Reply #28: We don't need a flat tax, but we need a flatTER tax system. [View All]

Here's my idea, and I think both liberals and conservatives could get behind it:

(1) All income, whether earned in the form of wages, dividends or capital gains, are taxed at the same rate.

(2) You have three (well, four) tax brackets:

No one pays income tax on the first $30,000 of income.
Income between $30,000 and $60,000 is taxed at 10%.
Income between $60,000 and $100,000 is taxed at 20%.
Income over $100,000 is taxed at 35%.

Remember, all capital gains, dividends, etc. are being taxed at the same rate, so a super-rich person deriving lots of income from these sources would still be taking a pretty heavy tax hit.

The problem that I see with ultra-high tax rates (e.g., upwards of 70%) is that they discourage compliance. If you tax earnings that high, there is much more incentive for the super-rich to hire expensive tax professionals to find loopholes, hide income, move assets offshore, etc. At the 35% rate, I think you'd have a good level of compliance, while generating good revenue.