Posted by
Poor Richard Reborn on Thursday, December 27, 2007 7:00:06 PM
THE INCOME TAX…
The amount of the tax that businesses and individuals would pay out of their own pocket would be based on a graduated scale. Here’s how that works.
If you earn you pay this % employer pays this %
$0 to $10,000 1 32
$10,001 to $20,000 2 31
$20,001 to $30,000 3 30
$30,001 to $40,000 4 29
$40,001 to $50,000 5 28
$50,001 to $60,000 6 27
$60,001 to $70,000 7 26
$70,001 to $80,000 8 25
$80,001 to $90,000 9 24
$90,001 to $100,000 10 23
and so on until income reaches $330,000
$320,001 or more 33 0[1]
What is considered “income”…
Business owners and executives often receive benefits that ordinary employees do not receive. The 33% Solution defines “income” this way: anything of value that an employee receives or uses is “earned income”…commissions, bonuses, a company car, stock options, a vacation, spousal travel on business trips, free meals, group insurance benefits, etc[2].
“Income” refers only to “earned income” not to income on savings and investments. The 33% Solution allows the individual taxpayer to pay taxes on the growth and income they earn from savings and investments either
- in the year in which they are earned or
- as an estate tax at the death of the taxpayer (see the Estate Tax section below[3])
The New IRS would receive the same kind of income reporting from investment firms that it currently receives in order to keep track of this kind of income.
[1] The “earned income” schedule would be adjusted for inflation. The tax rates could be reduced if income exceeds expense but could not be adjusted up except in time of national emergency. See the entire schedule in Attachment A.
[2] The New IRS can come up with a list that is much more comprehensive but creates the desired result.
[3] Taxpayers who choose to pay the taxes when they receive unearned income can effectively eliminate the need to have their heirs pay any estate tax after their death but may, in fact, pay more tax than is needed.