I understand that Tax Reform is scurrying around the Hill once again. I have a simple proposal. The Federal Income Tax is equal to (10%+(.0001% x AGI)) AGI. Adjusted Gross Income (AGI) equals the post tax-free income (IRA, 401k, etc) minus the Poverty Level for your situation. At the national level, a family of four PL is about $20K, a single is about $10K.

So, if a family of four earns $50K, then their AGI is $30K and they would pay 13% of that: $3900. A family earning $100K has an AGI of $80K and would pay 18% or $14,400. I expect that the rate should cap out at 30%, so a family making $400K would have an AGI of $380K and pay 30% tax on that, or $114,000.

A single earning $50K would have an AGI of $40K and pay 14%, or $5600. A single making $11K would have an AGI of $1K and pay 11%, $110.

There is only one deduction, the Poverty Level; no Mortgage interest deduction, no charity deductions, no withholding deductions. After thinking about this some more I can see one more modification that needs to be added and that is for catastrophic medical payments. I don’t think taxing major medical treatment should be allowed.

What do do if a family earning $50K faces a medical bill of $250K or even $5K? I think that here we will reduce the AGI by an amount equal to anything in excess of 10% of the premed-AGI, so, in the example above, if the $50K family has a $5K medical emergency they could reduce their $30K AGI by $2K and pay 12.8% on $28K, or $3584.

The numbers can be played with, but the basic focus of this proposal is to use the poverty level as the baseline deduction. This is the value that we measure for basic sustenance. I expect one major change would be to use the local poverty level instead of the national poverty level as the deduction. I expect that poverty is defined higher in NYC than in Milledgeville, TN.

I was just looking a the US Poverty Guidelines and they differentiate between HA, AK, and the lower 48.

PS. I tie all this together by making Representative salaries 5 times the national Poverty Level for a family of four. So, if they try to play games with the poverty guidelines, they will notice as well.