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Taxes: Let's Start Fresh

Scrap everything and start fresh with a broad-based system that draws from three revenue sources:  sales transactions, wage income, and investment income.
  • No deductions or exemptions
  • One $25,000 pre-tax exclusion for each taxpayer
  • No employment taxes (Social Security, Medicare, etc.)
  • No filing of annual tax return for most individuals
  • No commodity or excise taxes
  • No corporate taxes

  1. National sales tax:  5% paid on the sale of all goods and services. 
  2. Distributed corporate earnings that are not tied to an individual U.S. tax ID are taxed at the single personal rate.
  3. Personal income tax
    • Income from labor and capital is taxed at the same rate.
    • A single steady rate that excludes the first $25,000/year.
    • Tax deferral on the first $25,000/year of new savings and investments in a single account; continual "catch up" contributions; phase out 401(k) plans and Roth IRA.
    • Withdrawals from the tax-deferred account are treated as income with no penalty.
    • Capital gains and earnings within the tax-deferred account are not taxed until withdrawn from the account.
    • Capital gains and reinvested earnings on any asset outside the tax-deferred account are not taxed until the asset is sold or those gains and earnings redeemed.
    • Assets can be transferred to another owner and are not taxed until the asset is sold or those gains and earnings redeemed.

  • Eliminating deductions and exemptions lowers the single tax rate.
  • Because of the $25,000/year exclusion, the system remains progressive – that is, individuals with greater income pay a higher effective tax rate even though there is only one marginal tax rate.
  • Eliminating employment taxes removes a cost to hire and retain employees.
  • Eliminating taxes on traceable distributed corporate earnings removes double taxation of investment income.
  • Equal treatment of income from wages and investments makes the system equitable.
  • A national sales tax means that everyone contributes.
  • Tax rates must remain constant across economic cycles to pay off debt in good times and take on debt in bad times.