Here is what I think would be a fair tax system:

Question 1 – How many people live in your household. See chart 1 to determine your deduction (that number would be about 15% over the established poverty threshhold).

Question 2 – How much money did you and all household members earn last year?

At this point, you subtract the number from chart 1 from the number in question 2. This is your “taxable income”.

Question 3 – Multiply your taxable income by a set percentage…everyone uses the same percentage, and that number is set each year and is based on how much money the government needs to bring in to pay for all the things for which it should own responsibility.

Now you have the amount of tax you should pay. From that you need to take a number from chart 2, that basically is an estimate of how much an average household of that size pays in the form of all taxes collected by states, cities, counties, etc. for things like gas taxes, sales taxes, property taxes, etc. You should get a tax credit for taxes paid basically on necessities of life.

You subtract that number from your tax liability, again same deduction for everyone, and viola, you have your actual annual tax liability.

Question 4, how much tax was withheld? Subtract that # from your liability, if the remainder is positive, you owe that much in taxes and if it’s negative you get a refund.

It would take the average American 10 minutes to do his taxes, it would cut down on the ability to cheat, it would eliminate the need for the bureaucracy that is the IRS, and it would ensure that taxes were fair, and that everyone got to make $x before they paid ANY taxes of any kind, and that essentially, all taxes collected would be collected only on “excess” income, i.e. income over and above what you’d need to survive, and that the tax amount was the same for every person.

That would be fair. There are a number of ways it could work, but what I don’t like is constantly cutting taxes at the Federal level for the wealthy, so that overall a person making $10k a year is paying 40% of his income to taxes and the person making $10m is paying 10% because of all the tax shelters they can afford and because the local taxes which make up the majority of that 40% borne by the poor don’t hit them as hard as a percentage of their income.