Steve Forbes' Flat Tax Form

Being this is the day where the federal government gets their cut of the action (er, I mean where you pay your taxes, sorry about that), I would like to share with the reader Steve Forbes flat tax form:

1. Wages & Salary
2. Number of adults in family
3. Number of children in family
4. 1. Deductions for adults (multiply line 2 by $13,200) or
   2. Deductions for head of household ($17,160)
5. Deductions for dependants (multiply line 3 by $4,000)
6. Total deductions (line 4 plus line 5)
7. Taxable income (line 1 minus line 7)
8. Pre-credit tax (multiply line 7 by 17%)
9. Child tax credit ($1,000 per child under 16)
10. Earned income tax credit (see EITC rules)
11. Total tax credits (line 9 plus line 10)
12. Total tax (line 8 minus line 11)

Not a bad start to reforming the tax code. It is a lot simpler than the behemoth tax code we have now. Steve Forbes wants to the tax rate to be 17%. You can read more about his plan in his 2005 book: Flat Tax Revolution. Using a Postcard to Abolish the IRS. Will the tax code be reformed? Probably not, unless the tax payers want it to be reformed and they vote for candidates who want it to be reformed too. Otherwise, too many people (tax accountants, tax lawyers, etc.) make money off of the system as it now and Congress uses it as a way to punish and reward certain groups.

Some people like Neal Boortz want a National Retail Sales Tax (or if you prefer the FairTax) instead. If you are going that way you then Congress would have to repeal the Sixteenth Amendment otherwise you are going to be taxed twice. You can read more about the FairTax in Neal Boortz's 2005 book: The FairTax Book. I think first we should start with a flat tax rate similar to Steve Forbes plan then think about the FairTax later on.

In full disclosure I should say I have never met Steve Forbes and do not know him. I just think his plan is a step in the right direction.

At the end of his 1993 book For Good & Evil: The Impact of Taxes on The Course of Civilization Charles Adams described what he called the Four Square approach to taxes. Basically, tax rates = intrusions (the tax agency looking at your tax records) = penalties = equality (taxpayers paying the same rate and being treated fairly). In other words, all the components of a tax system should be in balance and be fair. It's called four square because you visualize a square where rates and penalties are the top and bottom and equality and intrusions are the left and right sides respectively. A flat tax rate fits this approach.

Before I end this blog entry here is a couple tax quotes from President Ronald Reagan and Will Rogers:

The taxpayer (is) someone who works for the government but doesn't have to take a civil service examination.
        -- Ronald Reagan

Even when you make a tax form out on the level, you don't know when it's through if you are a crook or a martyr.
        -- Will Rogers