Subject: Tax Reform Comment: TAX REFORM Individual It would be very easy to simplify the tax laws. The first step is to remove all deductions, personal exemptions and credits. Start from base. The individual tax would be based on earned income. This doesn’t include interest income, dividends, capital gains, retirement income, or social security. Earned income does include salaries, bonuses, stock incentives, and all business activity and rental income. Deductions The following deductions would be allowed on earned income. 1. Retirement account funding. Maximum contribution is 30% of earned income. 2. Health care costs and related necessary health expenses. Frivolous health expenses such as breast enlargement, plastic surgery, liposuction, would not be deductible, unless it was a medical necessity. 3. Total day care expenses if both parents are working and earning income. 4. Alimony, as long as it is taxable to the receiver. 5. Total higher education costs by the parent(s) or the student. Exempt the first $10,000 per working spouse. Start the tax rate 1% and graduate the rate to 50%. See Tax table. Business Keep necessary deductions for the operation of the business. Repeal all accelerated depreciation and go to straight line over the current MACRs time periods. Additional tax for all companies which have factories overseas and are paying lower wages than those working in their United States factories. A tax of 85% of the difference in wage will be assessed and used to fund training and unemployment for loss of jobs created by the foreign operations. Upper management can not substitute salary for increased dividend payouts. Increased deductions 1. 110% for employee health insurance expenses 2. 110% for company funding of employee retirement accounts. New law Businesses will not be able to change employee benefits for retirees. All retirees will be grandfathered under the benefits at the time of their retirement.. Tax rate Tax rate will start at ten percent (10%) of net income and graduate to thirty percent (30%). Tax Tables Maximum Tax Percent Maximum Actual Tax Income < Tax Tax Total Tax Percent $20,000 1% $200 $200 1.00% $40,000 2% $800 $1,000 2.50% $60,000 3% $1,800 $2,800 4.67% $80,000 4% $3,200 $6,000 7.50% $100,000 5% $5,000 $11,000 11.00% $125,000 6% $7,500 $18,500 14.80% $150,000 7% $10,500 $29,000 19.33% $200,000 8% $16,000 $45,000 22.50% $250,000 9% $22,500 $67,500 27.00% $300,000 10% $30,000 $97,500 32.50% $400,000 11% $44,000 $141,500 35.38% $500,000 12% $60,000 $201,500 40.30% $650,000 13% $84,500 $286,000 44.00% $850,000 13.50% $114,750 $400,750 47.15% $1,000,000 10.00% $100,000 $500,750 50.08% $1,500,000 16.75% $251,250 $752,000 50.13% $2,000,000 12.50% $250,000 $1,002,000 50.10% $2,500,000 10.00% $250,000 $1,252,000 50.08% $3,000,000 8.50% $255,000 $1,507,000 50.23% $3,500,000 7.00% $245,000 $1,752,000 50.06% $4,000,000 6.25% $250,000 $2,002,000 50.05% $4,500,000 5.75% $258,750 $2,260,750 50.24% $5,000,000 5.00% $250,000 $2,510,750 50.22% $5,500,000 4.50% $247,500 $2,758,250 50.15% $6,000,000 4.25% $255,000 $3,013,250 50.22% $6,500,000 3.75% $243,750 $3,257,000 50.11% $7,000,000 3.50% $245,000 $3,502,000 50.03% $7,500,000 3.50% $262,500 $3,764,500 50.19% $8,000,000 3.25% $260,000 $4,024,500 50.31% $8,500,000 3.00% $255,000 $4,279,500 50.35% $9,000,000 2.75% $247,500 $4,527,000 50.30% $9,500,000 2.50% $237,500 $4,764,500 50.15% $10,000,000 2.50% $250,000 $5,014,500 50.15% $1,000,000,000 50.00% $500,000,000 $505,014,500 50.50% 50.00% |