Sunday, September 23, 2007

Proposal for a New Federal Tax Plan

-- The Basic Plan --
Flat Tax Rate of 20% on all income. An individual doing nothing more than the Basic Plan would see 20% taken out of his gross pay.

-- Modifications to the Basic Plan --

- Retirement Deduction -
For every 2% of income put into a qualified retirement plan (401K, etc), up to a maximum of 10%, 1% will be removed from the Basic Plan's Flat Tax Rate.

So, an individual can save up to 10% of his income for retirement, and pay 15% to the Federal Income Tax, thus seeing 25% taken out of his gross pay.

- Charity Deduction -
For every 2% of income put into a qualified charity (churches, Goodwill, etc – 61% of the charity organization's income must be earmarked specifically for charity work, not for salaries, office needs, overhead, etc), up to a maximum of 10%, 1% will be removed from the Basic Plan's Flat Tax Rate.

So, an individual can give up to 10% of his income to charity, and pay 15% to the Federal Income Tax, thus seeing 25% taken out of his gross pay.

- Combined Reduction/Charity Deduction -
Combining the two deductions, an individual can save up to 10% of his income for retirement, give up to 10% of his income to charity, and pay 10% to the Federal Income Tax, thus seeing 30% taken out of his gross pay.

Advantages:
  • Many Americans are already paying 28% or so to the Federal Tax, along with another 10% to their church, along with 5% or so to retirement, for a rough total of 43%, so these Americans get the immediate benefit of more take-home, and they see more personal benefit (more retirement, less tax), and they have more control of their money.
  • Those Americans who don't care to give to charity or save up for their retirement get the immediate benefit of more take-home.
  • Much of the role of charity work is shifted from the Federal Government to private local control, which generally provides more bang for the buck, and reduces the expenses of the Federal Government.
  • The tax laws are vastly simplified, reducing costs to both the government and to individuals, benefiting every one.

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