This year, as last-minute filers are struggling to figure out how much you owe the federal government, we’d like to offer a proposal that is so nutty it just might be worth considering.
Today, the tax code is built on the idea that “progressive” is good. And by progressive, we’re talking about tax brackets. The idea that the more you make, the higher percentage you should pay on the extra dollars you earn.
Right now, there are seven tax brackets – 10%, 12%, 22%, 24%, 32%, 35%, and 37%. For single filers, every dollar of taxable income over $11,925 is taxed at 12%. You owe the federal government 22% on every dollar over $48,475, and 24% on income over $103,350, etc.
Yet, despite the fact that, thanks to this scheme, the richest 1% end up paying 47% of federal income taxes and the bottom half of income earners account for less than 4%, the left never gets tired of screaming about how the rich don’t pay “their fair share.”
But as economists well know, the current tax code is an enormous drag on the economy. The higher the tax rate is on the rich, the less incentive they have to earn that next dollar. Tax avoidance and even evasion become worthwhile because the savings can easily outweigh the costs of paying tax attorneys and hiding money.
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