On the individual side, it would institute just two brackets, setting up a 15 percent tax rate for up for people earning up to $75,000 or married couples making up to $150,000, and a 35 percent top rate for everyone above that line. The current top rate is 39.6 percent.
Gone would be taxes on capital gains and dividends, as well as estates.
It would also create a new $2,500 child tax credit, applicable to payroll tax liabilities as well as for the income tax. The senators justify that credit on the grounds that the current tax code creates an unfair bias against parents who raising children who will pay for government programs supporting retirement and old age healthcare benefits.
I am all for tax simplification but what if we went in the other direction and created many many brackets?
Here is how it would work.
- Your base deduction would be the federal minimum wage x 2080 rounded up to the next thousand dollars. So currently it would be $16000 (7.25 X 2080 = 15080. round up to 16000.)
- If you are married it it doubles.
- For each kid under 16 that you have you get a $2500 deduction. (maybe 18 but I don't want to award the ever increasing infantilization of US kids)
- For every 4000 dollars of income, of all typed, above your deductions your tax goes up 1% to a maximum of 25%.. So if you are single with no kids you pay the maximum rate at $116,000. If you are married with 3 kids you pay the max rate at $139500
Thats it. No other deductions No other credits. It's pretty simple and avoids the huge gap in the middle that the Lee Rubio plan creates