Half the families in this country earn $125,000 or less. That same half of families have expenses ($135K) that exceed their income ($125K). Both the easiest and hardest place for any government to address the costs facing their citizens is taxes. Decreasing taxes is easy. Increasing them, on anyone, is hard.
Let’s do the easy part first. The average family of four in this country pays around 14.5% of their gross income in federal income taxes. We want to cut that number to zero. ZERO! ZIPPO! ZILCH!
For families making $125,000 or less would that would mean their expenses would be reduced by roughly $18,000 annually. That alone would solve the Expense Gap for families, turning a $10,000 deficit into an $8,000 surplus without any change in income.
While half the families in this country cannot pay their bills, there are also another 40% of families that can pay their bills but still cannot afford the American Dream. Remember, only 10% of families in this country earn enough to live comfortably. We would eliminate taxes on those families that can’t make ends meet but those families that are struggling to reach the American Dream also need help.
We would reduce taxes on those earning between $125,000 and $235,000 annually with the greatest decreases toward the bottom of that range.
The goal is to increase prosperity for everyone in this country. Right now expenses exceed income for half the families in this country and 90% of families cannot afford the American Dream. But as we fix that problem, more and more families will be able to pay their bills and more and more will be able to afford the American Dream. As they achieve these milestones, they should pay more in Federal Income Tax.
We have historically set income taxes at certain rates for broad income swaths for years at a time. With current technology we can be much more fluid in our adjustments. We should calculate annually the Expense Gap and the American Dream Gap. Income below the Expense Gap pays no federal income tax. Income below the American Dream Gap sees minimal tax increases.
We should be able to lower the threshold for the Expense Gap quickly which will mean more and more Americans paying federal income tax. That will be a good thing.
Those who already can afford the American Dream, which currently is only the top 10% of earners, will see their taxes increase. The increase will be significant with an income tax of 50% on every dollar earned over $235,000.
This will lead to much pearl clutching and hand wringing. You will be told that it will strangle growth. You will be told that people will be unmotivated to earn more money. You will be told that our industries won't compete, that the wealthy will take their money elsewhere.
These are all lies. We have proof. The 1950s and 1960s are generally viewed as the highpoint for the middle class. Wages grew substantially and there was low inequality. Everyone could achieve the American Dream.
The tax rate at that time on top earners was 91%, almost double what we are proposing. So don't worry, the billionaires will be fine.
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