Tax and Benefit Example

In this example, consider a family for which the situation calls for basic living expense funding totaling $10,000 per year. (This is the data for the graph in the Taxation page.) Assume that the flat rate on income tax is 35%. It is hoped that a value lower than this will suffice after the transition. The following table summarizes the familyís financial relationship with the government:
Annual
Income
Government
Benefit
Tax
Rate
Tax Tax Net of
Benefits
Net Tax
Rate
Spendable
Income
$0

$10,000

35%

$0 -$10,000  

$10,000

$10,000

$10,000

35%

$3,500 -$6,500 -65%

$16,500

$20,000

$10,000

35%

$7,000 -$3,000 -15%

$23,000

$30,000

$10,000

35%

$10,500 $500 2%

$29,500

$40,000

$10,000

35%

$14,000 $4,000 10%

$36,000

$50,000

$10,000

35%

$17,500 $7,500 25%

$42,500

$60,000

$10,000

35%

$21,000 $11,000 18%

$49,000

$70,000

$10,000

35%

$24,500 $14,500 21%

$55,500

$80,000

$10,000

35%

$28,000 $18,000 23%

$62,000

$90,000

$10,000

35%

$31,500 $21,500 24%

$68,500

$100,000

$10,000

35%

$35,000 $25,000 25%

$75,000

$125,000

$10,000

35%

$43,700 $33,750 27%

$91,250

$150,000

$10,000

35%

$52,500 $42,500 28%

$107,500

$175,000

$10,000

35%

$61,250 $51,250 29%

$123,750

$200,000

$10,000

35%

$70,000 $60,000 30%

$140,000

$225,000

$10,000

35%

$78,750 $68,750 31%

$156,250

$250,000

$10,000

35%

$87,500 $77,500 31%

$172,500

$300,000

$10,000

35%

$105,000 $95,000 32%

$205,000

$400,000

$10,000

35%

$140,000 $130,000 33%

$270,000

$500,000

$10,000

35%

$175,000 $165,000 33%

$335,000

$600,000

$10,000

35%

$210,000 $200,000 33%

$400,000

$700,000

$10,000

35%

$245,000 $235,000 34%

$465,000

$800,000

$10,000

35%

$280,000 $270,000 34%

$830,000

$1,000,000

$10,000

35%

$350,000 $340,000 34%

$660,000

The tax proposal under this ComingTogether Plan does provide progressivity in the tax paid net of benefits received, but this progressivity comes without the sharp changes in the citizenís situation due to entering a new tax bracket or becoming ineligible for a particular benefit. Combining this tax with the Social Security tax would also remove the regressive nature that enters into the current system at the point that the Social Security maximum is achieved.

NOTE: If you would like to see how your own financial situation would look under this ComingTogether Plan, click here. This is an Excel spreadsheet, so you must have software on your computer to use this, such as Excel or Open Office (free).

Just allowing more taxpayers to do their own taxes again, instead of paying an accountant, would constitute a de facto tax cut for many. Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, April 17, 2002.