Sunday, March 05, 2006

How can we flatten income taxes?

Congress voted for progressive bracketed tax rates for political expediency and some appreciation of a pure flat rate’s effect upon lower income earners. They considered the potential economic harm, (greater government welfare) costs to our nation. Often great harm is done with the best of intentions.

It’s mathematically possible and revenue neutral to flatten income taxes by increasing lower bracket rates. For the reasons they were bracketed to begin with, that’s a political “no starter”.

We could create another tax to replace lost income tax revenue and retain revenue neutrality. Consumption taxes such as VAT, (value added tax) have been suggested. If a consumption tax is used, there should be some provision to compensate for VAT’s greater proportional burden upon low income tax payers.

We could increase tax deduction per dependent, index all finite dollar amounts of our tax laws and regulations, and reduce the income tax rates as we initialize or increase the VAT. The process would best be accomplished in a gradual manner. IMO the process would have to be halted when VAT approaches an unacceptable rate.

The evaluation of a tax policy’s fairness is subjective. IMO regardless of motive for adopting a consumer tax, (to simply repeal tax bracketing or to tax spending rather than earning), this proposal’s fair and feasible.

Please submit your opinions regarding this blog's messages.
Respectfully, Supposn


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