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jduster

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For those who don't know the Negative Income Tax would annually tax every person at the same percentage and it would give a tax deduction/reimbursement of the same dollar amount to everyone.

For example (

**this is just a tentative example; the numbers can be re-worked**):

The variables could be

**25%**of income taxation +

**$4000**tax deduction.

In my variant of this tax, a person working

**full time**(let's say an income of $15,000 or more) pays into this tax. People making less than that shouldn't be paying federal taxes and if they were to pay into this one, the payout of deductions would be too big to make it revenue nuetral. Welfare programs exist for welfare, but I don't suggest we have a tax system masquerade as a welfare program.

Person A makes $20,000

Person B makes $40,000

Person C makes $90,000

Person D makes $1,000,000

Person A pays $5000 (25%). Takes in $4000. They pay $1000 total in taxes and their gross income is $19000.

Person A pays 5% of his/her income.

Person B pays $10,000 (25%). Takes in $4000. They pay $6,000 total in taxes and their gross income is $34,000.

Person B pays 15% of his/her income.

Person C pays $22,500 (25%). Takes in $4000. They pay $18,500 total in taxes and their gross income is $71,500.

Person C pays 20% of his/her income

Person D pays $250,000 (25%). Takes in $4000. They pay $246,000 total in taxes and their gross income is $754,000.

Person D pays $24.6% of his/her income

This cures the bracket creep problem. For example, in our current tax code, there is a bracket from $35,000 to $80,000 (or around that range) taxed at 25% and someone making under $35,000 is taxed at 15%.

For example (this is a real life example of someone I know), Joe normally makes $34,000 at his 40-hour-a-week job. He was called for overtime, to be paid twice as much per hour, for an additional 10 hours per week. That pushed him into the next bracket and his tax rate increased by 10% of his total income (40% increase on his tax RATE).

So essentially, he only took in half of what he made during overtime, entirely cancelling out the extra money he was paid for overtime. He additional percentage he paid on his income was much higher than the percentage that his income has increased.

Someone who makes $36k pays significantly more than someone who makes $34k, yet pays the same amount as someone who makes $80k. Ridiculous.

In order to stop bracket creeping, we could make 80 different income brackets, to make sure nobody pays proportionately more. But it would never be perfectly in order and it would be way too complex.

NIT's math formula is so absolute, that a simple equation would ENTIRELY prevent bracket creeping. Because everyone has their own bracket. There are literally an

**infinite**amount of brackets, yet they require no more math than a simple $2 calculator.

This tax proposal will appeal to both liberal and conservatives.

This tax could be applied to any type of government. A minimalist government can lower the rates, and increase the deductions to leave little profit for the government. A welfare-state government can increase the rates or lower the deductions to leave more room for welfare programs.

Liberals will like that this tax proposal is progressive. The higher your income, the higher percentage that you pay, always. Unlike our current tax code, the N.I.T. is progressive 100% of the time.

Conservatives will like that this tax proposal is simple, applies the same formula to everyone and it requires much less bureaucratic overhead.

And one more thing. To address a common criticism of this tax plan:

"Why should Bill Gates get an extra $4000 when he doesn't need it?"

This is tautological because we can adjust the rate. If we up the rate 25.1%, Bill Gates will be paying much more than $4000 extra in taxes. This criticism is more symbolic than practical.

It doesn't make sense that a person who wants the wealthy to pay more would be okay with charging him 25% and taking away the 4000 instead of charging him 25.1% and letting him keep the $4000.

Let me know what you think of this proposal. Thanks.