gwax's rumblings

I’ve been read­ing some of Milton Friedman’s Capitalism And Freedom and, although I dis­agree with a lot of what he says, he does have a few good points. In read­ing some of his sug­ges­tions for a good sys­tem of tax­a­tion, I have got­ten a few ideas and come up with a sys­tem of tax­a­tion that I like:

	T=(I-C1)*C2

It’s a very sim­ple sys­tem, (T) is how much money you have to pay in taxes annu­ally, (I) is your annual income, C1 and C2 are con­stants to be deter­mined by some­one more under­stand­ing of eco­nom­ics than myself. In essence, you can earn up to C1 with­out being taxed and then any­thing beyond that is taxed at rate C2. Key issues with this sys­tem are that is must be taken as it is exactly and there must be no excep­tions made; it does not mat­ter where your income derives from, how many chil­dren you have or any­thing else, just your annual income.

One could also con­sider a dif­fer­ent approach to the under C1 realm and use a neg­a­tive tax scheme where indi­vid­u­als are paid a frac­tion of the amount they need to reach C1. For exam­ple, take C1 to be $50,000 and C2 to be 50%: indi­vid­u­als mak­ing more than $50,000 are taxed half of what they make beyond $50,000 and indi­vid­u­als mak­ing less than $50,000 are given half of the dif­fer­ence between their income and $50,000.

I would say that the sec­ond inter­pre­ta­tion is a more “lib­eral” or “social­ist” approach and can be taken or left based on that fact alone but that the first inter­pre­ta­tion would make for a very good tax scheme that would be well liked by quite a few peo­ple. Personally, I’d like a C1 of $200,000 and a C2 of 50% but that’s just me.

This entry was posted on Sunday, October 24th, 2004 at 3:52 pm and is filed under musings. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.