Saturday, November 5, 2011

A Flat Tax Plan With Low End Progression

by: Les Carpenter
Rational Nation USA
Liberty -vs- Tyranny

It seems that politicians and lawmakers have a knack for making things very complicated as well as extremely opaque. Probably by design and so nobody has a clue as what is really happening.

Take the tax code for example. A complex and burdensome piece of law that has accomplished keeping overpaid tax attorneys, lobbyists, accountants, and judges to name just a few gainfully employed.

We can thank the progressives who love the progressive income tax for the $200.00 plus dollars {now that's low end cost} a person shells out each year in tax preparation. Hopefully so their tax burden is ever so slightly lessened.

Sometime ago Rational Nation USA, in one of those moments of inspiration devised a flat tax plan that was simple, and as equitable as anything the nightmarish progressive tax could possibly offer with all its loopholes, deductions, credits, and the rest of the tax code mumbo jumbo.

In light of the Cain 9-9-9 plan, which I'm not yet sold on, and the democrats desire to raise taxes (I'm told the House Boner is on board) I decided to call up my proposal and dust it off and make some slight revisions.

Of course with tax and regulatory reform the size of government would be reduced as well. So lets roll it altogether in a condensed format and maybe someone will take a look and run with it! :)

Recent revisions to a previous post.

In essence our government created a tax code that is as mind-boggling as it is convoluted, requires hundreds of thousands if not millions of pages, and keeps the tax accountants and lobbyists in business. It also creates uncertainty within the business sector and markets, and decreases our competitive standing in the world.

Achieving limited government in taxation would be quite rudimentary and uncomplicated, were it not for the pull peddlers. However, the moment the United States government instituted the graduated income tax with its exemptions, deductions, and loopholes the stage was set for a ever increasing and more complex tax code. Slaying Leviathan will not be easy but it is necessary.

The following proposal would increase individual as well as corporate and business tax revenues, simplify the tax code {so Reagan's idea of the post card size 1040 could be realized} and it would eliminate the need for tax lobbyists that are engaged in “protecting” corporate interests by writing into law loopholes that allow them to pay little to no taxes.

The proposal...

1.1 - Graduated tax shall be retained for individuals whose gross earnings are less 39K. {5% starting at 18K, 6.5% at 25K, and 8% at 32K}
1.2 - Gross earnings above 35K would be taxed at a flat rate.
1.3 - There shall no exemptions, deductions or other considerations that would have the effect of lowering the gross taxable income.
1.4 - The individual tax rate shall be 10% on gross income of 39K and higher. Changing the law shall require a 75% affirmative vote of the 50 states making up the union of The United States of America.

2.1 - Business and Corporate income shall be taxed on the flat tax basis.
2.2 - Business and Corporations shall cease to receive government subsidies and corporate welfare. Too big to fail shall no longer be an operative word.
2.3 – Deductions for businesses and corporations shall be limited to legitimate business expense as defined by current cost accounting principles.
2.4 - Business and Corporate tax rate shall be 10% after deductions for legitimate business expenses as outlined in 2.3 above.

Simple and straight forward, the above would create an environment in which everyone would know month to month and year to year what their tax liability would be. Planning for business investments and expansion would thus proceed on a stable and level playing field.

Plainly put - get the lobbyist out of the picture by revising the tax code, let market forces work in weeding out the unproductive and non competitive businesses. We then would most certainly have a more vibrant and competitive economy. To use an analogy - giving one dog preferential treatment over his fellow dog is both unethical and counterproductive.

A common concern when discussing limited government is the nature of, and need for, appropriate and measured regulation. Few would disagree with the premise government has a role in protecting the public safety. Even the staunchest conservative advocates of limited government support the belief that government has some responsibility in ensuring public and workplace safety, the environment we live in {air and water as examples}, as well as maintaining the public infrastructure {roads, bridges etc.}.

By the same token most can agree the level of governmental regulation {often duplicitous} is costly to business and serves no real purpose in insuring public safety. Beyond staggering costs, the very businesses that create jobs and spur economic growth are significantly and negatively impacted by frivolous and unnecessary regulatory restrictions. I refer you to John Stossel’s spot on video covering the subject of over regulation as an illustrious example of this.

The cost borne by business and corporations as a result of our regulatory framework is significant and frankly often unnecessary. Freeing business and corporations from unneeded burdens of over regulatory control would be a major leap towards improving our industrial competitiveness in the global marketplace.

Perhaps an over simplification. Perhaps not. At any rate RN USA leaves you with a question... Haven't we been thinking inside the same box for way to many years?


  1. that is a good compromising idea for taxes but it has a very apparent flaw, Les. it still violates the one flaw that exists in the tax laws today, "double taxation." it still taxes the business man twice on the same moneys earned.

  2. Griper - How so? My mind is still unthawing from the no power tower of 5 days!

  3. Let it thaw a little longer, Les. It'll come to you.

  4. Gorges and Griper - Mind completely free of frost and remains undaunted.

    Therefore, the rebuttal platform is yours.

    Hint... I am completely prepared for counterpoint.

  5. businesses make a profit, les.
    the profits of a business becomes the earnings of the owner or owners of that business.
    thus when you tax the profits of that business you are taxing the earnings of the owner.
    he then has to pay a personal income tax on the moneys left after it has already been taxed once.
    and while you'll find employees income on an expense sheet for purpose of deductions you will find nothing about the owner's income on that expense sheet.

    thus the earnings of a business man is taxed twice.

  6. griper - being a individual responsible for managing at the "executive level" for over 10 years of my career I am aware of what you say. In fact as I had a father who not only managed as a general manager as well as owning and running his own small business with my mother I had many "business" conversations with him on these issues.

    I will not dispute your statement from the point of a small business owner. Although my father had more problems with other aspects of running a business than the "double taxation" angle you spoke to.

    Where I a larger business {corporation} I would merely establish the salary level I felt the business could afford to py a CEO and pay taxes on that salary. Willingly based on my plan.

    The balance of the "profit" would be plowed back into the business for development, growth and expansion

    A portion of the profits would become part of a profit sharing plan for my valuable employees that made the business {and myself} profitable or as the left would say wealthy.

    If you want to get technical griper there is not a dollar spent anywhere that has not been double, triple, quadruple... etc. taxed.

    Government need revenue to function. I believe I spelled out a few essentials. A few more would be, military for the common defense, the police {law enforcement} to keep the civil order, the courts to judge crimes against people and property. I'm sure you can think of more.

    The plan I put worth closes loopholes, ends crony capitalism and corporatism, Stops the march toward an Oligarchy, and allows business and corporation to compete on a leveler playing field without the influence of lobbyists and pull pedlars.

    Not much in life is perfect griper. Bit I would love to hear and consider your limited government, tax plan, and regulatory thoughts.

    There is much to consider and the field of rational ideas is wide open to all.

  7. Les,
    you asked me to present my case for double taxation and i did. and you agreed.
    the profits of any business are the earnings of its owner or owners and that includes corporations. the shareholders of a corporations are the owners of that business.

    and when they pay taxes on the dividends the same thing applies. they are paying taxes twice on the same money.

    CEO's of corporations are considered as employees. and their salaries are found on that expense sheet for the purpose of deductible items. the dividends are not found on that expense sheet.

    and you are only excusing the use of double taxation by downplaying its use. remember, taxation of the people was one of the principal grievances of the founding fathers and the reason they demanded representation in the king's government.

    the only value that double taxation has is to increase the revenues for government and to effect the people by making them poorer. so, yes double taxation should always be a factor in any new tax plan offered up to replace the system we have now.

  8. "Bit I would love to hear and consider your limited government, tax plan, and regulatory thoughts."

    Limited Government
    1. return to the government established by the Constitution. that would be seen in terms of separation of powers of government which consists of internal or domestic affairs and external or foreign affairs. by the nature of separation of government powers you create limited government. this would declare that the State governments are limited in their powers to the domestic affairs of their State. the federal government would be limited in its powers to external affairs with the advice and consent of the States.

    that is the explicit as well as the implicit meaning of the tenth amendment to the Constitution.

    and it is this understanding that gives us the concept of State rights. without this understanding State rights cannot be seen as a valid concept.

    and it was this understanding of government that prevailed until around the time of Roosevelt. i say this in light of the fact that there can be seen of prior incidences of federal interference in State affairs tho they were but temporary incidences.
    i wrote a series of posts a while back on this very issue here.

    the meaning behind the Preamble

  9. Regulatory Thought:
    the separation of powers as outlined in the previous comment would address this issue greatly. it vastly eliminates federal regulatory powers over "the people". and the individual Constitutions of each State would be the determinate of limitations of that State's regulatory power.

  10. Tax Plan
    this would be the simplest plan of all. i would lobby for the repeal of the income tax amendment, nothing more at the moment.

    with this repeal it limits the federal government ability to tax only as the Constitution has clearly outlined already. and those means would be in line with the separation of powers as described previously.

    tho, from an ideal point of view the founding fathers had it right as determined in the Articles of Confederation.
    it clearly establishes that it was the States that created the federal government, thus, must accept responsibility for the federal government's expenses.
    it also clearly declares implicitly that the state governments were the dominate government over the people, not the federal government.

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