Very High Incomes

(5) The Impact of Sensible Tax Reform upon Very High Incomes: A Simple-and-Just Federal Income Tax

Under the STR tax proposal, most of us will have neither a federal income tax to pay nor tax-filing obligations. 99% of Americans will pay no income taxes. Only the wealthiest 1% of taxpayers in the country might be subject to the income tax in any given year. For them, the simple-and-just federal income tax on very high incomes will truly be very simple and just.

First, all personal income from whatever source will be totaled. Second, unlimited charitable deductions will be available. Then, a $500,000 income exclusion will apply (up to $1 million for a couple filing jointly).

          Net taxable income = (Total income) - (charitable deductions) - ($500,000 exclusion)

For the less than 1% of taxpayers who will still owe taxes, the tax rates will be very simple:

• 15% of the first $10 million of net taxable income
• 25% of the next $15 million of net taxable income
• 35% of net taxable income greater than $25 million

In 2016, the 15% rate begins (for a family of four) at only $18,551, the 25% rate at $75,3000 and the 35% rate at only $413,350. Sensible Tax Reform will totally eliminate the income tax for the vast majority of Americans. For those with very high incomes, only those three tax rates will apply, but only to vastly higher income levels than at present.