Friday, April 22, 2011

Tax Reform, Federal Income Tax that is. Pt II

I used to think a flat tax, no deductions, no exemptions, no credits, no nothing, with a rate cut, would bring in enough revenue to run the country. Now I'm not so sure.
Federal expenditures were 17% of GNP from the end of WWII to Obama. So, it would seem reasonable to make a tax rate of 17% and that would pay the bills. No tax hike.
I looked at the federal rates from 2010. They start at 10% and work up to 33% at $370,000 per year. They don't hit 17% until you hit $50,000 (single) and $100,000 (married). That's after deductions, exemptions, credits and what have you ("stuff"). We need 17% to maintain the government at the pre Obama level. It looks to me like we need more than the current rates to furnish 17% of GNP to keep the government in money. If we drop all the "stuff" we probably cannot cut the rates much and still furnish government revenue of 17% of GNP.
Even with really solid spending cuts, the Feds are gonna be short of revenue.

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