W(w) = ….. or most individuals may use the “Wealth Tax” table below to simplify the computation.
Your total taxes due this tax payment period, T, are: T = I(i) + W(w) – AP where AP is the amount Already Paid by withholding from salary or by other means, including any prior payments you made directly to the IRS during this tax year.
If T is greater than 100 times the prior year’s minimum wage, next year you must file tax return quarterly.
If T is greater than 1000 times the prior year’s minimum wage, next month you must file tax return and each subsequent month also, until T computed for that month is no longer forcing monthly payments.
(These more frequent payments normally apply only to people not adequately making their AP payments or to those who unexpected received large increment of income or wealth. – Their purpose is to distribute the government’s tax revenues more uniformly throughout the year.)

Current year’s “Gift Deduction” Table (applied to amounts above the 50% deductability limit):
Over limit Amount: $ A ..$ B..$ C ..$ D……
Extra Deduction: 45% 40% 35% 30%.....etc.

Income Tax Component Table:
……
Wealth Tax Component Table:
……

 

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How about no income tax but a sales tax instead?

 

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Very unfair burned on the poor who must spend most of their income just to live. The very rich mainly invest theirs to increase their control over others, and thus would pay very small percent in taxes. Some, like Bill Gates are giving funds acquired away but this provides no US government revenue, if paying for wells dug in Africa etc. For another example, I live in Brazil, have large US based income and would pay zero taxes to the US. The Brazilian store owner from whom I bought some oranges, might convert my payment into dollars and order a CD etc, but very likely not from the US, just as many now avoid paying state sales taxes by buying where they do not exist. Thus, not even indirectly is my US income likely to be taxed by a sales tax. Good for me, but not fair to most Americans.

I.e. Federal sales tax is not a practical nor fair source of US federal revenue needs. Further more sale tax is better reserved for the states so that real estate taxes can be lower. I would agee to elimination of state income taxes and their partial replacement by a sales tax which excluded food bought for home cooking and medical cost. etc. Perhaps with higher rates on specified items like sail boats, hard liquiors, cars not initially able to exceed X mpg, etc.

 

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Then cut spending!!

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Always a good idea if there is waste or governmental expenditures are inefficiently providing a social need, which has been determined to exist by Congress. Otherwise not possible to do.

Please give the OP proposal some serious thought. I did when writing it. I do not expect more than 3 or 4 will as most people now days do not care to think about problems.

 

Most of the curent complexity of the tax code is right there, and your proposal does not help with that.

I definitely agree that all income should be treated alike regardless of source (barring perhaps direct government payouts such as welfare of SS). However, as long as a corporation is a legal person wit hthe attendant rights etc, corporate income (profit) should be treated as a legal person's income - for simplicity.

 

I do not understand your points - can you explain them more?

For example, now there are many different forms of "income" probably more than 100, all of which get different and complex consideration when entering into the computation of your taxes. To use myself as an example, there is both my long term and short term capital gains, three different work sheet to determine how much of my social security is taxable, how much of my annuity is taxable (part is return of the capital I paid for it); how much of my required minimum distributions from my 403b retirement plan is taxable (I paid in for that too, as did my employeer), how much of my income paid by companies I own stocks in is "return of capital" not taxed and how much is "dividend" and whether or not they are "qualified" dividends (I have no idea what that is I just stupidly follow the line by line instructions on the forms) or not. Etc.

I do not have any income from apartments in areas hit by hurricanes, or areas of the "disadvantaged" or tax benefited industral zones,or form municiple bonds. Etc. etc. I am retired and have a relatively "simple" set of only about 8 different types of income to process differently. Some people have 50 different types!

I have looked at each dollar - and as far as I can tell they are the same regardless of why I received them. It is silly beyond belief and a great pain you know where to treat them as if they were different. They are just income.

In OP tax proposal, corporation are not directly taxed - cannot get much simpler than that - they must however distribute any profits not expended with 10 years to individuals who are taxes on that as income. I want to not only make individual tax computations simple and fair, but also reduce to essentially zero the complex taxes of corporation - make them more productive without the cost of a small army of corporation tax lawyers. We could pay less for what they produce if that cost were eliminated and be more competitive internationally (more jobs for non-lawyer Americans).

As I understand what you are saying - you are making greater complexity than the OP proposal suggests and achieving no (or negative) benefit, but if I fail to understand, please explain.

 

Mod note: Although I think this could spawn an interesting conversation, I do think that asking us to do your homework doesn't belong in this forum, no matter how political it is.

Topic moved to Free Thoughts. If the Mod there decides it is not "Free Thought-ish" enough, then I suggest the Cesspool.

 

Why would you call it "my homework"?

Every tax payer complains; I am trying to get a better solution to what may be the most important political / economic problem currently facing the US. - Namely how to pay for the growing debt, which is destroying the dollar, and probably sending the US and EU into a deep depression if it remains with the current trends.

This is not my "job" or my "home work" - it should be a concern of all citizens, certainly all who pay taxes. I have no objection to thread being moved to the economics forum, but moving it to "free thoughts" - a forum for threads without suitable forum is IMHO ridiculous. Please reconsider where this thread belongs. If moved to the economics forum then delete this post and correct yours (post 8). Thank you.

P. S.
I initially placed thread in the "Politics" forum because, the decision as to which type (or set of types) of taxation is most desirable is a political decison. (All tax systems do obviously concern economics, but chosing which to implement is a political decision.)

 

Do we have to be politically realistic?
Have you heard about the "Fair Tax" promoted by radio talker Neal Boortz and congressman John Linder. Did that inspire this thread?

I have been thinking about this puzzle for years.
My Goals:
1. Making paying taxes simple.
2. Making a tax system that encourages a stronger economy.
3. Making a fair tax.
4. Making it harder to cheat on taxes.
5. Stopping States and cities from competing against each other for jobs via tax breaks.
6. Removing the financial incentives for creating economic segregation, pockets of high crime, and underfunded schools.
7. Stopping the Welfare, Arts and farm programs from being inefficient, excessively bureaucratic, and counterproductive.
8. Discouraging Suburban sprawl onto farmland and reducing oil imports.

So, I am going beyond taxes and creating policy and I am reducing the separation between Federal, State and local government. I don't think the American people would be comfortable with reducing The separation between Local, State and Federal government. I don't think Congress and the lobbyists would be comfortable with simplifying taxes.

I would have only one tax collection agency and would distribute money to states and local government by a formula based mostly on population. State and local government would get some money based on land area because roads and firefighting cost money. High cost of living cities might get some extra money.

The main tax would be a Sales Tax. This Sales tax would all transfers of monies from ownership by one legal entity to ownership by another legal entity. As with the Boortz/Linder "Fair Tax" I would use a payment to all people as the method of transforming a regressive sales tax into a non-regressive fair tax. The Boortz/Linder "prebate" payment to people is a lot to small in my opinion.

I want to give a much larger Prebate. I want to give enough money that a person could live in comfortable poverty even if the Prebate was their only source of income.

I would eliminate the Social Security program and all Welfare programs. All means all, no food stamps, nothing. I don't see why the government changed Social Security from a program that tried to eliminate desperate poverty among the elderly, into a program that tried to help the elderly continue to live in the style to which they had become accustomed to while working. There is a level of poverty below which we don't want any American to experience. No American should fear or be ashamed of living just above the level of poverty that we don't want any Americans to endure.

Conservatives would say people will be lazy and won't work if the Prebate allows be who are not working to not be painfully poor. I think people would want to work if jobs pay a decent wage and bosses respect their hard workers. I could be wrong. Perhaps everybody would quit work and write novels or play in bands, or play video games all day if they could get away with not working. What is the Truth about the Netherlands and Sweden?

One Problem with the current Welfare system is that it makes the transition from not working to working odd jobs and temp work into a bureaucratic nightmare.

I would end all arts programs. Arts bureaucracies are not capable of recognizing the next Vincent Van Gogh. The Prebate would do a better job of helping undiscovered artists do their work than Arts Bureaucracies would. Let Bill Gates or other rich keep their traditional role as patrons of the celebrity artists.

Small farms would probably be helped if big agriculture was not subsidized. The Prebate would help small farmers get through bad years. Maybe keep a limited farm loan program in place to help small farms buy seed and fertilizer after bad years. If a farm loses money in the free market for five years in a row, that farm should probably not be in business.

One problem with the Boortz/Linder "Fair Tax" is that they have no plan to stop people from evading taxes by making their purchases in foreign countries. The rich may choose to keep a simple house and cheap cars in the USA while their second house overseas is a mansion where they keep their Rolls Royces. The could send their kids to college over seas and have medical care over seas. Middle class people would mail order their new computer from overseas. The answer to this problem is to tax all funds leaving the country as if they were a purchase.

My second tax would be a special property tax. I would exempt the most expensive 1/8th of an acre that a person owns from taxation. I would tax the next 20 acres that a person owns as well as any parcels that they own more than 20 miles from their primary home or farm. I would exempt any land owned in excess of 20 acres but less than 1000 acres. I would tax land owned in excess of 1000 acres. Corporations would not be eligible for any exemptions on land that they own. These land taxes are designed to discourage suburban sprawl without hurting small and mid sized farms.

I would tax the value of the 1st 20 feet of elevation above ground of any building, but any stories above the 2nd floor would be exempt from taxation. This encourages compact cities. Compact cites decrease miles driven to work and don't sprawl over farm land.

Large companies might gain an advantage over smaller companies by doing in house activities that would generate taxes when a smaller company had to buy the services. A large company might have a company doctor. This would allow the employees to not pay taxes for medical care. I like competition and don't trust large companies to not rig markets and to not bribe politicians. I Would want an additional tax that only applied to very large corporations. This would encourage the existence of more mid-size corporations and less large corporations.

I would have an Estate Tax on estates over 7 million. Small business and farms are worth less than seven million so I don't want to hear that it is unfair for a death to break up the family business bit. Larger family business will have to take out a loan or bring in a parter; tough luck.
Taxes on petroleum imports might be good.

I had a friend who would race to buy under-priced used cars as soon as he saw them advertised by their owners. Then he would advertise the car and sell it to somebody a little uninformed for slightly above the cars normal market value. What a waste of intelligence and effort. My friend was just inserting himself between the buyers and sellers but was not adding any value to the economy. Higher Sales taxes would discourage that behavior.

We have bad corporate management. This is partly because stocks turn over to much. Nobody cares about the long term future of the corporations. Mutual funds will sell their stock holdings rather than try to improve bad management. Having the sales/transactions tax would encourage long term ownership. Long term ownership will not neglect bad management.

I am no better than my car selling friend and the mutual funds. I spend time trying to find undervalued stocks. When I think they are over valued I sell. I also have been beating the market (maybe luck) and making money on my time and effort without adding anything of value. A sales/transaction tax would change my behavior. There would be no more day traders.

Doesn't quite fit on a post card, but there it is.

 

Article 1: Everyone pays 1/10 of their income to Avatar.
Article 2: Avatar decides what to do with it.
Article 3: No complaining!

 

Should this not be in B&E forums?

 

No. Two chance occurances at about same time did:

(1)I started doing my taxes last week. - It got so complex and frustrating (and found I still lacked some data) that I quit in disgust. – I plan to start again soon.

(2)There was an exchange in "Tax the Rich" thread where in post 127* I pointed out the little recognized fact that the US has a great deal of "central planning" via the complex IRS tax laws. (In some cases it is so strong in effect that the old USSR would have been proud to have done it as effectively.) I stated that because of the special interest lobbyist etc. the tax code now runs to 10s of “thousands of printed pages.” (That may be an exaggeration, but not my much, if it is.) Then I went on to boast that I could write a better tax law on a 3x5 inch index card, if I used both sides.

That (item 2) was just before going to bed, and as is my habit, I often think about difficult things while falling to sleep. Next morning, first thing after breakfast I decided to try to write the "3x5" tax law. Quickly, it transformed to the "one sheet of paper" tax law as just defining the essential terms (like "income" etc.) took more than one side of the page. The tax computation section alone of the OP does fit on a 3x5 index card, so my boast was not too far wrong.
------------------------
*Location added by edit later - initially post said "I forget where" but I accidently stumbled on it today (26March).

 

Dismantle the industrial military complex, remove income taxes completely. Keep Corporate and business taxes at low levels and begin tariff and trade taxes to pay for the nukes.

 

Absolutely. It was badly placed here by a MOD, who gave an entirely false reason for doing so!

See post 8's false justification for moving it here (A mod claimed I was asking people to do "my homework"! - most readers here know I have not done "home work" for more than 40 years.)

See also my reply, post 9, protesting the move of this very serious and potentially important political/ economic discussion to "free thought" and why I originally placed it in the "Politics" forum.

In addition to post 9, I first sent a very polite, rational request to the MOD by PM. He has neither replied to that PM nor to post 9. I do not see how he can justify his action, so am not surprised. I have been critical of some other actions of his about a year ago and to counter balance that soon thereafter went out of my way to thank him for doing job well in another case. As I noted in the "thank-you" post being a MOD is a hard job with little thanks given for it - noting further that I would not do it.

I hope it is not a vindictive action that moved this thread here, but the stated reason is complete false, so I do not know why it was moved.

 

Who pays these?

 

Results of that are obvious:

New corportations, with a few very high paid employees. It would of course just be chance, that their salaries reduce the corporation's net profit to zero.

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Ok get rid of corporations ( i think it's easier to get rid of the industrial military complex now).

 

not much different than current tax situation only replace "avatar" with "government" and 1/10 with 3/10....

 

An excellent list of goals. - It clearly exposes the need for change for the present monstrous tax code, which meets few of them and
furthermore the tax code is in truth "central planning" in disguise.

For an example, which I have used before:

A childless successful lady real-estate agent, married to lawyer or stock broker, with family annual income (counting their investments) in the lower seven figure range, MUST buy a large country estate with the main house having at least 6 bedrooms. - So they can place a big “tax sheltering” mortgage on it. (Eventually they sell and pay the low capital gains tax rate. More distortion of economic decisions via the tax code.)

They waste a lot of time and make a lot of CO2 / oil imports / etc. every work day as they separately drive their MBW and Mercedes in thru the traffic to work (They need both as often have different hours, etc.)

If it were not for the effect of central planning, via IRS code, their city could be more like most in Europe, say Paris. I.e. not be a slum, but have desirable high rise luxury apartments for them to rent with good rapid transit (or perhaps short walk / cab ride) to work place and nice park for the dog. The US tax deduction on home mortgage is UNLIMITED. This has made the US suburban development much greater than in Europe. Made the city schools poor as they are locally funded by those poor still living there (Not only can they not afford to flee to the suburbs, but they do not have the income to make the mortgage deduction significant.) The distortion of the economy caused by the complex special interest IRS tax code is nearly impossible to overestimate.

ECONOMIC DECISIONS SHOULD BE BASED ON THEIR ECONOMIC MERITS.

NOT ON THEIR "TAX CONSEQUENCES" !!!!!

Buying a home in the US (vs. renting) is main economic decision most people make. It is strongly driven by tax considerations. There are, of course, also strong non-economic considerations. My most important non-economic factor was the quality of the local school.

That one is a good example of the strong "positive feedback" which makes the US "central planning" via the tax code much more effective than was possible in the old USSR, but also much more stupid.

The local school is funded by the local community and thus the effect of the IRS tax code, which tends to drive the wealthier out to where the more expensive homes are built is greatly re-enforced. In a very real sense, seldom recognized, the stupid IRS tax code combined with local funding of school has destroyed most US cites. - Made them into undesirable slums. - It need not have been so - look at European cities, like Paris. Cities can be (and a few in the US are) exciting places for the rich to live. The fundamental reason why most are not in the US, IMHO, is the stupid hidden "central planning" built into the IRS code, which drove the rich to the suburbs; undercut the quality of the urban school, etc.

This is just one, but important, example of the uncoordinated, stupid, hidden, unintended, central planning effect of the complex IRS code. We badly need a simple tax code free of a zillion special exceptions written by lobbyists that favor the rich with tax lawyers. We need a tax code designed to fund the government's financial needs, not one doing "social engineering" so badly that it destroys US cities!