13.3: Simplification
Tax uniformly all income sources that are spent on consumption. Other Information:
A Simplified System. The basic structure of this tax plan is simple. With its single rate, it taxes uniformly all income sources
that are spent on consumption. This means that taxable income includes all labor compensation and all net borrowings. The
net amount put aside in savings is then subtracted to determine net taxable income. Thus, the more individuals or families
save, the lower their taxes; they pay tax on savings only when savings are used to pay for goods and services. However, the
new tax system does not tax government transfers explicitly associated with low-income citizens, such as welfare, health care
assistance, and similar programs. Ultimately, when the Social Security and Medicare programs are fully reformed, the Social
Security checks and premium support that seniors receive will not be taxed either. In the Social Security and Medicare transition
periods, a portion of the benefits of some seniors will be taxed if their income is above a certain amount, just as many seniors'
Social Security is taxed today. Thus, the new tax system offers individuals and families a comparable or lower tax rate and
vastly improves their savings incentives to build wealth and ensure their own financial security. It simultaneously improves
the ability of the economy to raise wages and provide more job opportunities. And filling out tax forms will be a lot simpler.
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