The countries tax system is screwed up, its biased, unfair, complicated and downright unproductive. It creates criminals were criminals should not exist and complicates matters when there should never be complications. It entices political pushes, changes, and bribery, should I go on?
In 2012, the federal government had a total Tax Revenue of just under 2.5 Trillion Dollars. $1.4 Trillion in Income Taxes, .8 Trillion in Social Security Taxes, .1 Trillion from Ad Valorem taxes and .1 Trillion in Business and other Revenue. The total revenue between Federal, State, and local taxes from all sources was just under $5.1 Trillion
The average person in america spends just under $50,000 a year, remember this is an average, so some spend far less, while some spend ten thousand times that amount. According to the US Census in 2012, the US had a population of 312.8 million people. This equates to a total spending per year of $15,640,000,000,000.00, or $15.6 Trillion Dollars. According to the IRS and other government entities, the GDP or gross domestic product for 2012 was $15.1 Trillion Dollars. Therefore the estimates on spending per person is very very close to reality.
As of 2012, the government takes 15.3 percent out of every paycheck no matter how rich or poor you are for social security taxes (this includes Medicare). Federal Tax for 2012 ranged from 10% to 35%. Which means If you made a $1,000 paycheck you would lose $153 to social security and medicare no matter how rich or poor you are, and then lose another $100 to $350 depending on how rich or poor you were. Which means the average american that brings home a $1,000 paycheck will actually only get to see between $497 to $747 of the original money. Or in percentage every american pays income taxes between 25.3 percent to 50.3 percent of every check. On top of that, you have to pay sales tax and fees at every location you spend your money, ranging anywhere from around %5 to %12, making you lose another large chunk out of your paycheck. In the end, every american, no matter how rich will lose anywhere from 28% to 63% of their paychecks. And yet even with such a massive amount of our payroll being taken in just income taxes we still manage to spend $15.1 Trillion every year.
Unfortunately many business, and other entities get away with paying little to no taxes because they will spend the funds during the year on so called "expenses" to get around having to pay any taxes on the funds at the end of the year.
The goal with this posting is to layout a more effective measure for collecting taxes and at the same time allow the american people to retain more of their hard earned money.
My method for taxes is very very simple and not only lowers taxes for every american, but it will actually increase the total taxes taken in for federal, state, and local governments.
The plan is very simple, Income tax, estate tax, sales tax, and all other taxes are eliminated completely. the only tax that will remain is business revenue Tax. Business pay 29% of gross sales paid to the federal, state, and local tax agencies on a monthly basis.
Tax revenue will be distributed according to the following chart.
| Federal Sales Tax | 64% |
| State Sales Tax | 12% |
| Local Sales Tax | 24% |
This allows the majority of all americans to retain all their money and therefore spend more, the average american would now have 28% or more in income compared to what they have now. This would result in the GDP raising significantly because of the additional funds available to the public workforce, equating in an average increase in national GDP of 16.5% or an additional $2.5 Trillion spent each year at a minimum.
With this method, Federal tax revenue would equate to 3.28 Trillion, state at 729 Billion, and local at 1.3 Trillion. Compared to the current numbers, it shows increase in federal tax revenue and local tax revenue and a decrease in state revenue.
HOWEVER.
There are countless departments within the Federal, state, and local levels designed for regulated, collecting, and enforcing tax regulations, rules and laws. The IRS department of the federal goverment cost $12.4 Billion to operate in 2012 alone, not including any other tax departments between the different levels of government.
By eliminating income tax and other taxes and relying solely on sales tax, we can eliminated every single one of these departments and rely only on the individual state tax commissions to collect quarterly sales tax payments from each business. This would save tens of billions of dollars every year in expenses between each level, and would even allow the state levels to cut their tax departments down to only their sales tax portions of the department.
Enforcement would only need to made against business's not filing and paying their quarterly sales tax and no enforcement would ever need to be performed towards individuals, eliminating the creation of criminals, tax fraud, and all other costs involved with enforcement. Allowing law enforcement to focus on more pressing matters that truly effect society.
With having additional money to spend the overall welfare of the average american would increase, they would eat better, live better, and overall enjoy life better. And business's would no longer be able to avoid taxes, however in this method, the taxes are paid by the consumer not the business, allowing the business's to focus more on growth, it would eliminate their need to worry about tax's, and would significantly reduce the costs the companies incur in keeping track of and paying income tax.
Another issue facing america has always been the increase of internet sales and the lack of any of these sales being taxes. With a flat sales tax across the board, this would enable all sales, whether in person, or through the phone or internet to be taxed, increasing the overall amount of tax collecting even further.
This method also eliminates any arguments about who should pay more or less in taxes, with everyone paying the same percentage of sales tax, the amount you pay each year will be based on the amount you spend, therefore the more money you make and spend the more taxes you pay, making it so that top 1% will pay far more taxes then all the 99% combined.
With the increase in taxes, and the changes, there will need to be many additional changes to government to reduce spending and pay off the national debt. Which at the end of 2012 was roughly 16 trillion dollars.
Currently The government spends $793.2 Billion each year on Pensions (Social Security Primarily), another $882 Billion a year on Health Care (Medicare and Medicaid primarily). 129.8 Billion on Education, 964.8 billion on Defense, 495.6 Billion on Welfare, 60.7 Billion Protection (Police, Fire etc), 94.5 Billion on Transportation, 33.2 billion on General government (IRS and other government employees and organizations), and 158.4 Billion on other spending (Housing development, agriculture, forestry community development, water supply etc). and we pay out 206.7 Billion in interest payments on our national debt.
This all equates to $3.8 Trillion a year in expenses, roughly 1.3 Trillion more a year then the federal government is currently bringing in.
With the new sales tax structure, that tax gap would be brought down from 1.3 Trillion to 1.2 trillion, Although this does not bring it positive yet, it does make a great step towards independence of the debt.
So with the new sales tax system we would need to eliminate another 1.2 Trillion (1,200 billion) Dollars a year in government expenses. Eliminating the IRS would bring that number down 12.4 Billion to 1,187.6 Billion.
There are several areas the federal government is putting money into that needs to left to state levels, or even the private sector, Transportation is one of those. Obviously the federal highways need to be maintained, states do not need to maintain them nor should they. But all transportation grants and other expenses should be eliminated, every one. This eliminates another 27 billion a year from expenses. bringing the number to $1160.6 billion. Air transportation needs to be handed over to the private sector, all security, maintenance and other costs involved need to be handled and paid by the private sector. This would eliminate another 21.6 Billion from expenses. bringing the number to $1139
Mortgage Credit should be eliminated and community development should be handled by the individual states and private sector. This frees up another 46.7 Billion bringing the number down to $1092.3 billion.
Foreign Military Aid should be eliminated completely and Foreign Economic Aid should be moved to the private sector. This saves an additional 55.2 Billion bringing the number to $1037.1 Billion.
The DODs budget should be reduced from $739.7 Billion to $350 Billion, lowering the number to $647.4 Billion. For comparison, the DOD spent only $287 Billion in 2001. We have more then doubled, nearly trippled our defense budget in the last 12 years. We will need to cut that back, I would propose $350 billion, this is nearly a $70 million increase over 2001 or 25% increase. More then enough to constitute larger defense projects.
Medicaid/medicare needs to be eliminated, medicaid/medicare will be eliminated for a national medical program outlined in a future post. Public health services such as CPSC, OSHA, FDA, FSIS will remain but do need reform. Health R&D will me moved solely to the private sector. These changes will eliminate 877.5 Billion a year. However there will be costs involved in creating a national medical program, which will be outlined in my other post. However those costs will equate to roughly 216 Billion per year. Bringing the total to a net profit per year of $14.1 Billion
135.9 Billion is being paid out through income tax returns for people with no tax liability or claim additional credits. This would be eliminated completely since there would no longer be any tax obligations besides sales tax. Bringing the number to $150 Billion per year in profit.
Social Security payouts equates to $793.2 Billion of the federal budget. Social Security would be eliminated since there is no longer any tax income. Instead a new program will be designed to support our old and disabled, this is outlined in another post. But the average cost per year will sit just around $608 Billion. Which brings our number to being positive $335.2 Billion per year.
Welfare payments for housing assistance, TANF payments, unemployment, and others equates to 495.6 Billion per year. This will be transferred to the state level and eliminated from the federal budget. Bringing the net profit per year to 830.8 Billion.
At this point we will be able to spend 750 Billion per year towards paying off our national debt. The other 80.8 Billion would be saved for future emergencies and unforeseen expenses. Adding the750 billion to the 206.7 billion we already pay each year towards the national debt, we will be able to have the national debt paid in full in roughly 21 years. At which point we will then have an annual net profit (savings) of just under 1.1 Trillion per year. Enabling us to save half for emergencies and unforeseen expenses and use the other 550 billion to increase expenses in other areas IF needed.
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