A Simple Progressive Flat Income Tax

Washington state’s tax system doesn’t produce enough revenue to provide our residents access to quality health, education, welfare, transportation and other public services. Yet most of our residents pay too much tax. The solution is to replace our business and occupation tax and part of our property and sales tax with an income tax. See the income tax rates that other states charge.

At both our national and state level, our personal and corporate income taxes should be a simple progressive flat income tax. A flat tax with little or no deduction is not progressive. But with a deduction equal to medium income, it becomes more progressive than our present national income tax. For example, assume that the deduction is the medium income for corporations or households of various compositions. Everyone whose income is less than the medium would pay no tax. Income above the medium would be taxed at a flat rate.

Suppose that the national income tax rate is 40% and the state income tax rate is 5%. Assume the medium family income for a two adult family is $50,000,. The following amounts would be paid.

Family Federal % of State % of Total % of

Income Tax Income Tax Income Tax Income

50,000 0 0 0 0 0 0

100,000 20,000 20 2,500 2.5 22,500 22.5

200,000 60,000 30 7,500 3.75 67,500 33.75

500,000 180,000 36 22,500 4.5 202,500 40.5

1,000,000 380,000 38 47,500 4.75 427,500 42.75

The general formula is tax = (income times tax rate) – (medium income times tax rate). See how simple it is to calculate your own tax. Similar tax tables could be calculated for different types of households and for corporations.

Notice that perhaps 80% of our households earning less than $200,000 would pay less national income tax than they do now before deductions. The highest income households would pay more, as they should to sustain our social heritage which contributed to their earning ability. While households earning more than the medium would pay state income tax, many of these would pay less total tax, if property and sales taxes were lowered and utilities taxes eliminated.

To keep taxes simple, many of our present deductions might be eliminated, but that is a separate issue to be addressed. Other tax reforms are needed. National taxes for supporting social security and other entitlements should be shifted from our present regressive payroll (jobs) FICA tax to a non-progressive VAT tax. Instead of discouraging employment, this would discourage consumption. Government paid, but not provided health insurance (as in France) instead of employer paid health insurance would also encourage employment. Dave Thomas