Alongside an AI tool for comparative analysis to current tax structures, I am proposing an iteration of a new tax structure which may be more amenable to the diverse economic status of the American people. We have long been under financial duress due to the complicated nature of a functional country, its operational requirements like security, safety, critical infrastructure, military capabilities, science and technology innovations across industries and other competing priorities we need to factor when thinking about how to contribute to our country while also being able to feed our families and care for ourselves financially. Our financial wellness is personal wellness, its peace of mind, its stability and security, in our everyday waking lives.
Currently the economic impacts of the world bear heavy weight on the American people. It’s time to reconsider and simplify how we function, to support ALL of our wealth growth capabilities and while still ensuring a robust operational capability at the federal level. Additionally it supports our positive capitalistic values by providing small business incentives.
As my husband and I are small business owners ourselves, and I am coming from a blue collar family where entrepreneurship served our household, I recognize how important the American Dream is to so many! We have to shield that dream from unending taxation and failure models discouraging small businesses and families from growing wealth and creating a diverse economy.
Here is a structured draft for a comprehensive tax reform bill designed to balance effective national revenue generation with fair, equitable opportunities for financial growth for all Americans. This proposal will emphasize simplification, protection for all income brackets, and responsible enforcement by the IRS.
The Fair Growth Tax Act (FGTA)
Preamble:
To establish a tax structure that encourages wealth growth across all economic categories, promotes responsible capitalism, and upholds government efficiency while ensuring that IRS penalties and fees are fair and transparent. The FGTA aims to provide every American the financial path forward to achieve personal economic success within a sustainable economy.
Section 1: Tax Structure Simplification and Rate Adjustment
1.1 Progressive Tax Brackets with Built-in Wealth Acceleration Options
Bracket A: 0% tax on incomes up to $30,000. All citizens and residents earning less than this amount are exempt from federal income tax.
Bracket B: 10% tax on incomes between $30,001 and $75,000.
Bracket C: 15% tax on incomes between $75,001 and $150,000.
Bracket D: 20% tax on incomes between $150,001 and $300,000.
Bracket E: 25% tax on incomes above $300,000, with the potential to reduce the rate to 20% if investing 5% of income in qualified domestic funds focused on economic revitalization, sustainable energy, and job creation.
1.2 Capital Gains Reform
For individuals earning below $150,000, long-term capital gains tax will be capped at 10%.
Above this income, the capital gains tax rate will gradually scale, capping at 20% for those earning over $500,000.
Real estate capital gains exemptions increased for primary residence sales, providing relief for individuals reinvesting in the housing market.
Section 2: Small Business and Corporate Tax Adjustments
2.1 Small Business Tax Rate Reduction
A 12% flat tax for businesses earning under $500,000 annually, encouraging entrepreneurship.
Income reinvested into the business for hiring or innovation may qualify for tax credits up to 5% of revenue.
2.2 Corporate Responsibility Tax Benefits
Corporations that demonstrate environmental sustainability, fair wages, and community reinvestment can receive tax reductions.
A tiered incentive program for companies repatriating jobs from overseas, with credits for wage parity and domestic manufacturing.
2.3 Simplified Compliance for Small Businesses
IRS will provide a free “Small Business Tax Assistant” tool for companies with under 50 employees to ease tax preparation.
Small businesses will be shielded from penalty surges for minor compliance errors by implementing a “three-warning” policy before fines are issued.
Section 3: IRS Reform and Restrictive Enforcement Policies
3.1 Streamlined and Fair Penalty System
Penalty caps set at 5% of total taxes owed for non-willful errors in tax filings.
Removal of compounded penalties for individuals with income below the poverty line.
Elimination of penalties for any taxpayer who completes an IRS educational course on tax filing, offered at no cost, to encourage compliance rather than penalize unintentional errors.
3.2 Transparent and Accessible Dispute Process
Simplified dispute process available online and via telephone.
Taxpayers have the right to review with an independent tax advocate before penalties are enforced.
IRS is prohibited from garnishing wages or placing liens for cases under $5,000 if individuals can demonstrate financial hardship.
3.3 IRS Taxpayer Education Fund
Creation of a Taxpayer Education Fund, with grants for non-profit organizations that provide tax education and financial literacy programs, aimed at underserved communities.
Section 4: Wealth Building Programs for Lower and Middle-Class Families
4.1 National Savings Incentive for Individuals and Families (NSI)
A government-matched savings plan (up to $1,000 annually) for households earning under $100,000, encouraging emergency fund creation and wealth growth.
Additional credits for investment in retirement accounts for households under the $75,000 threshold.
4.2 First-Time Homebuyers Assistance
Federal tax credits of up to $15,000 for first-time homebuyers in lower and middle-income brackets.
State and local governments encouraged to match with funding for down payments and reduced interest rates.
4.3 Student Loan Interest Credit
Interest paid on student loans will be fully tax-deductible up to $5,000 per year, encouraging higher education without punitive debt.
Section 5: Social Safety Net Funding and Transparent Allocation
5.1 Essential Services Assurance
Revenue from taxes will be transparently allocated, prioritizing funding for healthcare, infrastructure, and education.
Annual report required from the Department of Treasury outlining allocations and expenditures for public awareness.
5.2 Anti-Poverty Measures
Expansion of the Earned Income Tax Credit (EITC) with higher phase-out limits for larger families and individuals in high-cost areas.
Child Tax Credit adjusted to increase for single parents and households earning less than $100,000.
Section 6: Implementation and Review
6.1 Phase-in Schedule
Gradual implementation over five years, with high-income tax adjustments and IRS reforms to be prioritized in the first year.
Phase-in for corporate responsibility tax benefits and small business compliance tools, with feedback from businesses to shape final requirements.
6.2 Annual Review and Adjustment by a Non-Partisan Council
Establish a Tax Reform Council (TRC) with economists, public policy experts, and representatives from all income brackets.
Yearly review of the tax code’s performance, economic growth impact, and IRS enforcement practices, with an amendment option by council vote.
Conclusion
The Fair Growth Tax Act is designed to empower every citizen with a fair path toward financial success, reinforcing a capitalist economy that is inclusive and encourages responsible growth. This act restructures penalties, provides enhanced transparency, and introduces savings and investment opportunities for all Americans, giving every citizen a chance to contribute meaningfully to the nation’s prosperity.
This draft of the Fair Growth Tax Act provides a blueprint for a fairer, simpler, and more growth-oriented tax system that aligns with the needs of a dynamic capitalist economy while upholding equitable opportunities for all.
Comparative Analysis information
The Fair Growth Tax Act (FGTA) proposes several changes that address key criticisms of the current U.S. tax structure, aiming to make it more accessible, equitable, and growth-oriented. Here’s a comparison between the FGTA and the current tax system, along with an analysis of why these changes could be beneficial:
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Simplified Income Tax Brackets and Rates
• Current System: The U.S. tax code has seven income tax brackets ranging from 10% to 37%. The structure is complex, with various deductions, exemptions, and credits that make understanding tax liability challenging for many taxpayers.
• FGTA: Reduces the number of brackets to five with more straightforward rates, capping at 25%. The highest rate (25%) is attainable only for those earning above $300,000, with additional incentives for those reinvesting in the economy.
• Why It’s Better: Simplifying the tax brackets and reducing top rates can make tax filing easier, encourage reinvestment in the economy, and alleviate tax burdens for the middle and lower classes. By making rates clearer and incentives simpler, the FGTA helps citizens understand their financial standing and paths to growth. -
Capital Gains Reform
• Current System: The U.S. capital gains tax is progressive, but many believe it unfairly benefits high-income earners, particularly through loopholes that can reduce effective tax rates on investments.
• FGTA: Introduces lower capital gains rates for those earning below $150,000, while capping rates at 20% for high earners, encouraging broader access to wealth-building tools like investment.
• Why It’s Better: By lowering capital gains rates for low and middle-income earners, FGTA makes wealth-building tools more accessible to a wider demographic. Limiting high earners’ rates at 20% also ensures that capital gains taxation doesn’t become overly regressive, balancing economic encouragement with fairness. -
Support for Small Businesses
• Current System: Small businesses often face high compliance burdens, with complex tax regulations and little relief from federal tax rates.
• FGTA: Establishes a 12% flat tax for small businesses earning under $500,000 and provides a free Small Business Tax Assistant tool.
• Why It’s Better: Lowering taxes for small businesses gives entrepreneurs more working capital and a better chance of success. Simplifying compliance with a free assistance tool lowers administrative burdens, allowing small business owners to focus more on growth rather than tax complexities. -
Corporate Responsibility Incentives
• Current System: Large corporations can often take advantage of loopholes to reduce tax liability without needing to demonstrate social responsibility.
• FGTA: Rewards corporations that demonstrate environmental sustainability, fair wages, and domestic job repatriation with reduced tax rates.
• Why It’s Better: Encouraging corporate responsibility through tax incentives aligns economic incentives with social goals, supporting domestic growth and fair wages. This makes it beneficial for both the economy and the wider community. -
Reduced IRS Penalties and Fair Enforcement
• Current System: The IRS enforces strict penalties for late payments or errors, which can disproportionately impact lower-income individuals and small business owners. The process is often opaque, and resolving disputes is complicated.
• FGTA: Caps penalties at 5% for non-willful errors, removes penalties for low-income individuals, and simplifies the dispute process.
• Why It’s Better: Lowering and capping penalties reduces the financial strain on individuals and small businesses who may have minor filing mistakes. Making disputes easier to resolve builds taxpayer trust and focuses IRS resources on genuine enforcement needs rather than penalizing inadvertent errors. -
Wealth-Building Programs for Lower and Middle-Income Families
• Current System: Programs like the Earned Income Tax Credit (EITC) exist but are complex, and tax deductions often disproportionately benefit those in higher tax brackets.
• FGTA: Introduces government-matched savings accounts, enhanced retirement contributions, and higher first-time homebuyer credits.
• Why It’s Better: By directly incentivizing saving, investing, and home ownership, the FGTA provides practical, actionable steps for low and middle-income families to build wealth. The focus on accessible wealth-building options creates a fairer system, ensuring that financial growth isn’t limited to higher-income groups. -
Transparency in Social Safety Net Funding
• Current System: Tax revenue allocation can be opaque, and citizens often lack clear insight into how their taxes support public services.
• FGTA: Requires the Treasury to issue an annual public report detailing how tax revenue is allocated to essential services.
• Why It’s Better: Greater transparency fosters public trust, showing citizens exactly where their tax dollars go. This accountability can improve public confidence in the tax system and the government. -
Anti-Poverty and Social Assistance Measures
• Current System: Programs like the EITC and Child Tax Credit help low-income families, but they phase out quickly and don’t necessarily address regional cost disparities.
• FGTA: Expands the EITC and adjusts the Child Tax Credit based on income and family size, allowing for more robust support tailored to high-cost living areas.
• Why It’s Better: Expanding credits with regional cost adjustments makes anti-poverty measures more equitable. This adjustment ensures that families in high-cost areas receive a fair level of support, thereby reducing the risk of financial instability and encouraging economic mobility.
Summary: Why the Fair Growth Tax Act is Better
The FGTA seeks to create a balanced tax environment that supports growth for individuals across all economic categories by simplifying tax rates, reducing unnecessary penalties, and providing practical wealth-building opportunities. It offers:
1. Transparency in government spending, building public trust.
2. Support for Small Businesses to encourage entrepreneurship.
3. Tax Incentives for Social Responsibility among large corporations.
4. Reduced Penalties to prevent undue financial strain on taxpayers.
5. Enhanced Wealth-Building Opportunities for low and middle-income families.
In effect, this bill aims to reshape the tax system into one that is simpler, fairer, and better aligned with the financial success of all Americans, not just the wealthy or corporations. This reform balances economic incentives for growth with protections and supports that help every citizen, creating a more robust and sustainable economy.
Q & A
Q: How does this impact our country’s capabilities for infrastructure sustainment, military operations, science/innovation compared to current structures. Frankly I want to know if there’s a reason our current tax structure is so complicated. What might the FGTA be missing?
A: The complexity of the U.S. tax structure is largely due to the multiple competing priorities it attempts to address. It’s designed not only to fund essential government functions like infrastructure, military, and scientific research but also to regulate economic behavior, encourage certain types of investments, and provide social safety nets. Let’s examine how the Fair Growth Tax Act (FGTA) compares to the current tax structure in terms of its impact on national capabilities in key areas and explore the reasons behind the existing complexity.
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Infrastructure Sustainment
• Current System: The current tax structure funds infrastructure largely through income tax, corporate tax, and specific programs like the Highway Trust Fund (supported by fuel taxes). Tax credits for specific industries, particularly energy, incentivize infrastructure development. The system also supports public-private partnerships through favorable tax treatment, which can draw private investment for large-scale projects.
• FGTA: By simplifying tax brackets and creating corporate responsibility incentives, the FGTA encourages sustainable infrastructure investment without overly burdening lower and middle-income taxpayers. While it lacks direct references to specific infrastructure funds, FGTA’s transparency requirement for Treasury spending could lead to more accountability in funding essential services like roads, bridges, and public transit.
• Consideration: The FGTA’s success here depends on maintaining or even expanding funding for infrastructure through a transparent budget allocation. Although the FGTA reduces tax complexity, it may need additional provisions, like a redefined Highway Trust Fund or specific infrastructure funds, to fully secure long-term infrastructure sustainment. -
Military Operations
• Current System: A significant portion of federal revenue supports military spending, with income taxes and corporate taxes as primary sources. The tax code’s ability to generate high revenue from all sectors, including progressive income brackets and corporate tax, enables consistent military funding.
• FGTA: The FGTA’s streamlined tax brackets still generate revenue, though potentially at lower marginal rates, especially for higher earners and corporations. To keep military funding stable, the FGTA would need effective enforcement to ensure high earners contribute their fair share. The plan’s corporate responsibility incentives could further contribute to defense-related technological development.
• Consideration: To ensure robust military funding, the FGTA may need an earmarked defense fund, sustained by specific levies or a proportional percentage of general tax revenue, to keep military capabilities at their current level. While FGTA’s simplified system may slightly reduce revenue from the highest earners, reallocation and transparent spending could offset potential gaps. -
Science and Innovation
• Current System: The current tax code provides tax credits and deductions for research and development (R&D), which encourage corporations to invest in innovation. It also offers grants and incentives for public and private research institutions. Complexity arises here due to highly specific incentives, like the R&D tax credit, renewable energy credits, and deductions for particular types of investment.
• FGTA: By simplifying tax rates and offering clear corporate responsibility incentives, the FGTA encourages broader innovation investments. However, without specific R&D credits or deductions, companies may be less inclined to invest heavily in high-risk, high-reward innovations. FGTA could maintain these investments by redirecting funds through federal grants to research institutions, though it would require a direct focus on R&D funding in the national budget.
• Consideration: The FGTA’s streamlined system might miss some nuanced incentives that currently drive corporate R&D investment. It could benefit from a provision for federal matching grants for private R&D projects or reinstate specific tax credits for sectors crucial to innovation, such as technology and renewable energy. -
Why the Current System is So Complex
The U.S. tax code has evolved to address diverse economic, social, and political goals. The complexity is intentional to allow flexibility in funding priorities, encourage specific economic behaviors, and provide financial assistance in targeted ways. Here are key reasons for the current complexity:
• Revenue Needs and Flexibility: The government requires substantial and flexible revenue streams to fund large-scale projects and respond to economic changes. By having a complex tax code, it can adjust rates, exemptions, and credits to balance revenue needs with political or economic priorities.
• Social Programs and Redistribution: The tax code includes deductions, credits, and exemptions designed to support low-income families, healthcare, housing, and education. Each tax break often comes with eligibility requirements, creating additional complexity but targeting funds where they are most needed.
• Economic Incentives and Behavioral Adjustments: Tax incentives influence behaviors, such as promoting home ownership (via mortgage interest deductions), renewable energy (via green tax credits), and job creation (via business credits). These provisions can be intricate because they target specific actions within different sectors.
• Targeted Industry Support: Specialized tax breaks like R&D credits, accelerated depreciation for capital investments, and renewable energy credits support industries crucial to U.S. economic growth. This results in a code with a patchwork of industry-specific rules, aimed at fostering targeted economic benefits.
What Might Be Missing in the FGTA
The FGTA’s simplicity is its strength but also its potential weakness, particularly in the context of complex funding needs for sectors like defense, infrastructure, and innovation. Some aspects to consider:
1. Loss of Targeted Incentives: By simplifying the tax structure, FGTA may reduce specific incentives that currently encourage R&D, clean energy investment, and housing development. While corporate responsibility incentives help, they may not replace the effectiveness of targeted credits.
2. Revenue Consistency: FGTA’s lower marginal rates, especially for high-income earners and corporations, could lead to a decrease in federal revenue unless offset by substantial economic growth. This might impact funding for areas like the military or public research without careful budget reallocation.
3. Behavioral Influence: The current tax code’s complexity allows the government to influence economic behavior directly. Without specific tax incentives, FGTA would rely more on indirect encouragement (e.g., transparency and accountability in spending) to drive behavior, which may be less effective.
4. Need for Direct Allocations: Simplifying the tax code puts greater responsibility on Congress and federal departments to directly allocate funds for defense, infrastructure, and science rather than relying on tax-based incentives. FGTA would require clear, specific budget mandates for these areas.
Conclusion: Finding Balance
The FGTA offers a promising alternative by simplifying the tax code, improving transparency, and easing compliance burdens, particularly for lower and middle-income households. However, some complexity in the tax code serves as a tool for precise economic management, allowing the government to meet specific funding needs and incentivize key sectors.
Incorporating a few targeted adjustments within the FGTA, like reserved defense and R&D funds or limited tax credits for high-priority industries, could provide a balanced approach. Retaining some nuance in the tax structure may enable the FGTA to fulfill the current tax code’s multifaceted role without overwhelming taxpayers or stifling growth.
Ultimately, the right solution likely lies somewhere between the FGTA’s simplicity and the current tax structure’s intricate design, allowing for straightforward taxpayer experiences while preserving essential economic incentives and revenue-generating capabilities.
