How would you adjust these bracket-schedules?

[Verily]

One tax system based on individual income. Eliminate special treatment for marriage.

$0 - $10,000: 5%
$10,000 - $50,000: 15%
$50,000 - $100,000: 25%
$100,000 - $300,000: 35%
$300,000 - $1,000,000: 45%
$1,000,000+: 55%

Plus an annual 1% tax on the value of assets totaling over $10,000,000. Corporate tax is eliminated.

[Verily]

One tax system based on individual income. Eliminate special treatment for marriage.

$0 - $10,000: 5%
$10,000 - $50,000: 15%
$50,000 - $100,000: 25%
$100,000 - $300,000: 35%
$300,000 - $1,000,000: 45%
$1,000,000+: 55%

Plus an annual 1% tax on the value of assets totaling over $10,000,000. Corporate tax is eliminated.

Valuing assets every year would be an administrative nightmare, and involve tons of litigation. So scratch that one. It would be great however for the precious metals and high quality jewelry market, and anything else that can be put into that little lockbox that Gore has stored somewhere, safe from "preying" eyes (I meant to type "prying," but I kind of like this typo, so I am going to leave it!).

It would not be so great for publically traded securities, and stuff whose value can be reported straight to the feds on some little 1099 type form however.

Precious metals are limited in supply. Most people who "invest" in gold/silver/etc. do so through easily traced transactions rather than by squirreling it away in their basements. Anyway, it's mostly a tax on intangible assets and real property, which are impossible to hide, and every rich person would still want to own them (because the returns are greater than 1% a year, and more than 1% greater than fixed assets that could be hidden, like jewelry).

Not an administrative nightmare at all. It's very hard to hide most assets completely. Those assets that can be hidden are not going to add up to enough to be worth searching for, so, yes, there will be some evasion, but I'm okay with some evasion if the tax is only imposed on very high net worth individuals to begin with (which of course it would be if the tax is only on total assets over $10M).

Obviously this system also eliminates special treatment for capital gains.

Other things that change include the elimination of the standard deduction and the vast majority of itemized deductions, including the charitable deduction. Many above-the-line deductions also go, most prominently the mortgage deduction. Also eliminate the child tax credit and dependency credits. The personal exemption is increased to $10,000 and phased out once income passes $10,000 up to $50,000, where it disappears.

(With those changes, it may be possible to put the rates a hair lower than I have them here. Mostly, I want a system with virtually no deductions/credits other than normative ones.)

[Verily]

Personal exemption phased out over 50K??  Dude, even I'm not that liberal.

Has nothing to do with "liberal". The personal exemption is intended to exempt from taxation a subsistence living. For those not living at or near subsistence level, it simply serves no purpose at all. In fact, continuing the personal exemption for those with high incomes has the perverse effect of benefiting high income taxpayers more.

Those making exactly $10,000 (and thus able to claim the full personal exemption), would pay at a rate of 5% on all of that income but have it all exempted, so they save $500 in taxes through the exemption. Here's what happens if we don't phase out the exemption:

$10k income, $500 advantage through personal exemption
$50k income, $1500 advantage through personal exemption (top marginal rate of 15%)
$100k income, $2500 advantage through personal exemption (etc.)
$300k income, $3500 advantage through personal exemption
$1M income, $4500 advantage through personal exemption
>$1M income, $5500 advantage through personal exemption

I see no reason why the subsistence bonus of a millionaire should be more than ten times greater than the subsistence bonus of the impoverished, especially when it's the impoverished person who is actually living at subsistence level. An alternative might be to just lop off $500 from everyone's tax burden (and have no personal exemption), but that still provides subsistence bonuses to people who clearly don't need them (really, no one above $20k or so in income is anywhere close to subsistence, but I made the top level $50k to match up with the brackets--it would fade out over the $10k to $50k range anyway, so the $49k person barely gets a personal exemption).

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You don't have a f'ing clue what you're talking about. You're just spouting buzzwords.


Also, forgot something. Constitutional amendment to abolish community property because the Supreme Court are idiots. Damn former Spanish colonies, mucking everything up.

[Verily]

No clue what I'm talking about?  Try again, I passed the CPA exam and I'm FAR better at taxes than I am at audit.

And the "personal exemption" is $3,700 for 2011, not $10,000 as you said.  There's also a Standard Deduction or Itemized Deduction you can take, whichever is more advantageous to arrive at taxable income.  And current tax law phases exemptions and itemized deductions out over a certain amount.  Just MUCH higher than $50,000 for both phaseouts.  I understand the reason for such deductions and phaseouts.

I was quoting my plan, not the current reality (although I did say that $10,000 approximates the personal exemption plus the standard deduction, which it does--since I'm eliminating the standard deduction, the personal exemption is essentially absorbing it). And the current law does not phase out the personal exemption completely, nor does it phase out the standard or itemized deductions at all--you really have no clue what you're talking about, which makes your claims to have been an IRS auditor terrifying.

There is a cap to the amount of itemized deductions you can claim, but it's as a percentage of total income, so it rises as your income rises and thus never phases out the itemized deduction. Plus, the cap is not exactly ungenerous--if you have enough of your income in itemized deductions that you reach the cap, you donated a TON to charity (since that's the only itemized deduction that it's really possible to get very large).

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Poor taxpayers do not have the EITC. The EITC is phased in before it is phased out, such that the poorest taxpayers get little or no benefit from the EITC. Those who benefit most from the EITC are somewhat poor but not destitute.