Comment: My name is Cliff Lawrence. I am a working professional, married with four grown children. I strongly encourage an overhaul in the way the Federal government generates revenue. 1. Description of proposal As much as possible, and in the simplest way possible, revenues for the cost of government services should be derived directly for the services provided, for individuals and businesses. The income should be collected in the simplest and most efficient way possible. Impose a national sales tax or a VAT of 7% . Flat rate income taxes of 20% should be paid by businesses. Individuals with income above a minimum amount of $50,000 (head of household) or $80,000 (joint) should be taxed at the flat rate of 8%. Individuals in the top 1% of income should be taxed at the flat rate of 20%. All capital gains and investment income should be included as regular income, except for the sale of a principal residence. Specific services such as those listed below can be taxed directly. Roads and Highways, etc., should be paid for by sales taxes on energy costs for transportation using the roads and highways. Medical, social, and criminal justice costs for alcohol abuse and for tobacco use should be paid for by sales taxes on alcohol and tobacco. Deductions: 100 percent of direct Education costs (tuition, books, and associated fees, but not living expenses) to a limit of $10,000 per year and 100% of all charitable donations should be excluded from income tax, regardless of age and income level. Medical costs exceeding 10% of an individual's annual income should be 100% deductible. State income and property taxes for the principal residence only should be 100% deductible. Dependent Exemptions: Similar to current tax code except no limitation on age and does not have to enrolled in college. 2. Impact of Proposal The above offers a simple prescription for all tax payers. One of the major injustices of the current income tax is there are many individuals who are not on a payroll and do not have taxes withheld from their earnings. They are paid by cash for their services and do not report income. The national sales tax or VAT compensates for this major problem as those individuals spend their non reported income for goods and services. The setting of the flat income tax rates, sales tax or VAT rate, and the minimum income limit is subject to a congressional study to ensure a balanced budget, and to maximize the efficiency of government provided services. This plan reduces tax filing to a simpler procedure and is required only for those that choose to claim exemptions or deductions. Employee withholding of income taxes is still required. For those earners not on a payroll, banks will be required to report the annual cash flow for individual accounts and will be required to withhold taxes on the deposits for the limits indicated above, unless the account holder proves that payroll withholding is in place. |