Debt Commission Proposes Streamlined Tax System to Lower Rates and Increase Revenue
When the debt commission released their proposals for balancing the United States budget over the next ten years, nobody was happy.
Whether it was for raising the Social Security age, cuts to Medicare and defense spending, or increased taxes, there was something in it that everyone had a problem with.
However, one aspect of the debt commission's proposals that offered an interesting perspective and didn't get as much coverage is their proposals for a streamlined tax system.
In the current system, the United States has a marginal tax rate with increasing percentages as income goes up.
However, many people don't actaully pay at these levels because of the wide array of deductions and tax credits available.
As a result, even if a person is in the 35% tax bracket, they might not ever actually pay 35% on their income.
Warren Buffett highlighted this when he bet a million dollars that nobody on the Fortune 500 list paid a higher percentage in taxes than their secretaries.
However, with the debt commission's proposals, the United States tax system would change significantly.
Tax rates would lower, but government revenue would actually grow because they would eliminate the wide array of deductions and credits offered to people.
This would have a wide range of effects as it would make it easier for the government to review the tax forms, possibly reducing the size of the IRS as a result, and it would make filing taxes significantly easier for everyone.
Many people protest these changes because they would cause the loss of exemptions or credits that people receive.
However, are these losses really that bad of a thing? If the United States tax system can be reduced in its complexity, it would mean reduced costs for the whole system.
As a result, in the long term, everyone would win.
Lower taxes, higher government revenue, and less work around taxes time.
Are there really any problems with this system?
Whether it was for raising the Social Security age, cuts to Medicare and defense spending, or increased taxes, there was something in it that everyone had a problem with.
However, one aspect of the debt commission's proposals that offered an interesting perspective and didn't get as much coverage is their proposals for a streamlined tax system.
In the current system, the United States has a marginal tax rate with increasing percentages as income goes up.
However, many people don't actaully pay at these levels because of the wide array of deductions and tax credits available.
As a result, even if a person is in the 35% tax bracket, they might not ever actually pay 35% on their income.
Warren Buffett highlighted this when he bet a million dollars that nobody on the Fortune 500 list paid a higher percentage in taxes than their secretaries.
However, with the debt commission's proposals, the United States tax system would change significantly.
Tax rates would lower, but government revenue would actually grow because they would eliminate the wide array of deductions and credits offered to people.
This would have a wide range of effects as it would make it easier for the government to review the tax forms, possibly reducing the size of the IRS as a result, and it would make filing taxes significantly easier for everyone.
Many people protest these changes because they would cause the loss of exemptions or credits that people receive.
However, are these losses really that bad of a thing? If the United States tax system can be reduced in its complexity, it would mean reduced costs for the whole system.
As a result, in the long term, everyone would win.
Lower taxes, higher government revenue, and less work around taxes time.
Are there really any problems with this system?
Source...