A standard deduction per adult. That way, no marriage penalty. No mortgage write-offs, no health care write-offs, no tuition write-offs, no childcare/eldercare writeoffs, no earned income tax credit, blah blah blah... Leave capital gains rate the same as regular income. Keep everything as value-neutral and revenue-source neutral as you can.
Close the business loopholes so your only deductible expenses are simple depreciation, labor costs, and raw materials. Then it won't matter if you class teh profit as "dividends" or personal income, it will be taxed the same.
No loopholes mean no places to disguise income- and shedding a LOT of deadweight loss related to hiring accountants and tax lawyers. IRS auditors would have a much lower workload and be able to enforce a LOT more consistently than they do now.
With one flat tax rate, if you raise taxes, EVERYONE is affected- no one can hide behind preferential tax treatments. And so everyone is a lot more interested in how gov't spends the money. And if you keep the tax rate reasonable, there's less reason to evade taxes (and less havens to hide in, anyway). You have a more reliable revenue stream and a more accountable government.
It's fair in that it applies to everyone the same. In a married couple with uneven incomes, the spouse that earns less does not have to weigh between staying home with the kids. On the one hand, a small income is eaten up in extra taxes and lost writeoffs- vs. the lost years pursuing a career and the more vulnerable position that partner is with regards to death or divorce. If you make $100K and your spouse makes $25K, how is it really "more fair" to your spouse to be taxed at the "rich" person's tax rate? |
