2010-December-21
Amended 2013-4-4


A.  Personal Income Tax -

When I am king, we will have a mathematical curve that defines the tax rate for all incomes.  This curve will be smooth,  
continuous and
progressive** so that the higher your income is, the higher your tax rate is, up to a designated limit,
and there it will be truncated for the richest tax payers.  (A flat tax for the super rich.)  One such curve is given by the
equation: TaxRate% = log(Income/a, b), in Excel math, where "a" is the zero crossing constant and "b" is the base of
the log.  Constant "a" and log base "b" were adjusted to make the curve fit the 2010 single tax rate schedule.  (a = 2
when income is in k$, and b = 1.202)  You can see this curve by downloading an up-to-date Excel work sheet (click
on:  
Tax Rate Curve) or by looking below at outdated photos of the Excel page.  The fit is not exact but close enough.  
(Further refinement is possible.)  Notice that the curve for the 2010 Singles Income Tax Schedule flattens out to a rate
of 35% starting at incomes over ~2M$/yr.  Well what do you know, the rich guys
already have a flat tax rate!!!

    **  A single flat tax rate for everyone is absurd!  It would be too high for the poor and too low for the rich.  Poor
    people are poor!  They don't have much money.  They need help.  If the flat tax rate were low enough for the poor
    to afford it, then there would not be enough tax money to run the country.  And if it were high enough to run the
    country, say 35% ??, then poor people could not afford it, the middle class would be stressed, and only the rich
    people could afford it, while the super rich wold be laughing all the way to the bank.   A progressive tax rate
    is the only fair way to tax a financially stratified society.  Its the Christian way.  Rich people helping
    poor people.  Are there no more Christians in the Republican party?

    A single flat tax rate,  which Increases the taxes of the destitute and decreases the taxes of the super rich,  is
    incredibly stupid.  It is taking from the poor and giving to the rich!!!  A tax credit for creating jobs I can agree with,
    but a flat tax rate for everyone is just plain dumb.

    OK, look at it this way - We should have a flat tax rate for the super rich, and a flat tax rate for the destitute, and
    for everyone in between - some kind of a tax rate curve.  As a matter of fact, thats exactly what I propose.  Read
    on.  (Or 5 flat tax rates for the destitute, the poor, the middle class, the rich, and the super rich.  Or 10 flat tax
    rates... etc, etc.)

    Also, think of the looming problems with Social Security, Medicare and the deficit that are awaiting solutions...  
    Rich people can afford to help.  With wealth comes responsibility.  Or so it should be.
    Furthermore, consider this fact - In 2008, only 1% of the taxpayers earned more than 380 k$.  However, this 1%
    group contributed 38% of all income taxes collected!!!  (See http://www.taxfoundation.org/news/show/250.html.)  
    What this means is that the average person in this 1% group earns one hell of a lot of money.  They are super
    rich.  Therefore, if this 1% group were taxed at a higher rate, it would significantly increase the amount of income
    tax money collected.  And super rich people can easily afford it.

















































    Figures A1, A2, and A3 are on the top row; figures B1, B2, and B3 are on the next row, etc.  The first column(A1
    to D1) contains blue data points derived from the 2010 Single Taxpayer tax schedule.  Column 2, graphs (A2 to
    D2), show a red curve that is a plot of a formula (TaxRate% = log(Income$/a, b) that was adjusted to "fit" the
    curve of the Tax Rate Schedule.  The red Formula curve is superimposed over the blue Tax Schedule curve for
    purposes of comparison.  Notice the ugly bumps in the blue curve and the nice smooth progression of the red
    curve.  Next, the third column (A3 to D3) of red graphs shows the proposed tax rate curve.  The column 3 graph
    horizontal axis use E notation; 1E+06 is read as one times ten raised to the power of plus six, which is 1M$.  The
    Excel spreadsheet has updated graphs and other good stuff.   To download it, click on: Tax Rate Curve.

Now notice the proposed new tax rate law, the curve shown in the right hand column of red graphs. This curve is the
same as the one fitted to the 2010 tax rate schedule except that: a) it extends to 0% tax rate at an income of 2k$
(2,000$), b) it has a 0% tax rate for incomes between 0 and 2,000$ (a flat tax rate for the really poor)**, c) it has no
35% tax rate limit, but instead, d) it continues to rise smoothly to a very-rich-guy flat tax rate of 50%, for incomes over
~2
0M$/yr.  (Only 1% earn more than 380k$/yr, but many of these people earn much, much more, like entertainment
celebrities, top pro ball players, top level executives, some merchant bankers, some investment brokers, and some
politicians.)  The upper limit of 94% of yore was too much and the present 35% limit is too little.  50% (a historically
prominent number - see sheet #4 of the "
Tax Rate Curve" spreadsheet) is more reasonable.  (Some experts say that
an upper limit of about 70% would maximize tax revenue.)   See:  http://en.wikipedia.org/wiki/Laffer_curve  for a further
discussion.  Its a little confusing but it will broaden your perspective.  
    **  Maybe people who do not pay any income tax should not have the right to vote?

This new curve is more fair than the old tax rate schedule for the following reasons:
  1. It is progressive over a longer range than is the tax rate schedule.  
  1. At the lower end, the schedule taxes poor people a flat 10% on incomes from 0 to 8,375$.  To be
    progressive, it should start at 0% and work up to 10%.  The proposed curve charges very poor people 0%
    tax on incomes from 0 to 2,0000$ and then it progressively increases to 10% at an income of 11,920$
    (11.920k$).  (The poverty level is about 12,000$.)  This is more fair.
  2. At the high end, as mentioned before, the schedule charges a flat 35% for incomes of about 2M$ and above,
    whereas the new curve allows the tax rate to continue to rise smoothly, until it reaches 50% for incomes of
    about 20M$ and above.  This is more fair.  
  1. The schedule results in bumps and pockets (explained latter) on a graph of the true** tax rate vs. income, that      
    result in inequities (see figure A1).  The Kluznickian tax rate curve has no such inequities.  It is continuous,
    smooth, and progressive.  It corrects a seemingly errant data point of the schedule - The true tax rate for the high
    end of the 2nd bracket, for an income of 34,000$, should be 15.4%, not the 13.8% that results from the tax rate
    schedule. This is more fair.  
    **  True tax rate is defined by the formula TTR% = (Tax$ / Income$) X 100.  This differs from the Incremental
    (or marginal) tax rate for a bracket, which is defined by the formula    
    ITR% = {[Tax$(Hi) - Tax$(Lo)] / [Income$(Hi) - Income$(Lo)]} X 100
    where Hi and Lo refer to the ends of the tax bracket.  The percentage numbers given in the tax rate schedule
    are incremental tax rate numbers.   All of the graphs above are of true tax rates.

As to the bumps of the tax rate schedule curve, they are a property of the formulation of the schedule.  Each bracket
has a starting tax amount and then on top of that there is added a percentage of the income in excess of the starting
income of that bracket.  This formulation causes the
true tax rate to progress asymptotically to the incremental tax rate
number.  When the amount of the income gets to be much larger than the starting income in the bracket, then the
starting income becomes insignificant and after that all income is taxed at a seemingly flat rate equal to the incremental
tax rate.  In other words, the tax rate schedule does not result in a smooth, continually progressing true tax rate.  That
is not fair.  

Most people could handle the logarithmic equation, (everyone who has Excel or maybe Turbo Tax software, or who
uses a Tax Accountant), but for some people it would be a problem.  But for those, the IRS could set up a phone
number and a URL where people could go to input a taxable income number and get back the amount of tax due.  Or
we could go back to a tax rate schedule, if we were willing to compromise accuracy (fairness), only this time we could
minimize inaccuracy by making the brackets smaller, especially at the lower end of the curve.  Also, the tax for the ends
of each bracket would be computed from the Kluznickian curve, and the incremental tax rate would be computed as the
slope of a straight line between bracket end points.  The new and improved tax rate schedule, based on the proposed
curve, would be as follows:
                                                         Alternative Income Tax Rate Schedule
                                                                      for a Single Taxpayer























The income tax upper limit should not be reduced until after the national debt is reduced to the pre-Reagan days -
about 2,000,000 M$ (2 trillion $) in 2010 dollars.  (See The National Debt on work sheet #5 of the "
Tax Rate Curve"
spread sheet.)  

B.  Capital Gains Tax -

The present flat rate of 15% is ridiculously low for the super rich !!!  

"The top 0.1%  --  about 315,000 individuals out of 315 million --  are making about half of all capital gains on the sale
of shares or property after 1 year; and these capital gains make up 60% of the income made by the Forbes 400."  And
these guys are paying 15% on their main source of income!!!  Absurd!  Obnoxious!  (See
http://news.yahoo.com/top-0-
1-nation-earn-half-capital-gains-172647859.html)

The capital gains flat tax is in need of change for all of the same reasons given above for flat taxes, and I propose the
same solution.  The capital gains tax rate should be a function of a persons adjusted gross capital gains.  This function
should be smooth,
progressive, and flatten out at an upper limit.  It should be logarithmic, like the one used for Income
Taxes, but with a different upper limit, say 35% starting at an Adjusted Gross Capital Gains of 20M$.  Why 35% and
20M$?  Because 35% for everyone is what we had in 1978, and 35% at 20M$ feels right for now.  Well, maybe 20M$
should be 2M$ ??  I leave it to the political economists to arrive at the "right" numbers.  

To see the graphs of the proposed curve, go to sheet #7 of the Excel spreadsheet "
Tax Rate Curve".  The equation is:
Tax Rate (%) = log(CapitalGains/2, 1.301)  in Excel math, for capital gains in k$, as above.  

The capital gains tax upper limit should not be reduced until after the national debt is reduced to the pre-Reagan days,
about 2,000,000 M$ in 2010 dollars.  (See The National Debt on work sheet #5 of the "
Tax Rate Curve" spread sheet.)


C.  Payroll Tax -

What are payroll taxes?  They are FICA, FUTA and SUTA.  FICA is Social Security (SS) and Medicare.  FUTA and
SUTA are Federal and State Unemployment Taxes.  As of 2007 the tax is:
  • SS - 6.2% is withheld from an employee's pay, plus a matching amount is paid by the employer, for salaries up to
    97,500$.  Once that amount has been earned, neither the employee nor the employer owes any more SS tax for
    the remainder of the year.
  • Medicare - 1.45% is withheld from an employee's pay, plus a matching amount is paid by the employer.  There is
    no wage base for the Medicare portion of the FICA tax.  Both the employer and the employee continue to pay
    Medicare tax, no matter how much is earned.
  • FUTA - The employer must pay a FUTA tax of 6.2 %, but he can take a credit of up to 5.4% for SUTA taxes that
    are paid.  If the employer is eligible for the maximum credit, the FUTA rate will be 0.8%. The wage base for FUTA
    is 7,000$. The employer will stop paying FUTA for each employee once their wages exceed 7,000$ for the year.
  • SUTA - Generally, the SUTA tax rate is based on the amount of unemployment claims that are filed by employees
    that have been terminated.  When a business is new, the SUTA tax rate starts at the maximum but then declines if
    a history of few claims is established.

97,500$ ???  What a crock.  Why in the world does the 6.2% SS tax stop at 97,500$ ???  What, the rich guys are
needy, and deserve a tax break???   Rich guy
favoritism!!!  What a crock!!!  Not only would I remove the income limit,
but I would also make the tax progressive, with a tax limit of 10% starting at 2M$.  Its the only fair way...  

Should we force business to pay for welfare (SS co pay, Medicare co pay, FUTA, and SUTA)?  I think not.  It raises the
cost of their products, makes them less competitive with their foreign competition, increases the foreign deficit,
decreases GDP, decreases the number of jobs available, ...  The government should shift corporate welfare taxes to
other sources...    income tax, sales tax, product tax, property tax, excise tax, estate tax, sin taxes, ...  ???

To be continued...  (maybe.)

D.  Estate Taxes -  TBD (maybe.)


E.  Loopholes -
Many people think that shady tax credits and other tax loopholes are the biggest tax problems we have.  But they are
beyond the scope of my knowledge.


F.  Balanced Budget Law -
Sounds good to me.  Why didn't Reagan or Bush 1 or Bush 2 think of this???  (See the National Debt on work sheet
#5 of the "
Tax Rate Curve" spread sheet. The Republican spending is shocking.)


So remember to vote for me.  (You wont have to call me "Your Royal Highness", Sire will suffice.  Or just Nick.)  

------------

ps #1:
If I were king, I would also:
  1. Put the nation on the metric system !!!
  2. Disallow businesses and unions from making political contributions !!!
  3. Restore banking and market regulations.   
  4. Bust up the biggest banks.  (And throw half of their executives into jail?)
  5. Reduce the salary, perks, and bennies of the Executive and Legislative branches; and the pensions of past,
    present and future members.   (You have to start reform at the top.)
  6. The Judiciary too?
  7. The same for all civil servants.   
  8. Eliminate estimated taxes for individuals, except for rich people.
  9. Pay out Social Security to an individual based on the amount of money payed in by that individual.   
  10. Make a law requiring all presidential candidates to prove they have a 3 digit IQ.  (130 minimum?)
  11. Amend the constitution to explicitly separate the church and the state.
  12. And disallow religion and clergy from politics and government.    
  13. Ban religion from public schools - no biblical creation myth, no  “Intelligent Designer”  myth, no school prayers.  
    (Religion should be taught to you in the church of your choice, not your political party or public school.)
  14. Get out of Iraq and Afghanistan.  But increase pressure on Iran and Korea.   
  15. Eliminate Affirmative Action (it is racial discrimination).
  16. Ban abortion issues from the legislature and the ballot.  (Men should not have the right to vote on it.)   
  17. Legalize the right to die in all the US.
  18. Legalize doctor assisted suicide in all the US.
  19. Ban football.  Ban boxing, and other martial arts.
  20. Ban all graphic violence from TV, movies, comic books, kids books and games, arcades, and the Koran.
  21. Ban new Muslim church construction until they revise the Koran to outlaw all violence and endorse all UN human
    rights.   
  22. Outlaw the practice of Sharia in the US, as it includes draconian corporal punishment, and bias against women.  
    Besides, all US citizens have the right to a US hearing by US law in a US court, and no church can usurp that
    right.   
  23. “Free” the Indians.  Make them all US citizens.  All the same rights and privileges; no more and no less.
  24. Make English the only official language in the USA; required of all citizens.  
  25. Make all government documents English only.  Including ballots and voter pamphlets.
  26. Further restrict immigration.   
  27. Eliminate the tobacco subsidy!  
  28. Corn and cotton too.  
  29. All farm subsidies?
  30. Tax kids rather than deduct them, each year.  (There are too many people in the world.)   
  31. Tax fat people for their overweight pounds.  (Well, somebody has to do something.)
  32. Have universal military training.  1 or 2 years.  Before collage.  Except the disabled and those who join the Peace
    Corps, or some such thing, for 4 or more years.    
  33. Keep the GI Bill, but for GI's only.
  34. Put both Saturday and Sunday at the end of the week on our civil calendars, ie make Monday the first day of the
    week.  
  35. Make the Kluznickian Calendar the prime candidate for calendar reform.
  36. Disband the Republican party.  
    The Republicans are all screwed up. They are composed of several factions and each of those factions is all
    screwed up.  I would disband them and tell them to start all over again.  Get rid of the intransigent Tea Party
    lackeys to the super rich.  Get rid of the anti-science, religiously-insane Christian fundamentalists (school
    prayers, biblical creation myth, intelligent designer, anti science* (since science debunked the Bible), no big
    bang, no evolution, God created Eve from the rib bone of Adam, no stem cell research, no climate change
    problems, no family planing, no abortion, no right to die, no doctor assisted suicide,  theocracy, ...)  (aka the
    GOP God Squad.)  The only thing worse than a Christian fundamentalist is a Muslim fundamentalist. Get
    religion and clergy out of politics and government!!!  Maybe form 2 to 4 separate parties: one for the
    Christian fundamentalist crazies???, one for the Trickle Down and Flat Tax idiots??, one for the traditional
    uber right wing hardcore war mongers who pander to the military/industrial complex, and one for the sane
    and rational middle-of-the-road businessman Republicans.  Some moderate and left leaning Republicans
    would be refreshing.  
    *  Other Republicans are anti science because scientists say that there is pernicious man made global
    warming, which is caused primarily by industry, and industry will have to spend big bucks to solve that
    problem, and industry would rather give Republican politicians big bucks to denigrate scientists, and
    politicians will do anything for money, so they denigrate science and scientists.  Thats what
    Republicans do.  
 37. And a few more things...


ps #2:  
For those of you who appreciate my political economics acumen, I have included the following:

A Short History of US Political Economics

In the beginning, the Democrats took from the rich and gave to the poor.  They expanded the government to include a
large civil servant work force.  And they wrote numerous rules and regulations to control business, and everyone else.  
And they expanded welfare to include just about everything and everyone, if they needed it or not.  And when they ran
out of money, they just increased taxes and printed more paper dollars.  Their motto was - Spend, spend, spend, and
then increase taxes and print more money.  And labor unions (who bank the Democrats) can do no wrong.  And
businesses (who bank the Republicans) are the enemy (completely ignoring the fact that businesses create jobs for
their unionists).

In the mean time, the Republicans ran around being the hard nosed businessmen.  They strove to balance the budget,
reduce government spending, reduce the size of government, reduce the deficit, …  But they also tried to reduce the
rules and regulations that limited business, and reduce the restrictions (like the environmental laws that protect people,
animals, land, water, air) that cost business money.  Their motto was - Reduce the size of government, reduce
government spending, and reduce laws and regulations that restrict business or cost business money.  

Then, when Trickle-Down Reagan became president, things changed.  Now Republicans where the ones to increase
government spending, for example for national defense contractors (their biggest clients), which ran up the national
debt to unprecedented levels.   "His" trickle-down economic theory (which is
still unproven) was implemented by
reducing the taxes of the rich, so that they had more money to invest, which would make them richer and happier and
more willing to donate more money to support republican politicians, and
maybe?, just maybe, create some more jobs
for the working class.  So, while spending was increased, the tax revenue was decreased, and the national debt shot
up.  Thanks a lot Trickle-Downers.  And, many of those new jobs and a lot of the old jobs ended up going off-shore
because -

Meanwhile the unions, the main clients of the Democrats,  were busy doing their thing – increasing wages and
decreasing productivity.  This worked fine just after the WW2, since all of our European competition was bombed out,
but after a while Europe rebuilt with modern equipment and cheaper labor.  Also, the cheap-labor Far East emerged as
big competitors to the US.  Bye and bye, US business could no longer compete, so of course US business farmed out
manufacturing and office jobs to cheaper labor markets overseas like India and China.  Now the US working class has
became the idle poor class.  The poor are getting poorer while the rich are getting richer.  Thanks a lot Democrat
Unions and Trickle-Down Republicans.  Idiots.  

Republican deregulation did not help either.  It ended up allowing banking and financial markets to screw investors
while the rich bankers and investment brokers got richer.  Banks gave out unsafe loans to unqualified home buyers
(who later lost their jobs to cheaper off shore labor), at the urging of a couple of Bush presidents. The banks then got
out from under these poisoned loans by bundling them into nondescript financial packages, dirivitives, that somehow
got good ratings from mentally defective rating companies, and selling them not only to the unsuspecting public but to
the sophisticated big account executives as well.  Well we all know how that worked out.  So the Democratic Unions
screwed us, the Republican Deregulaters screw us, the Republican Bankers screwed us, the Republican bond rating
companies screwed us, and the Republican Trickle-Downers screwed us, and now we are all screwed up.  And on top
of that we now have Republican Tea Partyers, who are uncompromising born again flat tax Trickle-Downers, who
refuse to let the political process function until they get their way.  Screwed, screwed, screwed...

So vote for me, I can't do any worse than those bozos.

Thank you very much,

King? Nick
Income > (k$)
Income < (k$)
Tax is (k$)
Plus ITR (%)
Of Income > (k$)
TTR% on 1st Col.
0
2
0.000
0.00
0
0
2
5
0.000
8.30
2
0
5
10
0.249
12.51
5
4.98
10
15
0.883
15.50
10
8.83
15
20
1.658
17.36
15
11.05
20
40
2.526
20.23
20
12.63
40
70
6.572
23.59
40
16.43
70
100
13.650
26.02
70
19.50
100
200
21.457
29.06
100
21.46
200
400
50.517
32.86
200
25.26
400
700
116.241
36.22
400
29.06
700
1000
224.908
38.65
700
32.13
1000
2000
340.860
41.69
1,000
34.09
2000
4000
757.755
45.49
2,000
37.89
4000
7000
1,667.582
48.85
4,000
41.69
7000
10,000
3,123.125
51.28
7,000
44.76
10,000
20,000
4,671.523
53.28
10,000
46.72
20,000
>20M$
10,000.000
50.00
20,000
50.00


Taxation