Revolutionary Tax proposal....The more you make, the less you pay. What do you think?

Question

K...before you start with your "heartless idiot" rhetoric, hear me out.

Under our current system, if you're a business owner, it's in your best interest to have your business pay for everything you need and to break even at the end of the year showing $0 income on your tax return. Individuals can get pay raises, but see no net gain, perhaps even keep less, because they cross over into a new tax bracket.

My point is that our current tax system incentivizes people to produce less than they could. Additionally, it's much more difficult to falsify income than it is expenses, making the tax code simpler.

So, what if people actually paid less in taxes as they made more. We want people to be industrious, start businesses, be creative, and produce. What if we created a system where people said "ya know, if I can figure out how to make an extra $3000, next year, I'll pay less in taxes."

If we could start over (smaller, more efficient government & simpler tax code), could this work?

Answer 1

I like it! But your proposal would never make it through the politicians; it wouldn't be popular with the masses, who mostly make under $100k per year.

How about we start with getting rid of the EIC, which rewards people for having kids with not enough money to support them??

Answer 2

Your logic is flawed on a number of counts.

First off, you can't use a business as you stated. Personal expenses paid by the business are not deductible by the business and are income to you.

Since the maximum tax bracket is only 35% -- and few taxpayers ever hit it anyway -- you will almost always keep the majority of the income you earn regardless of how high it goes. You had an argument when the max rate was 70%, but that has been gone for nearly 2 decades now.

Answer 3

Acting on your premise, then "the less you make the more you pay." I can understand the philosophy, but I don't think that it would work out, for most people. I do believe in the Libertarian idea of small government is better. Keep working on it, you might eventually come up with something.