Victory Tax: A Holistic Income Tax System
How can an income tax system be designed to exploit human nature and a free market to create a poverty free society, while balancing budgets without disproportional tax burdens? Such a tax system, with universal character, is deduced from the following guiding principles: (1) a single tax rate appli...
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| Formato: | article |
| Lenguaje: | EN |
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MDPI AG
2021
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| Acceso en línea: | https://doaj.org/article/2aee95acb85f4bdfbeeb650dfc6d6cb2 |
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| Sumario: | How can an income tax system be designed to exploit human nature and a free market to create a poverty free society, while balancing budgets without disproportional tax burdens? Such a tax system, with universal character, is deduced from the following guiding principles: (1) a single tax rate applies to all income types and levels; (2) the tax rate adjusts to satisfy budget projections; (3) government transfer only supplements the income of households with self-generated income below the poverty line; (4) deductions for basic living expenses, itemized investments and capital losses are allowed; (5) deductions cannot be applied to government transfer. A general framework emerges with three parameters that determine a minimum allowed tax deduction, a maximum allowed itemized deduction, and a maximum deduction defined by income percentage. An income distribution that mimics the United States, and a series of log-normal distributions are considered to quantitatively compare detailed characteristics of this tax system to progressive and flat tax systems. To minimize government dependency while maximizing after-tax income, the effective tax rate (<i>ETR</i>) as a function of income percentile takes the shape of the letter, V, inspiring the name victory tax, where the middle class has the lowest <i>ETR</i>. |
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