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Sunday, December 6, 2009

Time to Re Do our Income Tax Laws and Simplify Income Tax Returns.

I just want to offer a new way to do income tax. The key proponent being that income tax becomes much much easier to calculate, and that the american consumer only have to pay one entity, and then that entity pays out all the other tax entities in the proper amount.

I propose a level 4 income tax system. The level 4 income tax rate includes rates of 50%, 40%, 30% and 25%. The consumer CHOOSES which level of income tax percentage rate they want to pay, and each level comes with built in deduction choices.

If a consumer chooses a 50% income tax rate, they get three full deductions of their choosing. The consumer can choose to deduct their home mortgage, medical expenses, and car payment deductions.

The consumer would have additional choices for deductions, such as college education or home improvement, but they could only choose three to actually use when they file. The consumer simply chooses the three most costly deductions. I would also allow a renter the right to deduct their rent as long as they were not related to the person they were paying rent to.

The 40% plan would allow the consumer two income tax deductions.

The 30% plan would allow for one income tax deduction.

The 25% plan would have NO deductions, it would just be a pay as you go system in which all income is immediately income taxed at the 25% rate and the remaining 75% belongs to the consumer.

To prevent people from using their deductions to pay nothing into the system, there would be a bottom end cap at 20%. No matter how much one deducts from their income tax, they would still be responsible for 20% of their gross to the government, no excuses, no exceptions.

It is possible somebody could game the system and come up with a method in which one deduction is "overused". I would not be against limiting any one deduction to reducing someones income tax liability up to a certain percentage amount. I do not know what that deduction limit should be however. It would take some testing of the 4 level income tax plan to see how much each deduction could lower someone's overall tax liability.

Would you be ok with the idea of a direct deposit of your income into a bank for income verification and your income tax payment, but then you could immediately use the remaining money as you see fit knowing you had no more income tax issues to deal with?

The bank would also handle your deduction payments. Once again, the bank is immediately verifying your deductions because they process the payments you give them that relate to your deductions.

The final and very important aspect of the level 4 income tax system is you could choose to be a part of the above program, or not. I would definitely choose to be a part of the above program, and I would probably do the 30% deduction income tax with the one deduction option.

Could income tax simplification actually increase productivity?

Could income tax simplicity allow people to make more informed financial choices since they know where they stand with their taxes and know exactly the remaining portion is that they can afford to spend?

Could income tax simplification lead to increased productivity as people spend less time in general on their income taxes? Might the banks gain an extra method of usefulness by being the actual income tax revenue splitter that allocates all monies to the proper tax collection agency?

Isn't it ridiculous that with all the advances in computing that each and every tax payer is still directly responsible for paying each and every tax bill to the proper agency? Why does the government continue to waste my time with such frivolity?

Why can't I have the choice to just direct deposit my income into one banking entity, have my tax liability split off from my earnings, and I've honored all of my tax obligations while knowing exactly what I have left over that is actually mine!

What do you think? Are you afraid of income tax simplification, or crave it for it for the simplicity it would bring?

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