Distribution of Taxes, revisited
Early on, in chapter 16 I discussed the need to revamp and simplify our approach to taxation. As often happens, as one gains more insight, I now find that my approach would benefit from modification. I would still favor a progressive flat rate tax on income, but at much lower rates than I originally proposed. In fact I would suggest that the total revenue from this tax source be reduced by as much as 2/3rds of the amount originally suggested. The tax revenue lost would be replaced by an increase in the annual tax on personal equity capital (An individual or families total assets less liabilities). This calculation would include all assets, both domestic and foreign. To gain a complete understanding of the need to focus more on taxing capital than income please refer to the brilliant analysis contained in the book “Capital” by Thomas Piketty.
A restated view of the source for tax revenues would now be:
An average flat income tax of (3%) on all gross income except for capital gains. My math could be a bit off here, but the rate stated should be close to working. I would segment this into five categories with gross incomes at or below the poverty level at 0% (currently $25,000 for a family of 4). I would not provide incentives for larger families). For incomes from $25,000 to $50,000 I would make the rate .5%, from $50,000 to $100,000 1.5%, from $100,000 – $250,000 2%, from $250,000 – $500,000 at 3%, and all over $500,000 at 4%. These rates would become the automatic withholding and there would be no deductions
The above would not change either SS or Medicare tax rates.
I would completely eliminate capital gains taxes. Instead I would propose an annual tax on wealth (assets minus liabilities). The proposed rates would be: 1% for under $500,000, 3% for $500,000 – $1,000,000, 3% for $1,000,000 to $5,000,000 and 4% for $5,000,000 to $100,000,000 and 5% over $100,000,000.
Also, a flat national sales tax at 2% on all business sales at retail. I would completely eliminate corporate income taxes.
At this time I would not suggest any change to the excise tax structure.
Note: I have done my best to insure that the above would effectively replace the total revenue achieved by the current tax system and freely admit that the results may not be perfect, but you get the idea. These numbers can be tweaked to achieve the desired revenue results.