A Flat Tax

This month I have been discussing some of the proposed alternatives to our current tax system. Last week we talked about the fair tax and this week I thought I would give you some information on the flat tax.

The current tax system taxes your personal income in graduated tax brackets. There are five tax brackets that begin at 10% and increase up to 35%. So for example a single filer would pay 10% tax on the first $7,150 they earn. Any additional earnings would be taxed at the 15% rate. The rate of tax increases as the amount of money that is earned increases.

The confusion in our current tax system comes from the deductions, special circumstances and alternative minimum taxes that a filer has to take into account. With over 54,000 pages and 2.8 million words there are a lot of variables.

A flat tax is fairly straightforward. The current proposal would eliminate all 480 IRS forms and replace them with two post card sized forms. No matter how much money you earn, you would simply pay a percentage of those earnings as tax. In order to keep the tax burden from increasing on the poorest Americans there would be an exemption on the first $12,800 that you earn if you file individually.

So for instance, if you made $30,000 a year and the flat tax was 19%; you would owe the government $3,268 in taxes. This type of tax would simplify our tax code and eliminate loopholes that are used to avoid paying taxes.