The OneTax is a

tax reform Tax reform is the process of changing the way taxes are collected or managed by the government and is usually undertaken to improve tax administration or to provide economic or social benefits. Tax reform can include reducing the level of taxati ...

plan and proposed

amendment An amendment is a formal or official change made to a law, contract, constitution, or other legal document. It is based on the verb to amend, which means to change for better. Amendments can add, remove, or update parts of these agreements. The ...

to the United States Constitution that eliminates the

federal income tax Income taxes in the United States are imposed by the federal government, and most states. The income taxes are determined by applying a tax rate, which may increase as income increases, to taxable income, which is the total income less allow ...

for all individuals earning less than $215,870. The OneTax is described as revenue-neutral, which means that it compensates for lost revenue from the income tax by closing

loophole A loophole is an ambiguity or inadequacy in a system, such as a law or security, which can be used to circumvent or otherwise avoid the purpose, implied or explicitly stated, of the system. Originally, the word meant an arrowslit, a narrow ver ...

s and eliminating tax expenditures in the current income tax system.

Background

The current United States

income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...

system imposes higher costs of tax compliance than any other country, with direct costs exceeding $460 billion, and indirect

deadweight loss In economics, deadweight loss is the difference in production and consumption of any given product or service including government tax. The presence of deadweight loss is most commonly identified when the quantity produced ''relative'' to the amoun ...

costs of over $1.2 trillion. As this figure was calculated in 2004, it is likely that the actual current deadweight loss caused by the income tax is more than $1.4 trillion. As a national sales would create comparable deadweight loss, tax reform plans like OneTax aim to reduce or eliminate income tax

compliance costs A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...

without instituting a national sales tax.

History

The OneTax and plans like it were first created in the 1990s by policy wonks outside the Beltway, seeking to put forward a tax simplification plan that wasn't regressive. At the time, the major tax reform proposals were the FairTax and flat tax, both of which are regressive with regards to income. The first recorded mention of this reform by a political candidate for national office was at a "Town Hall" campaign event held in Smithfield, Rhode Island in 2002. In 2011, the Republican Presidential Primary race brought tax reform proposals to the fore. In addition, discussion of the plan as a way to eliminate the income tax for "the 99%" was a topic of the

Occupy Movement The Occupy movement was an international populist socio-political movement that expressed opposition to social and economic inequality and to the perceived lack of "real democracy" around the world. It aimed primarily to advance social and econo ...

Implementation

The core piece of the reform is a proposed Constitutional Amendment which repeals the

Sixteenth Amendment to the United States Constitution The Sixteenth Amendment (Amendment XVI) to the United States Constitution allows Congress to levy an income tax without apportioning it among the states on the basis of population. It was passed by Congress in 1909 in response to the 1895 Sup ...

, but carves out taxes on income to remain in place for two specifically defined ways: 1. The

United States federal government The federal government of the United States (U.S. federal government or U.S. government) is the national government of the United States, a federal republic located primarily in North America, composed of 50 states, a city within a fe ...

may tax income on those individuals earning more than ten times the

per capita ''Per capita'' is a Latin phrase literally meaning "by heads" or "for each head", and idiomatically used to mean "per person". The term is used in a wide variety of social sciences and statistical research contexts, including government statistic ...

income Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. Fo ...

as determined by the most recent

census A census is the procedure of systematically acquiring, recording and calculating information about the members of a given population. This term is used mostly in connection with national population and housing censuses; other common censuses in ...

. 2. The United States federal government may continue to collect a

payroll tax Payroll taxes are taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their employees. By law, some payroll taxes are the responsibility of the employee and others fall on the em ...

on all workers, the proceeds of which are earmarked for exclusive transfer to, or provision of health care benefits for, those persons aged 65 or older.

Effects

The primary effect is the elimination of the present personal income tax system and the elimination of 97.6% of all personal income tax compliance costs, and the elimination of more than 96% of the current

. These two items are predicted to create an immediate boost of more than $2.1 trillion to the lagging U.S. economy.

Controversy

It is not in dispute that the OneTax will lead to higher effective tax rates for higher-income individuals (or it will lead to significantly lower federal spending). Many opponents of such tax changes argue that the country's highest income earners are the economy's "job creators". These opponents claim that taxing wealthy individuals at a higher rates will discourage job creation. Others argue that the current low rate of tax on

capital gains Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares ...

encourages investment and is necessary for the long-term stability and growth of the United States and world economy. Meanwhile, still others, such as

Warren Buffett Warren Edward Buffett ( ; born August 30, 1930) is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway. He is one of the most successful investors in the world and has a net ...

claim that higher

tax rates In a tax system, the tax rate is the ratio (usually expressed as a percentage) at which a business or person is taxed. There are several methods used to present a tax rate: statutory, average, marginal, and effective. These rates can also be p ...

on the rich do not discourage investment and growth.

References

External links

{{DEFAULTSORT:OneTax Political movements Tax reform in the United States