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Appendix 2
Revenue, Income, and Inheritance Tax Calculation
Recall that three issues—the
setting by the demos members of the corporate and
business, the personal income, and the inheritance tax
scales—require the line graph voting input method. A
vertical line along the left edge of the graph, the
vertical axis, would be labeled at intervals from bottom
to top with percentage tax rates, i.e., 0%, 1%, 2%, 3%,
etc. A horizontal line along the bottom edge of the
graph, the horizontal axis, would be labeled from left to
right with annual gross revenue or income amounts or with
inheritance amounts, i.e., $0, $1,000, $10,000, $100,000,
$1,000,000, etc.
The single line displayed on
the graph, the percentage tax rate line, would represent
the current consensus of the demos electorate on the
issue. A demos member would vote on the issue by
selecting various parts of the tax rate line and coloring
them green, yellow, and red to indicate which portions of
the line and, therefore, the tax rate should be increased
(green), kept at their current level (yellow), or
decreased (red).
Given a simple slidingscale tax rate
with no exemptions, the most obvious manner of
calculating the amount of a given taxpayer’s tax
would be to simply locate the dollar amount of the
taxpayer’s gross revenue or personal income for the
tax year or of an inheritance along the horizontal axis
of the graph, note the percentage tax rate of the point
on the tax rate line vertically above this amount, and
then simply multiply this percentage rate (expressed as a
decimal number) times the dollar amount to calculate the
tax. Done!
This is not the manner in which the tax amount
due would actually be calculated. The method of
calculation that would be used is presented below.
But, for the moment, let us stick with
the tax calculation method just described. The demos
member would not need to do any calculations to determine
the amount of tax due. The demos voting terminal would
calculate the tax for the member. The demos issue’s
page would allow the demos member to simply type the
dollar amount of revenue or income for the year or of an
inheritance into a small box, and, given the current
demos consensus, the percentage tax rate and the amount
of tax due would be immediately displayed. In addition,
as a visual aid, uniquelycolored lines, say, light blue,
would extend vertically from the specified dollar amount
on the horizontal axis to the intersection point on the
tax rate line and from there horizontally left to the
vertical axis tax rate scale. Or, at tax time, the
taxpayer may simply look up the dollar amount in the
appropriate tax agency’s tax table to see the amount
of tax owed.
It should be understood that the demos
would be used for voting on issues including the setting
of the tax rates for each of the three sources of tax
revenue. It would not be used for the calculation of
one’s actual taxes. The voting terminal could only
show the tax rate and the amount of tax due for a given
dollar amount given the current consensus of the
demos. A voter may find this to be a useful tool when
coloring various sections of the percentage tax rate line
green, yellow, and red when casting a vote on tax rates
or to merely satisfy curiosity. Although the tax rates
currently shown by the demos would likely be very close
to what the rates will be at tax time, the actual tax
rates for a given year would be set when the tax revenue
collection agency used the demos consensus at some
predetermined time, the same time each year, for the
creation of its tax tables for the year.
With these things in mind, let us now
examine the actual method by which each taxpayer’s
tax would be calculated. It may be that this is not a new
idea and we may be merely reinventing the wheel, but this
idea came spontaneously to this writer while examining
the question of fairness in the calculation of taxes.
The source of the dollar amount to be
taxed doesn’t matter. Whether it is from revenue,
income, or inheritance, the demos’ three tax scale
issues’ pages have a similar appearance and the tax
calculation method is the same.
The question of fairness in taxation is
rather nebulous. We may and do honestly disagree as to
what manner of taxation is fair. Some people consider any
and all taxation to be unfair and would ban it entirely.
Some people believe certain exemptions are necessary to
achieve fairness. Some people favor a flat tax. Other
people favor a simple slidingscale, i.e., a progressive,
tax. For the demos a simple slidingscale tax with no
exemptions has been embraced.
While we may in our society consider to
be fair the principle that the more one has benefited
economically the larger the tax burden one should bear
even to the extent of bearing a higher tax rate,
i.e. a progressive tax rate, there is a much fairer
method of slidingscale or progressive tax calculation
than the one described above. Wealthier taxpayers, who
generally know what is to their advantage, will no doubt
realize that it is primarily as a matter of fairness to
them that the tax computation method described below was
devised. (Given the hard time the wealthy have been given
in this book, the inclusion of a new method of
calculating slidingscale taxes that is fairer in a way
that is beneficial to these poor souls may seem
surprising. But, as has been written elsewhere, this work
is not about socking it to the rich. It is about fairness
and equity for all.)
The question may be raised as an issue
of fairness, why should a company or individual earning
during a given tax year a dollar amount, say, twice as
large as some other company or individual have to pay at
a higher tax rate for every dollar earned?
Wouldn’t it be more fair for the company or
individual to pay the same rate as the other taxpayer for
the dollar amount that is equal to that of the other
taxpayer and then pay taxes at a higher rate only for the
dollar amount earned in excess of the other taxpayer? But
there aren’t just two taxpayers; there are millions
of them. Can a simple, slidingscale and yet more
equitable tax calculation principle involving millions of
taxpayers be devised in which a company or individual
earning a greater amount does not have to pay at a higher
tax rate for every dollar earned?
Yes. The tax computational method that
would be used by the IRS and the demos is as follows: The first dollar
earned or inherited during the tax year by every taxpayer of a given tax
revenue source—corporate and business, personal income, or
inheritance—would be taxed at exactly the same rate. Every taxpayer
who earned a second dollar during the tax year would have that second
dollar taxed at the same rate, and, depending on the percentage tax rate
scale set by the demos for the issue, the tax rate levied against the
second dollar may be the same as but more likely slightly higher than
the rate levied against the first dollar. Every taxpayer who earned a
third dollar would have that third dollar taxed at the same rate, which
may be the same as but more likely slightly higher the rate levied
against the second dollar. Each taxpayer would continue to be taxed in this
dollaratatime manner until the taxpayer had no more
earned or inherited dollars to be taxed.
Surprisingly, we may use exactly the
same line graph described elsewhere in this work and
again at the beginning of this appendix. Basically, what
we need to do is to alter how we see and use the dollar
amount horizontal axis of the graph. Rather than seeing,
say, a $10,000 dollar amount as a lump sum to be taxed at
a single rate, imagine 10,000 vertical
lines rising up from the horizontal dollar amount axis
from its one dollar point to its $10,000 point to meet
the tax percentage rate line at 10,000 points along the
line. Each point along the horizontal axis represents one
of the 10,000 individual dollars to be taxed, and each
intersection point along the tax rate line represents the
rate at which its related dollar would be taxed. The
total tax due would equal the sum of the taxes levied on
the individual dollars.
This method of calculating taxes would
involve many calculations. Before the age of computers
this method of calculating taxes would have been absurd.
But now we do have computers capable of lightningfast
calculations and monitors capable of displaying beautiful
graphic representations of calculated results. It is time
for our method of calculating taxes to catch up with our
calculation capabilities.
As for the taxpayer, the method for
determining the amount of tax due on a given dollar
amount remains exactly the same as that described in the
first tax calculation method above. The demos
issue’s page would allow the demos member to simply
type the revenue, income, or inheritance dollar amount
into a small box, and, given the current demos consensus,
the average or overall percentage tax rate and the amount
of tax due would be immediately displayed. (With this tax
calculation method—each dollar being taxed at a
different rate—determining the amount of tax due
involves a lot of computer calculations, but the average
or overall percentage tax rate levied is determined by a
simple calculation. It equals the dollar amount of tax
due divided by the dollar amount being taxed times 100.)
Or, at tax time, the taxpayer may simply look up the
dollar amount in the appropriate tax table to see the
amount of tax owed.
While a person who believes any taxation at all or any
kind of progressive taxation to be unfair would not be placated by this
method of calculating taxes, and a taxpayer may still get
steamed about a tax burden, this method of tax
calculation would at least achieve tax fairness in the
sense that if a taxpayer earned or inherited, say,
$100,000 during a tax year, the taxpayer would pay the
same tax on the 1,000^{th} dollar as every other
taxpayer who earned or inherited a 1,000^{th}
dollar and the same tax on the 100,000^{th}
dollar as every other taxpayer who earned or inherited a
100,000^{th} dollar.
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