In the years prior to the American Revolutionary war, which created the great United States, Great Britain continually issued more and more taxes on the colonists after they had enjoyed years of salutary neglect. The colonists revolted in the face of these taxes. Our nation was created when it was because the people were being forced to surrender too much of their own earnings to a government that was using the money for its own personal agenda. The first tea party occured and we fought a war. The modern Tea Party is "Taxed Enough Already" and the countless citizens who are occupying Wall Street are calling for the wealthy to carry the tax burden. Both wings of politicians are struggling to come up with a solution that will benefit their consituents and keep the government floating. As always, I find my solution in our good friend logic.
My plan to make everyone happy, or at least to leave no one room to complain, is to eliminate income tax and to reduce capital gains tax. In exchange, we must increase sales tax based off of a much simpler tax code. We could separate all purchaseable items and services into three categories: Necessary Goods, Standard Goods, and Luxury Goods. The way that this plan differs from the FairTax plan is that we put even less stress on the middle class by increasing the tax more on the items and services included under "Luxury Goods", which would include items such as higher-end automobiles, televisions, and other top- quality items, so that we can keep the sales tax on "Standard Goods", being anything from simple, but unnecesary items from chips to basic computers and laptops, lower. Instead of increasing the tax on the goods that the average or "99%" of Americans do purchase, we can make the people in Wall Street happy as well as those of us who enjoy some tea with our tax breaks. Furthermore, this, if anything, would lower the burden on the lower class because they would not have to pay any tax whatsoever if they only stuck to the basic necesities. The FairTax proposes to increase sales tax to about 23%. With the separation of goods into these three categories, the "Necesary Goods" can have no tax, the "Standard Goods" could have something along the lines of 18% tax (give or take a point or two), and the Luxury Goods could have something along the lines of a 32% tax. This should accommodate the loss of income tax revenue at least, since it does not abolish all capital gains, gift, estate, social security, or Medicare taxes (so the suggested sales tax percentages may even be lower!). Of course, none of these figures are exact, just very rough estimations. The details, of course, could be worked out be the Bureaucrats who actually get paid to figure all of that out, but the basic idea should not be altered much, if at all.
Let's first take this from the perspective of the average American citizen. Say Billy makes $80,000 a year. He would have to pay approximately $16,125 in income taxes (according to moneychimp.com). This leaves poor Billy with only $63,875 to use for the year. If he owns a modest house, he has to more into his morgage bill as well as his electrical bills, water bills, and gas bills every month. At the end of the year, Billy really does not have a whole lot of money to use to try to push himself upward on the economic later and fulfill his American dream. He could make an investment in real estate, but then has has to worry about a second mortage and, in this economy, what if he gets laid off? That does not seem like a likely choice, it is too risky. He could also invest his money in a CD at a bank, but, again, what if he gets laid off and needs the money before he can withdrawl it without penalty? His other reasonable choice is to invest his money in the stock market, but he could loose value there, and even if he does manage to pick a stock that goes up, he still has to pay transaction fees and capital gains tax. But, if he had the $16,125 back he would have more money to potentially invest or to just improve his lifestyle. However, with the increase of sales tax, he would still be giving the government the same amount of money in tax revenue.
Next let's take a look through the eyes of a lower class citizen. They really do not make very much money at all and would be very upset if they suddenly had to pay more money for the goods that they need to buy. I say fear not. Everything that they need to live would be absolutely tax free. In addition to this, all people in a current lower level income zone could be given a card that excuses them from sales tax on other goods that would not be in the "Necessary Goods" category up to a certain amount. Then they would actually be paying even less tax than what they are now. So now the middle and lower classes are happy, and; therefore, so is the Occupy Wall Street movement.
Next, the upper class. Yes, even the Upper Class should be satisfied with this proposal. They will understand that there is a clear correlation between how much they buy and how much they pay in taxes. This will be a relief to them because it will be a change from a correlation between how much money they earn and how much money is taken away from them. They simply would not have any ground to complain with because if they do not want to pay taxes, then they do not have to! So for all citizens, this plan would work out well. However, there is one group that this would not work out very well with.
This new kind of tax code would just be horrible on the student population. Most college students do not have massive incomes to be taxed in the first place, so they would not benefit from the removal of this policy. They would also feel the heat very strongly from the increase in sales tax when they are trying to buy all of their electronic gadgets that they use for studying and class projects. The logical counter to this issue is to exempt all college students from sales tax all together. This will not pull from overall tax revenue too much and it will help the hard working students, the employees of tomorrow to get through college easier and get into the work force.
Of course there would be other benefits to this policy and if any of these are brought up or challenged, I would be happy to defend them. Everyone wants a change to our tax code. This seems to be at least one of the most logical solutions.
Disclaimer: I am NOT trying to start a revolution or revolt, I am just suggesting a new way to implement taxes.
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