Taxes
So, I thought of an idea for a tax model. I know very little about economics or taxes, so I suspect there may be lots of flaws I haven't thought of, but I don't know what they are, feel free to enlighten me. But the tax model I came up with does one thing I really like (in fact, that's the only thing it does, because it's the only real change it makes), it makes just barely going into the next tax bracket not suck. However, it also makes just managing to stay under the next tax bracket not very helpful.
This tax model should be adjustable to pretty much keep everyone paying about the same amount in taxes as they do now (except if you're right near the tax bracket, as it averages that out) or it could be used to tax people differently according to your personal prejudices (mine would be to tax the poor less and the wealthier a lot more, but it's not actually built into the model).
So, here's how it works...
The first A dollars you earn each year does not get taxed. Just as currently if you make very little money then you don't pay taxes.
Then you are in the A - B income bracket. If you make less than B dollars, then you subtract A from how much you made and what's left is taxed at the A-B income tax rate. If you make more than B dollars, the A-B amount is taxed at this rate, move to the next bracket.
The you enter the B-C tax rate, and it works the same way. Then the C-D rate, etc.
The nice thing is, while it may sound tedious to calculate different amounts of your money taxed at different rates, it'd actually be simple. Let's say you're wealthy, you make $800,000 and thus you're in the $750,000 - $1,000,000 bracket. You simply take the pre-calculated amount for what you owe for getting up to $750,000, since that's the same for everyone, it can be pre-calculated for you and on your tax sheet. Then you go, well, that leaves me $50,000 of money to be taxed in this bracket, so you figure out what percent of that you owe, add it to the amount you already know you owe, and you're done.
Now, obviously, we'd never use a tax system that simple, because it doesn't allow for deductions, so you'd also have to work deductions into the system. Also, to make the numbers work out the same way they are now, you'd need to have the percentage taxed in the higher brackets be higher than the current percentage people are taxed for their total income, but that's just a matter of playing with the numbers so that you make the figures work out. Where you set your brackets and how much you tax each one is settable.
So, what haven't I thought of that makes this model not work?
This tax model should be adjustable to pretty much keep everyone paying about the same amount in taxes as they do now (except if you're right near the tax bracket, as it averages that out) or it could be used to tax people differently according to your personal prejudices (mine would be to tax the poor less and the wealthier a lot more, but it's not actually built into the model).
So, here's how it works...
The first A dollars you earn each year does not get taxed. Just as currently if you make very little money then you don't pay taxes.
Then you are in the A - B income bracket. If you make less than B dollars, then you subtract A from how much you made and what's left is taxed at the A-B income tax rate. If you make more than B dollars, the A-B amount is taxed at this rate, move to the next bracket.
The you enter the B-C tax rate, and it works the same way. Then the C-D rate, etc.
The nice thing is, while it may sound tedious to calculate different amounts of your money taxed at different rates, it'd actually be simple. Let's say you're wealthy, you make $800,000 and thus you're in the $750,000 - $1,000,000 bracket. You simply take the pre-calculated amount for what you owe for getting up to $750,000, since that's the same for everyone, it can be pre-calculated for you and on your tax sheet. Then you go, well, that leaves me $50,000 of money to be taxed in this bracket, so you figure out what percent of that you owe, add it to the amount you already know you owe, and you're done.
Now, obviously, we'd never use a tax system that simple, because it doesn't allow for deductions, so you'd also have to work deductions into the system. Also, to make the numbers work out the same way they are now, you'd need to have the percentage taxed in the higher brackets be higher than the current percentage people are taxed for their total income, but that's just a matter of playing with the numbers so that you make the figures work out. Where you set your brackets and how much you tax each one is settable.
So, what haven't I thought of that makes this model not work?