A Fair System of Taxation

In our current system of taxation, a young father making $16,000 per year will, with tax credits and other benefits, maintain a $27,000 lifestyle. If he increases his productivity by 25% and his employer pays him 25% more ($20,000 total), his wages will increase but his tax credits and other benefits will decrease, resulting in no change in his total income.

On the other side of the tax spectrum, we have business owners who are able to pass certain earnings through as capital gains so that, instead of paying 35% or 39% on their highest income, they can pay 15%. This process is complicated, but the reality is, as someone’s income grows higher, the percentage they pay in taxes decreases. This is why most of American billionaires pay less than 15%.

This is unsustainable. Our current system produces a downward pressure on the poor that acts to keep them in poverty and it offers additional benefits for the wealthy that allow them to make even greater wealth. Our tax system, by design, will increase inequality.

All Americans know this is a problem yet a solution seems illusive. Our 74,608 page tax code is incomprehensible to most of us and it seems that it is constantly being revised to benefit the super wealthy. Over the past 20 years, the wealthiest 400 Americans have seen their effective tax rate drop from 27% to 17% (NY Times). This is not the intent of our progressive tax system.

A fair system of taxation should be intuitive. It will provide some benefit for workers at the lower end of the income scale, as long as they are working, to improve their situation. It will allow them to participate in an economy which has outpaced their earning potential. It will be stronger than the EITC, which is only designed to lift them above the poverty line. An effective system will continue to assist them in growing towards middle class status.

Ideas to improve our tax code will never be adopted willingly by the IRS, Politicians or the multi-millionaires who fund their campaigns. These groups all receive a benefit from the current complex system (which is why they have allowed it to become so complex.) The creation of a stable tax system is only possible if average voters unite and demand this change.

For a more on how to build a stable system of taxation, please check out my book, Vote Like Me, or my website: www.votelikeme.org

Thank you,