I propose doing away with all personal deductions and not taxing the first $50,000 of household income or $25,000 per individual. I would classify a household as two married people or an individual that has custody of children or an individual that is currently and current with paying child support.
Basically a household needs at least $50,000 just to make ends meet. That would be just under $4,200 per month. Let's look at a household of two adults and two children. At least one person has a medical condition. Maybe a recent surgery from an accident or illness, seizures, asthma, ADHA, diabetes, a heart condition or history, etc. They do not work for the State of Wisconsin or a company with over 50 employees. If they have to get their own insurance, it will cost approximately $1,500 per month if you have any preexisting medical conditions and then copays and medications are still variables.
Housing whether renting or owning with insurance, utilities, electric, heat, phone, cable and internet will easily run $1,000.
A vehicle including insurance, fuel, maintenance, and possible payments, $500.
This is $3,000 per month and we haven't even started with food, clothing, etc. I asked a lot of people how much they spend on food a day. Most say $10. If you actually keep track, it will be much higher, but if we use $10 per day that's $300 per month or $1,200 for the family.
We are now at $4,200 per month or $50,000 per year in just living expenses.
Need clothes, shoes, a winter coat, a dentist, maybe the hot water heater went out or you get laid off or miss a few days of work, OUCH!!! Now make a late a payment on the credit card that you've been using to supplement our income and watch your interest skyrocket.
REMEMBER, this is a family making $50,000 per year. Many Wisconsin families make much less, can't afford health insurance, and we have not yet taken out any income taxes, social security, or property tax. Yet that is what our politicians want to do. While at the same time giving huge tax breaks to the wealthy. They want struggling working families to "cut back" so the rich can "enjoy the fruits of their wealth". This is wrong in so many ways. It is one of the main reasons for our current economic crisis and needs to be corrected immediately.
This is why I don't want to tax the first $50,000 of household income. After the first $50,000 the tax formula would be to subtract $50,000 from your income. Next the first $10,000 would be taxed at 1%. The second $10,000 would be taxed at 2% and so on to $250,000. After that any household income would be taxed at a straight 25%. Under this system, people will be able to enjoy the fruits of their labor.
Example 1
$45,000 of household income pays no tax.
Example 2
$85,000 of household income
$85,000 - $50,000 = $35,000
| 1st | $10,000 | @ | 1% | = | $100 | ||
| 2nd | $10,000 | @ | 2% | = | $200 | ||
| 3rd | $10,000 | @ | 3% | = | $300 | ||
| 4th | $5,000 | @ | 4% | = | $200 | ||
| Total | Tax | = | $800 |
Amount to spend after taxes $84,200.
Example 3
$800,000 of household income
$800,000 - $50,000 = $750,000
| Running Total | |||||
| 1st | $10,000 | = | $100 | $100 | |
| 2nd | $10,000 | = | $200 | $300 | |
| 3rd | $10,000 | = | $300 | $600 | |
| 4th | $10,000 | = | $400 | $1,000 | |
| 5th | $10,000 | = | $500 | $1,500 | |
| 6th | $10,000 | = | $600 | $2,100 | |
| 7th | $10,000 | = | $700 | $2,800 | |
| 8th | $10,000 | = | $800 | $3,600 | |
| 9th | $10,000 | = | $900 | $4,500 | |
| 10th | $10,000 | = | $1,000 | $5,500 | |
| 11th | $10,000 | = | $1,100 | $6,600 | |
| 12th | $10,000 | = | $1,200 | $7,800 | |
| 13th | $10,000 | = | $1,300 | $9,100 | |
| 14th | $10,000 | = | $1,400 | $10,500 | |
| 15th | $10,000 | = | $1,500 | $12,000 | |
| 16th | $10,000 | = | $1,600 | $13,600 | |
| 17th | $10,000 | = | $1,700 | $15,300 | |
| 18th | $10,000 | = | $1,800 | $17,100 | |
| 19th | $10,000 | = | $1,900 | $19,000 | |
| 20th | $10,000 | = | $2,000 | $21,000 | |
| 21st | $10,000 | = | $2,100 | $23,100 | |
| 22nd | $10,000 | = | $2,200 | $25,300 | |
| 23rd | $10,000 | = | $2,300 | $27,600 | |
| 24th | $10,000 | = | $2,400 | $30,000 | |
| 25th | $10,000 | = | $2,500 | $32,500 |
No tax on first $50,000
Tax on the next $250,000 = $32,500
Tax on remaining $500,000 @ 25% = $125,000
Total tax of $157,500
Amount to spend after taxes $642,000.
This will allow people to spend more money at the businesses of their choosing, creating more jobs and taxable income for these businesses. This will stimulated economic grow and the additional income tax paid by businesses.
Deduction Caps
I would also limit the amount of salary and benefits that a company can deduct per employee to $200,000. If they can afford to pay top CEOs and officers millions in salary and benefits, they can help pay our taxes. Also companies should only be able to deduct salaries paid to US citizens.
Write-Offs
We also need to change the tax code to prevent companies from buying companies involved in the mortgage crisis simply for tax write-offs.