Simple Tax
Imagine a comprehensive tax system that any literate person can learn in four hours.
This chart illustrates the key elements. The vertical axis is the income of an individual in a country. The horizontal axis represents individuals at each income level. The median income for this chart is $23,875.
The purple portion shows the disposable income available to each individual after all life security and tax obligations are funded. Notice that a household comprising three individuals would pay no tax until the household earned $71,625 (3 x $23,875). The household is defined by the individuals; not by some bureaucracy.
It’s assumed the average annual contribution to a Life Security Plan is $2,500. Each individual would pay into his or her Life Security Plan once individual income hit the median level ($23,875 in this example) less $2,500. The Life Security Plan obligation would be in place for every individual after the threshold is reached. This is the narrow green line on the chart.
The red area represents the tax paid to all levels of government in the country. It is 50% of the individual’s income in excess of the median income. Notice that no individual below the median pays any tax to any jurisdiction. This loads all of the tax on the individuals with income above the median. The ideal would be every individual over the median would pay exactly the same amount of tax. However, there has to be a transition from zero tax to maximum tax. I suggest this transition be based on 50% of the individual’s income until the maximum is reached.
The darker blue area shows the amount of tax that would not be collected from the individuals who pay some tax but less than double the per capita amount. In order to compensate for the transition; some higher income individuals will pay more than a pro rata share of tax paid by half the population. While this violates the purity of the fairness goal; it still ensures a modicum of fairness far superior to our current indiscriminate confiscation of money from minorities.
This tax system can be articulated in a one-page tax act for every tax regime in the country.
To consider this tax regime in broader context, read the Village Café.