| Nothing gets people more riled up than a | | | | tax rate system was a flat tax with a twist. The |
| discussion of taxes, but what alternatives are | | | | twist gets a bit complicated, but it involves tax |
| there to the current system? The negative | | | | deductions and negative income. A flat tax rate |
| income tax is one such possibility. | | | | of say twenty five percent would be established |
| Tax Alternatives: The Negative Income Tax | | | | on all income earned. You would then be able to |
| The current tax system in the United States is an | | | | take certain deductions against the tax for things |
| unmitigated disaster. Nobody really denies this | | | | like dependents [kids]. If your deductions totaled |
| fact, one of the few issues that seem to unite | | | | more than the total income you earned during the |
| republicans and democrats in our country. The tax | | | | year, the government would then owe you all the |
| code is so big, nobody has a grasp of it and that | | | | taxes you paid in during the year and a |
| includes the IRS. While you and I may groan once | | | | percentage of your "negative income". At this |
| a year when it is time to file our personal tax | | | | point, an example will probably help. |
| returns, larger corporations don't have it much | | | | To make things simple, let's assume we have a |
| better. One well known corporation reported that | | | | family of five with total earnings being $30,000. |
| they file the equivalent of one tax document with | | | | Further assume the total deductions that can be |
| the IRS every 3 minutes! While the may or may | | | | claimed equate to $40,000. The head of |
| not pay their share, the pure burden of filing | | | | household has negative $10,000 under our |
| taxes for them and us is crazy. | | | | system. The government would then owe the |
| Given the nature of the mess, one would think | | | | family all the money they paid in during the year |
| we would do something. The age old question, | | | | in taxes from paychecks and a percentage of the |
| however, has been what functional alternative is | | | | $10,000 of negative income. Not bad, eh? |
| there to the current mess? One proposal that has | | | | The negative income tax rate approach never |
| been around for some time is the negative | | | | really caught on with advocates. The system is |
| income tax method. | | | | ripe for attack because taxpayers have a major |
| The negative income tax was originally proposed | | | | temptation to tweak their financial numbers to |
| in the 1960s by Milton Friedman, a fairly famous | | | | show negative income. Frankly, the criticisms |
| economist. His idea was not to just address the | | | | were probably justified, but that should not |
| collection of taxes, but to create a system that | | | | distract us from the idea that the current tax |
| would do away with welfare, food stamps and all | | | | mess can be dealt with. There is an answer to |
| types of government entitlement programs. | | | | the mess, but it will require thinking outside of the |
| The basic idea at the core of the negative income | | | | box as Milton Friedman tried to do. |