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A Path to a Flatter Tax

 

Phase 1:  (the length of time in each phase is as yet unspecified)

  • Give people the choice between:
  • Paying a 20% modified flat tax with generous exemptions for all and for those earning under $500,000 certain favored deductions, or
  • Paying the old progressive tax.
  • Adopt a parallel program of reducing government expenditures.

Phase 2:

  • Exorcise all refundable credits (ACTC, EIC, etc.) from the old progressive tax code and maintain them as standalone programs apart from the tax code – the application of/for these benefits will be no longer connected to taxes or filing for one’s tax return.
  • Taxpayers choosing the 20% flat tax will no longer have to pay payroll taxes this burden will be taken from their 20% flat tax payment, BUT the people earning incomes over 200,000 will no longer be allowed the favored deductions previously allowed under the flat tax.
  • Taxpayers still choosing the old progressive tax, still pay the payroll taxes.
  • Taxpayers choosing the 20% flat tax are still permitted the generous exemptions, BUT with the caveate that they will not be permitted to exempt more than 50% of their income from taxation.

Phase 3: (The real push to encourage people to switch from the old to the new tax begins)

  • All deductions previously allowed under the 20% flat tax are eliminated for all choosing to pay this tax, BUT the rate will be reduced from 20% to 16%.
  • Taxpayers still choosing the old progressive tax, still pay the payroll taxes.
  • No one will be permitted to exempt more than 50% of their income from taxation no matter which income tax code they choose to follow. (One’s payroll tax burden will not be factored into the 50% not exempted)
  • Starting in the first year of this phase, a four year limit will be placed on the welfare programs (credits) exorcised from the tax code above, after the fourth year of receiving these “credits” individuals will no longer be eligible for them.

Phase 4:

  • All income earners will be required to pay the 15% flat tax.
  • The old progressive tax code is eliminated.
  • No one will be permitted to exempt more than 50% of their income from taxation.

Phase 5: 

  • Over time the flat tax rate could be further reduced in exchange for corresponding reductions the percentage of one’s income that is permitted to be exempted from taxation.

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