Fixing our tax code in 7 simple steps

PHOTO: Some tax forms

You were supposed to file your taxes by yesterday. Shame on you if you didn’t. How else are we supposed to keep the war machine going?

Anyways, our tax system in America is a riddled mess. We shouldn’t have to hire people to do our taxes, and rich people shouldn’t be able to hire people to get around having to pay theirs.

So, courtesy of Megan McArdle, there is a seven step plan for fixing our tax code.

  1. Institute a negative income tax. Use a progressive system that starts at a negative rate of around 100% on low earners.
  2. Pay for Social Security and Medicare out of general revenue.
  3. Eliminate the corporate income tax
  4. Tax capital gains just like any other income.
  5. Eliminate all deductions
  6. No Value Added Tax.
  7. No more estate tax.

Check out McArdle’s post for some interesting explanations for why this might work. I don’t agree with her on all the details, but it’s definite food for thought.

Flickr photo by blmurch

9 Comments

  1. Cameron

    At first I thought this was supposed to be funny. But you’re seriously advocating a negative tax? I’m sorry, but that already happens via welfare, etc. We don’t need more of it.

    I dunno about you, but I believe that those who work harder and are better at what they do should be paid more than those who don’t and aren’t. Call me crazy.

  2. Chris

    Cameron,
    This is what McArdle mentions along with the negative tax that I didn’t include in the post… in retrospect I should have:

    “Get rid of all our poverty programs, except those aimed at the disabled, and temporary unemployment assistance, and institute the negative income tax.”

    So, the idea is that the negative tax would replace welfare because:

    “the negative income tax does two things: encourages work by removing the disincentives created by potential loss of benefits; and means that the entire country, poorest to richest, faces a marginal tax increase if they want more spending: the poor have to give back some of their rebate, while the rich have to pay higher rates. For many on the left, that may of course be a bug, not a feature, as it forces the electorate to think much harder about whether or not they want new spending.”

  3. Ian

    “I’m sorry, but that already happens via welfare, etc.”

    Really? Cause you know, with my sub-20K a year graduate student salary I feel like I should maybe be getting a slice of that if it already exists.

  4. Ian

    “I dunno about you, but I believe that those who work harder and are better at what they do should be paid more than those who don’t and aren’t. Call me crazy.”

    I certainly think you are crazy if you believe this to be true. How hard you work is in no way correlated to the amount of money you make. People who make minimum wage can bust their asses at multiple jobs and still make only like $20K a year take home. Its the perceived value of what you do that determines about how much you make. That it a pretty arbitrary way of determining wages.

  5. Cameron

    Notice that I also said those that are more skilled should make more money than those who suck and doing stuff?

  6. Ian

    No you said, “are better at what they do”. That implies that if there are two people with the same job, and one is better at that job, then they make more money. I know I am being nitpicky, but that isn’t what you said.

  7. Cameron

    As a general rule, *and all else being equal,* people who work harder and better in America are rewarded for it financially. And it needs to stay that way.

  8. Ian

    I don’t think that would change by what Chris is saying. Also, you could work pretty darn hard at a fast food type job and be really good at it, but that won’t guarantee decent pay. You could be pretty lazy and just good enough not to get fired at a business job and make considerably more money. Like I said before, your paycheck is determined by the perceived value of what you do. That is pretty arbitrary and doesn’t necessarily take into account skill and hard work.

  9. Chris

    Welfare or a negative tax is not designed to reward people for not working or not being good at their chosen profession. It’s about admitting that the market and philanthropy, even in the richest country the world has ever seen, won’t keep some people from starving and living on the streets.