Would this tax system work?

[Moooooo]

By work I mean would it generate enough revenue?  Do you like or dislike this system?
   

Earned income (wages)

under 40,000 - 0%
over 40,000 - 20%

Interest/Dividend/Capital gains

under 1,000 - 0%
over 1,000 - 30%

No deductions for anything. No mortage deduction, no child deduction, etc.

[Bono]

I've sene worse, that's all I'm saying.

[© tweed]

What about deductions for donations to charity?

[opebo]

That wouldn't generate enough revenue for redistribution.

[jokerman]

I'm not sure whether it would generate enough money.

Never the less, I don't like it.

[Moooooo]

Wheres Philip when you need him?

[A18]

As far as I'm concerned, a 0% income tax would produce enough revenue.

[dazzleman]

By work I mean would it generate enough revenue?  Do you like or dislike this system?
   

Earned income (wages)

under 40,000 - 0%
over 40,000 - 20%

Interest/Dividend/Capital gains

under 1,000 - 0%
over 1,000 - 30%

No deductions for anything. No mortage deduction, no child deduction, etc.

I don't know whether this would produce enough revenue.  I suspect it would not, since in many parts of the country, the typical income is less than $40,000 per year.

I also disagree with taxing passive income at a higher rate than wages.  This discourages investment, which in turn leads to less job creation.  This is one of those things that sounds better in theory than it works in reality.  Also bear in mind that, in general, money that is invested was already taxed at the time it was earned.

The elimination of the mortgage interest deduction would be highly problematic from a practical point of view.  Many, and I would venture to say, most people would have a very difficult time affording their mortgage payments without the tax deduction.  Expectation of that deduction was factored into their calcuations, and has effectively driven the price of housing.  Whether one agrees with it or not, the elimination of it at this point could only cause a sharp decline in housing asset values, as well as potentially forcing many people out of their homes.

What you are describing however is similar in principle to what the British do with their retirement systems.  The first X dollars are not subject to tax, so their system is less regressive than our social security taxes.

[A18]

The problem with taxing capital gains is that the corporate tax also reduces their value by as much as 35%.

[TeePee4Prez]

By work I mean would it generate enough revenue?  Do you like or dislike this system?
   

Earned income (wages)

under 40,000 - 0%
over 40,000 - 20%

Interest/Dividend/Capital gains

under 1,000 - 0%
over 1,000 - 30%

No deductions for anything. No mortage deduction, no child deduction, etc.

Sorry nickshep.  Your system is not well thought out and would stifle a lot of middle class families and reduce overall revenues.  I think even Phillip would agree with me that a 30% tax on capital gains over $1000 is severely anti-growth. 

[The Duke]

Aside from my concerns that this system would not produce enough revenue, I also think its unfair to say that those who earn less than $40,000 a year should not pay an income tax.

[© tweed]

As far as I'm concerned, a 0% income tax would produce enough revenue.

We'd go bankrupt instantly unless we elimated trillions worth of spending.

[A18]

As far as I'm concerned, a 0% income tax would produce enough revenue.

We'd go bankrupt instantly unless we elimated trillions worth of spending.

Sounds good to me.

[dazzleman]

Does anybody have any thoughts on how to address geographic differences in the spending power of an income?

What is considered a high salary in some parts of the country is barely a mediocre one in others.  What this effectively means is that the dollar does not have the same value everywhere in the country.  It seems unfair to categorize certain levels of income as "wealthy" and subject them to higher taxes when that level of income may not be wealthy in every section of the country.

For example, in the suburbs of our major cities, an income of $150,000 per year is not that exceptional.  It is a middle class income.  In Mississippi, a person with this income is fabulously wealthy.  This is a form of geographical bracket creep.

I don't think this is a huge issue in the grand scheme of things, but I sometimes wonder how many people recognize it as an issue.

[The Constitarian]

     The tax system is a good proposal but has one major flaw.  Getting rid of deductions would ruin small, one man companies.  Many comanies, especially those getting started, spend well over 50% of their gross income on material, insurance, advertising, and other of the near countless spendings that go with running one's own company.  This would lead to upwards of half their actual income going to taxes, bankrupting the country.

[dazzleman]

     The tax system is a good proposal but has one major flaw.  Getting rid of deductions would ruin small, one man companies.  Many comanies, especially those getting started, spend well over 50% of their gross income on material, insurance, advertising, and other of the near countless spendings that go with running one's own company.  This would lead to upwards of half their actual income going to taxes, bankrupting the country.

Those expenses would be taken out before income was calculated, if I understand the proposal correctly.  This is not a tax on revenue.

What would be eliminated are personal deductions like mortgage interest, charitable gifts, etc.  This is not the same thing as direct business expenses.