I & I Editorial BoardThis year, as last-minute filers are struggling to figure out how much you owe the federal government, we’d like to offer a proposal that is so nutty it just might be worth considering.
Today, the tax code is built on the idea that “progressive” is good. And by progressive, we’re talking about tax brackets. The idea that the more you make, the higher percentage you should pay on the extra dollars you earn.
Right now, there are seven tax brackets – 10%, 12%, 22%, 24%, 32%, 35%, and 37%. For single filers, every dollar of taxable income over $11,925 is taxed at 12%. You owe the federal government 22% on every dollar over $48,475, and 24% on income over $103,350, etc.
Yet, despite the fact that, thanks to this scheme, the richest 1% end up paying 47% of federal income taxes and the bottom half of income earners account for less than 4%, the left never gets tired of screaming about how the rich don’t pay “their fair share.”
But as economists well know, the current tax code is an enormous drag on the economy. The higher the tax rate is on the rich, the less incentive they have to earn that next dollar. Tax avoidance and even evasion become worthwhile because the savings can easily outweigh the costs of paying tax attorneys and hiding money.
Every year, there are proposals to simplify the code. But all of them are premised on the same idea that the rich should pay a bigger share of their income than the poor.
There’s one idea that never comes up in these discussions.
Do what Robert F. Kennedy Jr. did with the government’s misbegotten food pyramid, and turn the tax code upside down.
Make the tax code regressive, instead of progressive.
Insane, right? But hear us out.
Let’s say the lowest bracket, instead of 0%, starts at 20%. Lower-income families are far more likely to be the beneficiaries of government programs, so it seems only fair that they pay more of their money back to the government.
As your income goes up, your tax rate goes down. Not just on the extra dollar you earned, but all your income. So, if you make, say, $20,000, you’d be taxed at 20%, and owe $4,000 in taxes. But if you make $20,001, your tax rate falls to 18%, which means you’d owe only $3,600. And so on up the income ladder.
When you start making real money, your tax rate would bottom out at, say, 10%. So, a millionaire would owe $100,000 in taxes.
What sort of incentives would this create? The race would be on to make more money. People would be declaring every penny they legally earned. They’d be eager to take on that extra work. They’d make sure everyone in the family who is able has a job. Hiding income wouldn’t do anyone any good. People at the bottom would be clamoring for tax cuts. Businesses would face pressure to make sure they account for all wages paid, and then to increase them.
It’s crazy, we admit. Unworkable and a complete political non-starter. But how much crazier is it than the current system?
A system that is so complicated that it costs Americans nearly 7 billion hours and more than $477 billion each year just to figure out how much they owe, and that required at least five hours to fill out the woefully mislabeled “1040 EZ” (which the IRS scrapped in 2018). A system so difficult to enforce that about $500 billion in individual income taxes go unpaid every year. A system so incomprehensible that even the poor have to pay tax consultants to help them with their taxes.
And it’s a tax code that seriously hampers productivity, economic growth, and has a variety of other adverse economic and societal effects, the pain of which is felt most acutely by lower-income families.
Yes, there are more realistic solutions, such as a flat tax or a national sales tax, either of which would be far less damaging and far more fair than the current code.
The one singular benefit of a regressive tax code, however, is that it would make the heads of leftists like Bernie Sanders explode.
— Written by the I&I Editorial Board
Editor’s note: The editorial has been updated to reflect the fact that the IRS got rid of the 1040 EZ form starting with the 2018 tax year. Our thanks to an alert reader who pointed this out to us in the comments.
The 1040 EZ form has not been in use for many years. https://turbotax.intuit.com/tax-tips/irs-tax-return/what-is-the-irs-1040ez-form/L3KwQs5iR
Thanks for pointing that out. The editorial has been updated.
Make The Tax Code Great Again
MAGA
Again
Trump 2.0
This is an interesting idea. It is as you say unlikely to be considered.
I am a proponent of the sales tax on retail level goods, paid to my state and in turn paid to the federal government BY my state. i.e. ‘no direct tax’ by the fed’s.
Aside from the ‘fairness’ issue, I would pay tax only on money I spend on things important enough to buy.
My tax is paid the moment I leave the store. No records to keep for my own protection. No forms to fill out. I paid $1500. this year to an accountant for this years protection.
Millions of accountants and IRS employees turned loose for some form of productive work.
In a dispute, the feds can negotiate with the my states attorneys rather than me and my accountant. I am the least capable in the pecking order to defend myself against the IRS.
My understanding of the Constitution of the US is that taxes were to be PROPORTIONAL to population not direct to the individual. The sixteenth amendment made it possible for the largest form of government (The FED) to pick on the smallest form of government… me.
Observation: Ever notice it is about the same time between tax day and election day as it is between election day and tax day (approx 23 to 29 weeks). You can’t make the one longer without making the other shorter. Plenty of time to forget about being abused by the tax man. Hard to believe this was accidental. The 16th amendment to the constitution should read “Election day shall be the 15th day in April”
Thanks for your attention, Fred
Forget rates. First solve the problem systematically.
1. Define proper jobs of government: Protect the border. Keep civil peace. Enforce contracts. Anything else is optional.
2. Set a hard limit on what government can take from the economy, all forms. Say 25%.
3. “Tax” means cash tax, plus unfunded mandates, plus the cost-burden of all laws, and worst of all, the cheat of over-printing the money supply. That creates inflation, the most vicious tax, because it hits the poor worst of all. Note that government cannot borrow. That is merely a deferred, hidden tax on the unborn. A silent cost to our future. If we can’t pay for it now, we can’t afford it.
4. Execute the priorities in order. When the money runs out, stop spending. No more buying votes. Let politicians fight in cage matches to see who gets funding.
5. Hard term limits. Two as senator, or six as representative. If you can’t get it done in 12 years, you fail. Out.
6. Likewise, no more career bureaucrats. Destroy the “Deep State.”
7. For politicians and bureaucrats both: no private employment for six years after service. Until the value of your contacts is gone. No more prostitution.
Hilarious and a fun read!
Or we simply declare sanctuary from the income tax laws. You know, like they do with immigration laws.
If the rich didn’t pay their “share” then our debt would be a bit less than twice what it now is, $68 trillion.
Also, one might add, “Thank God the rich can’t do math.”
Otherwise they wouldn’t pay nearly half of the Government’s payload.
Or one might say,”Thank God the Left and the deluded are goggle-eyed hypocrites.” If they weren’t they’d see how unfair the tax code has become!
The tax code should be reformed, but until you have spending reform, it doesn’t mean anything.
right now the majority of tax dollars goes to waste, fraud and abuse.
If the IRS claims that the income tax is voluntary, then let them put their money where that statement is: Remove all criminal penalties associated with payment of taxes. Also, remove any penalties associated with (not) filing tax returns.
Or the alternative: Adopt the FAIR Tax.
The problem isn’t with the tax rates. The problem is with all the loopholes and convolutions that make the tax code incomprehensible to most people. Yeah, it would impact the income of CPAs and lawyers. Boo-hoo.
Simplify the tax code. You could reduce the number of tax rates. Leave the standard deduction and tie it to the cost of living since it generally covers the myriad taxes paid to state and local governments, health care, and other non-negotiable expenses for most people. Stop taxing retirement income. It’s quite likely that the amount of taxes taken in would increase significantly. How significantly? Maybe enough to reform the ridiculous health care system.
Taxes should be based on consumpgion. We need to eliminate the income tax.