For our Government officials in Washington here is my plan to help with our current debt crisis following some of the ideas of the Simpson & Bowles Commission Debt Reduction Plan with one exception.
1. Completely restructure the Federal Income Tax Structure by removing every income tax subsidy, loophole, credit from the entire tax code.
2. Provide one deduction to the Individual Income Tax based on Federal Poverty Level Guidelines for every household based on family size (not structure) and tax balance of all income at a 20% flat tax rate, of which 5% of that will be contributed to a Public Health Care Plan each year.
3. For Corporate Income Tax give a 5-10% deduction for research and development provided that they have created jobs in the US and a flat tax of 25% on remaining balance of all profits both onshore & offshore.
These two measures will completely eradicate the tax expenditures from our treasury will reduce total government spending related to tax expenditure which consumes 8.6 of GDP on average, and for corporations like GE who didn't pay any income taxes in FY 2010 but received $150 billion in tax subsidies, they will now pay 25% on all remaining profits (less a deduction for R&D and US job creation).
If you look at median income of Personal Income the average American now earns approximately $61,000 per year (based on 2011 census for 2009 levels) total 2009 Personal Income was equal to approximately $12 Trillion US Dollars offer a baseline deduction of $10,890 (based on current FPL for one individual) and an additional $3,820 for each additional family member to a maximum of $37,000.
I'm not either a micro or macro economics expert, but to me this would create a fairness in our tax structure, where everyone would receive a deduction equal to their family size rather than whether they are married or single. While I realize there will be some who will not be paying any income taxes due to being at or below poverty level, they also will no longer receive any tax subsidies such as EIC, Child Care Credit, etc.
I'm still researching and will continue to update this information as I discover current income levels of all Americans for people like Steve Jobs who's annual salary is only $1 (one) but has a net worth of $735 billion in stock and assets he'd be paying 15% on all of his worth less the baseline deduction + family size. Warren Buffet would do the same, Bill Gates, and so on.
The problem with the Fair Tax aka Federal Sales Tax is that it only deals with new consumption, not purchase of used products, and big business' and the wealthy could end up getting around this by purchasing used equipment rather than new.
Also we need to re-write our trade agreements with other countries so that global trade is truly fair. China is getting away with murder of our American Worker's Standard of Living. Stay tuned for more as I discover more data to prove my hypothesis.
If anyone has anything to add or suggestions please feel free to comment! Maybe we as Americans need to take the reins and fire all of our officials in the legislature and show them what to do!
