Another Comprehensive Approach: The Fair Share Tax Reform Proposal

I just came across a fellow internet econocrank’s tax proposal, and find it quite interesting — especially its proposed progressive tax on net worth, which echoes the flat tax on financial assets that I’ve bruited. It also reflects many of the notions I suggested I’d implement if I was the Dictator of America.
The basic problem with this and all comprehensive tax reforms, of course, is that the political system doesn’t work this way, can’t work this way, never has worked this way. We only move forward, improve the system, over centuries — with fitful, stumbling, fumbling steps, forward and backward, never addressing the whole economic ecosystem.
It makes biological evolution look downright intentional and speedy, by comparison.
All that said, I like this proposal. See what you think.

1. Federal Income Tax:
All income and compensation is taxed at a 20% rate except:
– Income under a realistic poverty line (eg $15,000 for a single person), which is taxed at 2% instead
– Income used to pay for large medical expenses (>10% of income) is tax-free
– Income placed into tax-free education-retirement savings account (with modest caps)
– No other adjustments, deductions, or exemptions
Effective rates: 10% on $60,000; 15% on $160,000; 19% on $1,000,000.
Totals about 65% of federal revenue.
2. Federal Net-Worth Tax:
All net worth (accumulated wealth), except the first ~$800,000 is taxed at a progressive 1-1.7% rate.
This tax replaces property, capital gains & estate taxes. Net-worth is the best measure of how much a household has profited from the economic infrastructure governments (all taxpayers) provide.
Effective rates: 0.2% on $1million; 1.0% on $3million; 1.7% on $27million and over.
Totals about 20% of federal revenue.
3. Federal War Tax: Everyone contributes to any war effort: A 6% surcharge increases a federal taxes bill of $10,000 to $10,600 while the nation is at war.

4. Eliminate all these taxes:
– Social Security Taxes – Social Security & Medicare funded from general revenue instead
– Estate Taxes & Capital Gain Taxes – Replaced by more efficient and fair Net-worth Tax
– State Income Taxes in their current form – Replaced by more efficient and fair surcharge – See #5
– Property (real estate) taxes – Replaced by more efficient and fair surcharge – See #5
– Sales taxes, tolls, etc. – Replaced by more efficient and fair surcharge – See #5
– Corporate Taxes – Profits distributed to corporate owners and taxed as income.
5. All states and local governments eliminate all their current taxes and instead set and collect a surcharge on a household’s combined Federal Income and Net-worth Tax.
6. Excise taxes only on products that have a cost to society that is not reflected in their price … e.g. cigarettes, gasoline. Totals only about 10% of federal revenue.

Cross-posted at Asymptosis.