Thursday, July 03, 2008

What if Federal Income Taxes were like Old School Property Taxes?

While it has become much less common, the local property tax rate was determined by:

tax rate = local government spending / total property values

Your individual tax bill would be then your property value times the tax rate. What if federal income tax rates were determined as

tax rate = federal government spending / total personal income

This would be a flat tax whose rate depended positively on the level of spending. For 2006, this calculation is (note that it is difficult to figure out what the government actually spends):

.261 = $2,866.7 /$10,983.4

I can think of several pros and cons to the current system, but my feeling is that this system would be an improvement.

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