In an effort to address the widely-recognized financial inequality in America, a review of the tax code was undertaken. It found that a U.S. citizen’s tax rate currently begins at 10% and increases five times within the first $400K. However, the tax rate does not increase at all in the next $400K, the next $400 Million, or the next $400 Billion. In fact, the tax rate never increases again no matter how much income is claimed.
(See Current Tax Brackets Attached)
The review also found that there is no logical mathematical scheme for the amount of increase from bracket to bracket, although the largest percentage increases occurred in the lower brackets. Obviously, the current tax brackets have been manipulated to benefit those with higher incomes.
Historically, the top tax rate has been 70% or greater for most of the 99 years the U.S. income tax has existed. There have only been 36 years where the top tax rate was 40% or less, and 25 of those years were 1987 thru 2011. This fact, combined with the bracket manipulation pointed out above, indicates that from 1987 thru 2011, America’s richest, most prosperous citizens have essentially enjoyed half off their taxes.
Meanwhile, state and federal governments have been borrowing to keep things going. But even that’s not working now. So while governments continue to borrow, they’re also closing facilities, laying off service employees, cutting programs and neglecting maintenance on public assets. Its no wonder people are marching in the streets.
It’s time to end the math tricks and adopt logical and mathematically incremented tax brackets. And that’s what the 300/150 Tax Plan does. Starting with a bracket that has a $10,000 income cap and a 10% tax rate, brackets thereafter are equal to 300% of the previous bracket’s income level and 150% of the previous bracket’s tax rate.
(See Reformed Tax Brackets Attached)
Logically, and mathematically, the top tax bracket results when calculation of the formula for the next bracket would exceed a tax rate of 100%. For the 300/150 Plan, this means the top tax bracket is 75.94%. The current Federal tax code stops abruptly at 35%.
As you can see, the logically and mathematically incremented tax brackets of the 300/150 Plan are somewhat in alignment with the first few brackets of the current Federal tax code. However, the 300/150 Plan results in a significant increase in tax revenue from those citizens earning more than $270,000.00.
(Note that along with logically and mathematically incrementing tax brackets, the option to use “income averaging” must be restored to the tax code. It is required to compensate for unusual or unexpected income, and permits taxpayers to avoid being put into a high tax bracket during a single year of unusually high income.)
As an example, under the mathematically incremented 300/150 Plan, an individual with a $4 million income would pay tax in the amount of $2,774,084. However, the same individual pays only $1,377,314.00 in tax under the current tax code.
That’s roughly half.
Expect the wealthy to plead for sympathy (not empathy) from the citizenry. And then will come the angry voices telling you why a tax bracket of 75.94% is insane. “Unimaginable!”, they will cry. But it’s not. The highest rate in history was 94% for a couple of years in the forties. And during each of the middle class boom years of 1950 thru 1963 the rate was over 90%.
Today’s half-off tax bracket system is encouraging the rich to cash out as soon as possible. Instead, there should be an American Investment Act that provides credit for investing in business on U.S. soil and eliminates credits and subsidies for overseas investment. When the fortunate are faced with the choice of reinvesting their annual fortunes in America or paying a 75.94% tax rate, you can count on seeing increased investment and job creation.