Recursion's crazy tax policy idea

[Recursion]

We used to throw around wildly wonky policy ideas on DU more than we do now. In memory of that, here is my Tax Proposal, for your consideration:

Take the median income ($36K for an individual, $55K for a household; this gets updated every year).

That is the personal/household exemption. So the poorer half of the country does not pay income tax.

All income above that is taxed at 40% (or whatever; the people with calculators come up with a number). That seems like a flat tax, but because the exemption is so high it winds up with a very progressive effective rate structure (the one below shows married couples):

$50K: 0%
$60K: 3%
$70K: 8.6%
$80K: 12.5%
and so on until as you start making millions you get closer and closer to a 40% effective rate.

Furthmore, there's a 5% defense surtax on all income above three times the median income, to remain in effect as long as a declaration of war or authorization of force is currently operating.

Thoughts?

[Voltaire2]

1. ugh. No thanks. That is a single tax bracket. Doesn't bother billionaires at all.

It is in fact a more or less standard flat tax proposal.

Is there some problem with actual progressive income tax rates? If so what is it?

[Recursion]

8. A millionaire's effective tax rate would be about 32%

I'm fine with bringing that rate up. The point is that a high personal exemption gives you the progressivity that we try to fake with marginal brackets.

[unblock]

2. Oooooh

I like the idea of a high exemption.

I'm not keen on the idea of a single bracket above that. I think we should have many brackets for a smoothly increasing rate to reflect the diminishing utility of income. In fact, a completely smooth continuous curve with be ideal, if we could ever sell the math politically lol.

But what really intrigues me is the idea of linking military adventures to a surtax on the rich. That would have great policy implications, both in terms reducing the deficit as well as curbing our appetite for stupid wars.

[Recursion]

7. What's not smooth about it?

It's 3% at 60K and 12% at 80K, and gets closer to 33% the more you make

[unblock]

9. With flat tax, each marginal dollar is taxed at the same rate. The rate should increase with income.

The higher the income, the less important is the marginal dollar and the easier it is shoulder the burden of taxation.

It really makes no difference to gates or bezoar if their marginal income is taxed at 20% or 40% or 90%. So why not tax them at the higher rates?

[Recursion]

11. That's what the surtax is for

It doesn't need to be 5%. Hell it could be 50% for all I care. Something to give rich people an incentive to get Congress to repeal authorizations of military force.

[unblock]

12. That's the part I really like

[BootinUp]

3. Can we require the rich to sit in a dunking booth?

[PSPS]

4. It's just a flat tax with a floor.

Nobody needs more than a million dollars a year. Nobody. Income over a million dollars has to be taxed at a confiscatory rate like 90%.

[SWBTATTReg]

5. I'd rather see a wealth tax and would rather have more information on this ...

Some countries do have an estate or 'wealth' tax, I'd like more information on this, and why not here in the US? I know that it is used in Switzerland, but the benefits (pros/cons) were muddled when I read about it with the influx of new residents moving into Switzerland and causing real estate prices to skyrocket, thus pricing natives out of their homes etc.

For those of you not familiar with a wealth tax, in Switzerland, entire estate (assets, cash, etc. lumped together) and taxed at a 1% annual rate. I don't know about exemptions, limits, etc.

I heard of another place w/ a wealth tax, but can't remember who.

Does anyone know personally of a good resource to go investigate wealth taxes? Thanks.

[Autumn]

6. I would rather corporations, billionaires and the wealthy pay more.

a LOT more.

[zipplewrath]

10. I understand the idea

But this is pretty much standard flat tax mathematics. Most of them have "floors" of various sorts. Part of the problem is all the other taxes we pay. You've got state and local taxes, property taxes, alcohol and gas taxes, not to mention tolls and fees.

And of course you'll always have "exemptions". They are basically features of tax codes that are meant to encourage certain type of spending or transactions. These typically benefit the wealthy more than the lower middle class.