The current US Income Tax Code (known as Title 26, of the United States Code) weighs in at a paltry 16,845 pages in length (source US Govt. Printing Office, www.gpo.gov ). Please take a moment and let that sink in, 16,845 pages. Reading at a rate of one page every minute (this is an impossible feat by any standards), it would take 280.75 hours of continuous reading to plow through our tax code. Folks, that’s just over eleven straight days of reading.  Anyone else feel a little sick at that thought? So, with this enormous volume (twenty volumes by the way) of text, how is the average American supposed to know exactly what is going to be taxed, what is exempt, what can be deducted, and what will you ultimately be responsible for every April? I’m sorry to say, but this does NOT meet the common sense test.
Instead of the varying percentages that we are taxed at, a flat tax may prove to be a better solution. Presidential hopeful Herman Cain (if he can shake the accusations against him) has stated he would institute a 9% flat income tax if elected to the White House. This idea isn’t a new one. In 1981 Robert Hall and Alvin Rabushka proposed a simple flat tax to replace the horrendous tax system that existed up to that point. The flat tax proposed by Hall and Rabushka was so simple, they claimed that an individual or a business could file their income tax on a piece of stationary no larger than the average postcard.
Reagan initiated a tax reform in 1986 that replaced the multi-layered percentages and instead instituted two percentages, 15% and 28%. The flat tax idea has resurfaced numerous times since then, but has never managed to make it past a good PowerPoint presentation. To complicated matters, lists of deductions and itemizations convolute even Reagan’s simplified tax code.
I, your humble author, again wielding the Magic Crayon of Power, would institute a sweeping reform of the tax code. By sweeping, I mean sweeping it right into the trash. Taxes would be divided into three categories: individual income, small business income, and large business income. Individual income tax is self explanatory. Small business income would apply to businesses with 250 employees or less. Large business income would apply to businesses with 251 employees or more. Pretty easy so far, right?
Individual income tax would be placed at 15% before deductions. This means that whether you earned $30,000 a year (a $4,500 tax liability before deductions) or $300,000 a year (a $45,000 tax liability before deductions), you would pay 15%. Regarding deductions, unfortunately, this section needs to be narrowed. Charitable donations would remain a tax deduction as long as the charity was a registered non-profit organization, and the maximum deduction allowable would be no more than 3% of the pre-deduction liability.
Example: Joe Snuffy makes $30,000 a year and donates regularly to the March of Dimes; he would only be able to deduct $135 (3% of $4,500) from his tax liability. In reality, persons making a lower wage are less likely to contribute vast sums of money to charities strictly for the tax deduction, but the idea is simple.
Other deductions would include a child tax deduction in the amount of 5% for the first two children, then 3% for each additional child, with a maximum allowable deduction of 16%.
Example: Joe Snuffy makes $30,000 a year and has four children. He would qualify for a total deduction of 16% (5% for two children, 3% for the other two) resulting in a deduction of $720. If Joe’s neighbor, making the same wage, has six children, he would only be eligible for a total deduction of 16%). Some may think that this negatively impacts large families with low wages, however, it must be remembered that government assistance programs for working families would be made available (no one minds helping those that need it).
Certain other deductions such as the 1st time homebuyer credit, earned income credit, head of household credit, and would remain depending on the economic state of the nation.
The individual income tax would be simplified to such an extent that every American regardless of income or education level would be able to understand what they are responsible for. By instituting a flat income tax, the fairness is placed back into our tax code.  A flat income tax also prohibits undue hardships on lower income families and doesn’t single out the highest income earners in the nation, thus eliminating the “class warfare” allegations that have cropped up as of late.
This is the basic premise of my flat individual income tax. If, after reading this entry, you desire additional information, please feel free to let me know. I will respond with the utmost haste.
Future posts will cover small business and large business income tax as well as a more in-depth discussion of deductions.