American Families

(2) The Impact of Sensible Tax Reform upon American Families

Americans and their families are the principal victims of our country’s complex, unjust and economically ineffective federal tax system of income, Social Security, Medicare and estate taxes. The poor are victimized by high Social Security and Medicare taxes on every dollar they earn, and may owe income taxes as well—despite living at the poverty line or below. America’s middle class pays a disproportionate share of federal taxes, often a much higher average tax rate than do the richest members of our society.

Many of the biggest tax loopholes (e.g., a 15% or 20% tax on dividends and capital gains as well as the $500,000 of tax-free capital gains on the sale of a house) primarily benefit the wealthy. Yet even many of the wealthy can be victimized by our estate-tax system which often treats the very rich much more generously than the “merely” rich.

Sensible Tax Reform will bring revolutionary changes to the federal taxation of households:

• For families, there will be an elimination of:
  
  • All Social Security and Medicare taxes,
  • All estate taxes,
  • Most deductions as well as all income-tax credits, exemptions and special tax rates,
  • The alternative minimum tax for individuals, and
  • The marriage penalty.
    
• Social Security and Medicare costs will shift to the general federal budget.
• All taxpayers will be treated alike, with the same tax rules applying to everyone.
• All income will be taxed alike (including dividends, capital gains and inheritance).
• There will be a $500,000 annual income exclusion ($1 million for a couple) for personal income taxes--thus completely eliminating income taxes for more than 99% of Americans.
• There will only be three personal income-tax levels: 15% (starting at $1 million), 25% (starting at $10 million) and 35% (starting at $25 million).
• The dollar brackets will be indexed for inflation.
• A federal tax on consumption will replace most of our existing taxes.

STR will greatly improve the finances of American families. Incomes and standards of living will increase.
The ability to save and invest will increase significantly.
The rules will be simple. They will apply equally to all taxpayers. It will be very difficult for any individual or group to manipulate the tax system for its own advantage and the disadvantage of others. There will be a great reduction in the sense of injustice that exists with the current tax system.