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Posted: January 14, 2013

U.S. Tax Code: The zenith of zany

Princes and paupers need to pony up

David Sneed

The American tax code is unjust. Why? Because the prince outpays the pauper. I believe that. And any law with a million pages must be the zenith of zany.

Here’s the solution to both in less than a paragraph:

  1. Every person pays at a 90 percent rate for all types of income.
  2. There are six deductions:
  • Every dollar spent in America is deductible; and so is:
  • $20,000 per child in a savings account per year.
  • $40,000 per person in annual retirement savings.
  • $5,000 per person in charitable gifts.
  • An additional $50,000 for every business owner/ farmer whose business is his primary source of income.
  • An additional $10,000 per employee.

And that’s it. That’s the new tax code.

We all have the same rate (a flat tax) and we all have the same deductions (no loopholes.) Someone who wants more to ‘take home’ need only to spend faster or hire more workers.

Now, I don’t know if the exact numbers are right. Maybe the rate should be 95 percent; or 70 percent, I’ll leave that to economists. And maybe we need a higher or lower deduction for children and farmers. But those are just details.

Corporations, those which actually hire workers or produce a product, can have a simple code too. Every dollar they spend is essentially tax-free, and they profit by hiring Americans and investing in infrastructure.

Two groups will likely pay more than they do now:

  1. The overnight investor: the guy who uses money to make a quick buck in the markets (and other capital-gainers.) Long-term investors will see a slow but steady rise in the value of the company, and a steady yearly dividend
  2. The CEO/Movie star, someone who earns makes $20 million/year with few or no employees, will end up paying more in total dollars - but at the same rate as his maid. He can pay less, however, if he hires or spends more; it’s his choice.

Well, what do you think? Is there a reason this is unfair to either the rich or the poor?  Would it stifle growth; or investment; or job creation; or not be a ‘rising tide that lifts all boats?’

The first argument against it may be: The rich still pay more, while the poor still pay nothing. Aha! Good argument, Sir. Touché!

You’ll have to ask yourself: Do I oppose current higher taxes on the rich because everyone should pay the same rate?  If you answer “yes,” then this plan is for you. My rate is the same for every American, and each of us gets the same deductions. It doesn’t get more even-Steven than that. Does it?

Or, you may argue something about spending and blah, blah, blah. That’s not relevant to the tax code so don’t bother. I agree that spending is out of control, but even if we loved how our budget was disbursed we’d still have to pony up. This proposal only covers HOW we pony up - if ‘pony up’ is still an expression.

In any event, would my one paragraph tax code be an equitable way to pay for whatever it is we decide to pay for?

David Sneed is the owner of Alpine Fence Company,and the author of" Everyone Has A Boss– The Two Hour Guide to Being the Most Valuable Employee at Any Company." As a Marine, father, employee and boss, David has learned how to help others succeed. He teaches the benefits of a strong work ethic to entry and mid-level employees. Contact him at  David@EveryoneHasABoss.com

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Readers Respond

David, you really did light the fire! The numbers are flying. However, the people who would have to decide any of this, The House, The Senate, The Congressional Budget Office have no interest any any change unless some lobbyist lines a pocket. If Congress were truly interested they would have listed the cap on Social Security taxable income years ago, never agreed to a 2% vacation to restore the economy. Plus, they never would have permitted the President not to submit a balanced budget, voted for any increase in the debt ceiling and given billions of dollars to vendors and special interest groups. Until Congress decides that they will enact Permanent Solutions instead of Temporary Stop Gap Solutions we will not see a simplified tax code, a balanced budget or less debt. By Jeffrey Fischer on 2013 01 20
David, YES, "Pony Up" is still a phrase. That's what we graduates of SMU say to cheer on our sports teams!! By Sam Robertson on 2013 01 17
I did a bit of thinking about this proposal and I arrived at the following conclusions. 1. How do you determine if dollars were spent in the United States? Did the product have to be made in the US, or is buying it at Walmart sufficient? 2. This has the net effect of discouraging savings in any form except retirement. If I want to save money for a down payment on a house, say $10,000. In order to do that, I have to actually save $100,000 (since 90% of my not spent money is going to the government). 3. How do you deal with capitalized purchases such as a car? 4. Why are you encouraging people, through the tax code, to maximize the number of children they have? Do we have a people shortage? 5. Large corporations have global supply chains for a reason. This code significantly penalizes any company that has raw materials not available in the US (coffee for example). By Robin on 2013 01 16
Scott. Most people would have no tax liability since they will spend every dollar they earn in one of the 4 categories: general spending, savings, charity. By David on 2013 01 15
David, so you believe people will save up all year to be sure they can pay their taxes? Can you imagine the enforcement issues with that kind of system? Sounds like our national defense and highways will surely be world class with that plan. Sorry, I still don't get the joke. By Scott on 2013 01 15
Oh, there's no payroll deduction. You pay at the end of the year if you have any money left. You're thinking the we're adjusting the current system - we aren't. The whole process is starting from scratch. By David on 2013 01 15
I agree with Scott. The average household won't have enough left to "buy" those deductions and feed the economy. Businesses can't prosper if consumers can't afford to buy their products -- something Henry Ford understood. By Dallas on 2013 01 15
Scott, Most people would have zero tax liability. No joke. Tax return is simple: "How much is left (not applied to one of 6 deductions) at the end of the year? - Send us 90% of it." By David on 2013 01 14
I don't think you would end up with much revenue. Anyone making less than about $150,000 a year now is spending most of that and the retirement and charitable deductions would certainly be enough to take their taxable income to zero. So, most people should jump at this. This probably covers, what, 75-80% of the population, maybe more. I would choose to give that extra $500 to a charity, or spend another $1000 on something rather than give it to the government. Or would I? Might test your patriotic fervor. By David Addor on 2013 01 14
I don't like the socialist approach. Instead of working to give it all to the government and relying on tax deductions to keep your hard earned pay. I would rather keep my hard earned pay. A graduated tax rate with NO deductions. Make it LOW LOW LOW rate - but every American, no matter the age, pays the rate. The very lowest income- those who qualify for public assistance will get it back in higher benefits. But at least then every American understands what it means when Gov raises taxes. We all feel the pain rather than passing the buck to someone else. We should all be in this together. No deductions takes away Congress ability to reward or punish. Gov becomes more transparent immediately. I'd also like to draw attention to the fact that "income" is not the only tax - everything they do taxes someone, somehow. By H Sanchez on 2013 01 14
David. Really? Pew says 2011 median household income was $50,054. You want to take 90% of that out? So you'll leave the average household $5,005 to live on before they file their return and get back all those deductions assuming they can prove any of their dollars were spent in America as they bought stuff from Walmart, Sears, and anywhere else that sells "Made In America" brands (right...). Then you give them $20,000 per child, but what about singles, or my widowed mom? Tough for them I guess? For sure they'll all get that $40,000 per person they were able to save from their $5,054 net pay for the year. Forget the $5,000 to my church, it will be bankrupt, and as for the business and employee deductions, there won't be any workers to hire, their bankrupt too, couldn't pay the mortgage. Sorry I just didn't get your joke. By Scott on 2013 01 14
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