No income tax shall be due or collected on any income under the tax floor for citizens. All earnings above above the tax floor shall be taxed at a single rate. The tax floor shall never be lower than the real median income as last determinied by the Census Bureau. Undocumented and guest workers have a tax floor of $0 and pay taxes on all earned income.
This tax plan is automatically graduated-- no brackets. For example, assume a tax of 50% and the previous years median income was $50,000:
- Anyone who makes $50,000 or less a year pays no income tax.
- Someone who makes $75,000 ends up paying $12,500, or roughly 17%.
- Someone who makes $125,000 pays $37,500 which is 30%.
- Someone who makes one million dollars pays $475,000 or 46.5%.
In the U.S.A. in 2003, the highest tax bracket is 35%
and the real median income was $43,318
So, here are the above examples again using those numbers:
- Anyone who makes $43,318 or less a year pays no income tax.
- Someone who makes $50,000 pays $2338.70, or about 5%.
- Someone who makes $75,000 ends up paying $11008.70, or roughly 15%.
- Someone who makes $125,000 pays $25,588.70 which is about 23%.
- Someone who makes one million dollars pays $334838.70 or 35%.
Targeted tax cuts as congress shall provide shall raise the tax floor on a per person basis up to the tax cieling. The tax ceiling shall not exceed two times the median income. Assume that folks have earned the maximum possible deductions through charitible giving and other means:
- Earnings less than $86,636 or less they'd pay no income tax.
- Earnings of $125,000 result in taxes of $13,427.40, or 11%.
- Earnings of one million pays $319,667.40 or 32%.
This automatically graduated flat-tax plan:
- Maintains and standardizes a mechanism to motivate savings, home purchases, charitible giving and whatever other spending behaviors congress wishes to subsidize.
- Results in a simpler tax system that will be cheaper to run and simpler to enforce.
- Provides high financial motivation for aliens to earn citizenship.
- Incentivizes everyone to raise the median income. The higher the average income, the bigger the standard and maximum deduction for everyone.