State Individual Tax System Simplification
G. 2018 state/federal individual withholding tax/payroll calculator and withholding report (for companies)
F. 2017 Kansas individual tax return calculator (for employees)
E. Existing and LG tax systems for Kansas individuals with 2 tax brackets and Tax Reform Simplification
D. Existing and LG tax systems for Iowa individuals (9 tax brackets are reduced to 3 or 2)
C. Existing and LG tax systems for Missouri individuals (10 tax brackets are reduced to 2)
B. Existing and LG tax systems for California individuals (10 tax brackets are reduced to 4, 3 or 2)
A. Existing and LG tax systems for Hawaii individuals (12 tax brackets are reduced to 4, 3 or 2)
Figures: Comparison of Existing State and LG Tax Systems (Compatible results) and Tax Return in 1/2-page or Postcard Form
State tax systems may be different from one flat tax rate to multiple tax brackets (from 1 to 12) in different states. A flat tax rate is too simple, making it difficult to cover different taxable incomes reasonably. Tax systems with more tax brackets (such as 4-12) are smooth and complex, which take more time and costs, for individuals, businesses and governments. Many states have more tax brackets such as AR has 6 tax brackets, AZ (5), CA (10), CT (7), DE (6), HI (12), ID (7), GA (6), KY (6), IA (9), ID (7), MD (8), MO (10), MT (7), ND (5), NJ (6), NY (8), OH (9), OK (6), VT (5) or WV (5) and multi-page tax withholding tables and tax tables. Complex tax bracket numbers, tax withholding tables, and tax tables are often changed over time.
The LG tax system balances the two factors with 2 or 3 tax brackets/ranges and slope tax rates, provides a self-checking tool, and analyzes tax data easily for state tax systems, which make tax and tax rate calculations, analysis, reform and projection more reasonable and quick. Saving with the LG tax system may be worth $100-$600 million/year for a state (from small to large state) compared to an existing state tax system with 2-12 tax brackets, tax rate schedules/charts, tax withholding tables, tax tables, and tax computations. For smooth tax rate changes, 5-10 tax brackets should be needed with the existing state tax systems. One slope tax rate range can replace several existing tax brackets compatibly (see the figures at the bottom part of this website). When an existing system has more tax brackets, which mean more smooth tax rates, their compatible results are even better simply and fairly. Linear slope is the most simple and reasonable without connecting with taxable incomes, which provides a good foundation of “Slope Tax Rates for Big Saving”. Also a simple tax return form may be designed in postcard format or half page (see the end part of this website).
A. Existing and LG tax systems for Hawaii individuals (12 tax brackets are reduced to 4, 3 or 2)
Hawaii personal tax system has 12 tax brackets (1.4%-11%) and 3 filing statuses (Tax Table and Schedule I, II and III), which is the most complex state personal tax system in the all states in the US. Tax Rate Schedules are used for employers to estimate income withholding taxes. Tax Tables and Tax Computation are used for employees to figure out income taxes to correct above estimations. When LG Tax System is used, the complex system may be simplified significantly with 3 or 2 (preferred 2) tax brackets. Two tax rate ranges/brackets should be good enough for a tax rate range less than 0.15 (15%). If a state has special needs, then three tax rate ranges/brackets may be considered. All U.S. states have a tax rate range less than 0.15 (<15%) currently. HI has the tax rate range of 9.6% (11%-1.4%).
HI has the two tax systems for employers to estimate taxes and for employees to calculate accurate taxes for tax returns. HI withholding tables and Tax Table (12 pages) are complex. The two tax systems need all taxpayers to file tax returns even many taxpayers have one-income source, low incomes, standard deductions and non-complex tax situations. The LG tax system can also offer many taxpayers with one-income source, low incomes, standard deductions and non-complex tax situations have the option to not file their tax returns or use W-2 (LG) reports as tax returns with or without minor modifications because a government can receive tax withholding reports with detail tax data (as mini tax returns) by Jan 31 or Feb 15.
Table 1 Existing HI Tax Rate Schedules (12 tax brackets)
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I. Single and Married Filing Separately II. Married Filing Jointly III. Head of Household
0 - $2,400 1.4% of TI 0 - 4,800 1.4% of TI 0 - 3,600 1.4% of TI
$2,400 - $4,800 34+3.2%(TI-2400) 4,800-9,600 67+3.2%(TI-4800) 3,600-7,200 50+3.2%(TI-3600)
$4,800 - $9,600 110+5.5%(TI-4800) 9,600-19,200 221+5.5%(TI-9600) 7,200-14,400 166+5.5%(TI-7200)
$9,600-$14,400 374+6.4%(TI-9600) 19,200-28,800 749+6.4%(TI-19200) 14,400-21,600 562+6.4%(TI-14400)
…………………….. …………………. …..……………
175000-200000 13879+10%(TI-175000) ………………….
Over 200,000 16379+11%(TI-200000) Over 400,000 ……… Over 300,000 24568+11%(TI-300000)
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Table 2 Existing HI Tax Table for Married filing jointly (12 pages)
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Taxable Income (TI) Tax is Taxable Income Tax is Taxable Income Tax is
At least But less than TI range TI range
0 - 50 0 50 - 100 1 ……..…..
6,000-6,050 106 6,050-6,100 108 …………
…..………… 99,900-99,950 6,751 99,950-100,000 6,755
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LG Tax System for Hawaii Individuals (4, 3 or 2 tax brackets)
The existing two tax systems (Tax Rate Schedules and Tax Table/Tax Computation) can be combined into one simple LG tax system, which is shown in Table 3 for Hawaii individuals. The tax brackets are reduced from 12 to 4, 3 or 2 (67-83% reduction). Then these tables are not needed. The new LG tax system has the tax rate checking tool and simple taxable income ranges. Their tax rate results from the existing HI tax system and the LG tax system are compatible with very minor differences, which is shown by the following figure.
Table 3 LG Tax System with Range Check for Matching Existing Hawaii Individual Tax Rates
I-Single or Married filing separately, II-Married/RDP filing jointly or qualifying widow(er) or III-Head of household
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Status Yearly Taxable Income TI LG tax rate formula Tax rate Range check Tax (TI*rate)
I/1 0 - 20,000 0.014+TI*F/509,165 0.014-0.054
I/2 20,000-50,000 0.04375+TI*F/2,097,902 0.053-0.068
I/3 50,000-200,000 0.06281+TI*F/10,478,519 0.068-0.082
I/4 200,000 0.11 – 5,621 / TI*F 0.081-0.11
II/1 0 - 40,000 0.014+TI*F/1,009,081.7 0.014-0.054
II/2 40,000-100,000 0.04435+TI*F/4,307,250.5 0.053-0.068
II/3 100,000-400,000 0.0628+TI*F/20,942,408.4 0.068-0.082
II/4 400,000 0.11 – 11,242 / TI*F 0.081-0.11
III/1 0 - 30,000 0.014+TI*F/763,747.5 0.014-0.054
III/2 30,000 - 75,000 0.04376+TI*F/3,149,790 0.053-0.068
III/3 75,000-300,000 0.06279+TI*F/15,704,979 0.068-0.082
III/4 300,000 0.11 – 8,432 / TI*F 0.081-0.11
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Filing factor (F) is 52, 26, 24, 12, 4, 2 or 1, which is based on weekly (W), bi-weekly (2W), semi-monthly (SM), monthly (M), quarterly (Q), semi-yearly (SM) or yearly (Y). F is used for employers to file income withholding taxes. F=1 is used for tax returns.
Tax Rate Comparison of existing and LG Tax Systems
The tax rate differences between the existing HI and LG tax systems for Single/Married filing separately are compared with very compatible results, which are shown by the following figure visually. These minor differences mean the tax rate results from the two tax systems are matched each other, which make the LG tax system much simple and practical. Other filing statuses have similar situations.
Options of tax returns
When employers, employees and HI government use the same LG tax system for income withholding taxes and tax returns, many taxpayers with non-complex tax situations may provide accurate tax tax information, which results accurate tax withholding reports from employers (similar as W-2 Form/1099 with all necessary tax data) as mini tax returns. Taxpayers with TI/S such as less than $50,000 or tax differences less than $3,000 and one-income source, standard deductions or non-complex tax situations may use tax withholding reports with or without modification. Withholding tax reports for most low incomers may be received by Jan 31 or Feb 15. Tax return format can be simplified in postcard form.
Tax rates may be simplified to 3 taxable income ranges with 0.014-0.053, 0.053-0.081 and 0.081-0.11 simply and practically. The tax rate difference between the taxable incomes of $20,000 and $200,000 is only 2.8%. HI tax system is shown in Table 4 with 3 tax brackets or Table 5 with 2 tax brackets, which can be used by HI government, employers and employees. F=1 is for tax returns. F (such as 26, 24 or 12) is used for employers to calculate withholding taxes. The three statuses have different numbers of 1, 2 or 1.5.
Table 4 LG Tax System with F and S Numbers for Matching Existing Hawaii Individual Tax Rates (3 tax brackets)
S=1 for Single or Married filing separately, S=2 for Married filing jointly or qualifying widow(er) and S=1.5 for Head of household
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TI*F/S TI*F/S Range TI LG tax rate formula Tax rate Range check Tax (TI*rate)
0 - 20,000 0.014+TI*F/(512,820.5*S) 0.014-0.053
20,000-200,000 0.04978+TI*F/(6,206,896.6*S) 0.053-0.082
200,000 0.11-5,600*S/(TI*F) 0.082-0.11
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Total ax=0.014 Sum TI1+Sum (TI2)1/512820.5+0.04989 Sum TI2+Sum (TI2)2/6428571.4+0.11 Sum TI3 - 5800 n
The existing “Over $200,000, tax is $16,379 plus 11% of excess taxable income (TI) over $200,000” (16379+11%(TI-200000)=0.11*TI-5,621) and tax rate at $200,000 is 8.19% in the existing HI tax system are converted into 0.11-5,600*S/(TI*F). The proposed Table 4 or 5 with F (filing factor) and S (tax status) numbers can be used to replace withholding and tax tables compatibly and simply.
Table 5 LG Tax System with F and S Numbers for Matching Existing Hawaii Individual Tax Rates (2 tax brackets)
S=1 for Single or Married filing separately, S=2 for Married filing jointly or qualifying widow(er) and S=1.5 for Head of household
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TI*F/S TI*F/S Range TI LG tax rate formula Tax rate Range check Tax (TI*rate)
0 - 100,000 0.014+TI*F/(1,960,784.3*S) 0.014-0.065
100,000 0.11-4,500*S/(TI*F) 0.065-0.11
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Total ax=0.014 Sum TI1+Sum (TI2)1/1960784.3+0.11 Sum TI3 - 4500 n
Tax reform: For a tax system reform with existing HI tax system, tax goal and related factors (tax rates, tax brackets, and taxable income ranges at least) need to be considered at the same time, which are complex and make a tax reform difficultly. With the LG tax system, only tax goal is considered to adjust tax rate ranges. There is no change for TI*F/S ranges. For a tax reform from 1.4%-6.5%-11% to 1.6%-6.7%-11.2%, its total tax is increased by 0.002∑TI. If reforming to 1%-6.2%-10.7%, its total tax (S=1) is reduced by -0.004∑TIm+∑(TI2)m/100,000,244-0.003∑TIn. A tax reform with reforming its tax rate ranges to meet a tax goal with the LG tax system is much easy than with the existing tax system to meet related tax goal or balanced budget. Then tax brackets, rates, and taxable income ranges are converted from "complex" political issues to simple technical issues.
B. Existing and LG tax systems for California individuals (10/9 tax brackets are reduced to 4, 3 or 2)
California individual tax system is relatively complex with 10 tax brackets (1.1%, 2.2%, 4.4%, 6.6%, 8.8%, 10.23%, 12.43%, 13.53% and 14.63%) in 2015. 2017 CA tax rates are from 1% to 12.3% with 9 tax brackets. Some states have flat tax rates, which are too simple and cannot cover different taxable incomes reasonably. Some states have more tax brackets (4-12) and multi-page withholding and tax tables.
California Tax Rate Schedules and tax withholding tables are used for employers to estimate withholding taxes. Then Tax Table (< or =$100,000) and Tax Rate Schedules and used for employees to figure out accurate taxes for their tax returns. The two sets of Tax Rate Schedules with related tables and Tax Table require every taxpayer to file their tax returns. There are 3(5) filing statuses. The CA existing tax rate schedules are shown in the following table (Table 1) with 10 tax brackets, which may be simplified significantly by LG Tax System (Tables 3, 4 and 5) from 10 tax brackets to 3 or 2. The new tax system can offer many taxpayers with one-income source, low incomes, standard deductions or non-complex tax situations have the option to not file their tax returns or use W-2 (LG) reports with or without minor modifications because of accurate withholding taxes. Also the government can receive tax withholding reports by Jan 31 or Feb 15.
California Personal Tax Table (5 pages)
Tax status: 1 or 3 (Single; Married/RDP Filing
Separately), 2 or 5 (Married/RDP Filing Jointly;
Qualifying Widow(er)) or 4 (Head of Household)
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Least Over Status 1 or 3 2 or 5 4
$1 $50 $0 $0 $0
51 150 1 1 1
......................................................................
99,951 100,000 ..................................
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OVER $100,000, MUST COMPUTE TAX USING
THE TAX RATE SCHEDULES
LG Tax System for California Individuals (4, 3 or 2 tax brackets)
Existing California Tax Rate Schedules, tax withholding tables and tax table can be simplified by the LG tax system, which can be used for employers, taxpayers and CA government with significant simplification, which is shown in Tables 3 or 4. The 10/9 tax brackets are reduced by 60% or more reduction. The new LG tax system has the tax rate checking tool and simple taxable income ranges. Their tax rate results from the existing CA tax system and the LG tax system are very compatible with very minor differences, which is shown by the following figure at the end part of this website.
When status numbers are considered, the existing CA tax calculation system with 15 pages (tax withholding table and Tax Table) is simplified with less than 1/4 page (Table 3 or 4). For taxpayers, a status number (S) is 1, 1.5 or 2. Related computer programs for withholding taxes, tax withholding reports and tax returns have been designed to do automatically.
A simple tax return form may be designed with 1/2 page or postcard (see below: 2017 or 20xx CA tax return form by the LG tax system). For taxpayers with non-complex tax situations, TI*F/S <$100,000 and standard deductions, they may not need to file normal tax returns to save processing time and cost. Tax withholding reports (from employers) with or without modification may be used to replace tax returns.
Table 3 LG Tax System with S and F Numbers for California Individuals (4 tax brackets)
S (tax status)=1 for X-Single (or Married/filing separately), =2 for Y-Married/filing jointly (or qualifying widow(er))
or =1.5 for Z-Head of household. F (fling period) =1 (Tax Return), =26 (bi-weekly) or =12 (monthly withholding))
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TI*F/S TI*F/S Range TI LG tax rate formula Tax rate Range check Tax (TI*rate)
0-100,000 0.011+TI*F/1,562,500*S 0.011-0.075
100,000-250,000 0.06433+TI*F/9,375,000*S 0.075-0.091
250,000-500,000 0.0758+TI*F/16,447,368*S 0.091-0.1062
500,000 0.1463 – 20,050*S / TI*F 0.1062-0.1463
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There are only 1.6% (0.091-0.075) and 1.52% (0.1062-0.091) between $100,000-250,000-500,000. When the two tax brackets are simplified and combined into one range with 3.12% tax rate difference, the 4 tax brackets can be further simplified to 3 or 2 reasonably and practically, which is shown in Table 4 or 5. CA has a tax rate range 13.53% (14.63%-1.1%).
Table 4 LG Tax System with S and F Numbers for California Individuals (3 tax brackets)
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TI*F/S TI*F/S Range TI LG tax rate formula Tax rate Range check Tax (TI*rate)
0-100,000 0.011+TI*F/1,562,500*S 0.011-0.075
100,000-500,000 0.0672+TI*F/12,820,513*S 0.075-0.1062
500,000 0.1463 – 20,050*S / TI*F 0.1062-0.1463
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Total ax=0.011∑TI+∑(TI2)I/1562500+0.0672∑TI+∑(TI2)/12820513+0.14631∑TI-20050 n
Table 5 LG Tax System with S and F Numbers for California Individuals (2 tax brackets)
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TI*F/S TI*F/S Range TI LG tax rate formula Tax rate Range check Tax (TI*rate)
0-250,000 0.011+TI*F/3,125,000*S 0.011-0.091
250,000 0.1463 – 13,825*S / TI*F 0.091-0.1463
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Total Tax=0.011∑TIm+∑(TI2)m/3125000+0.14631∑TIn-13825 n (for S=1)
2017 CA tax rates are from 1% to 12.3%. Its 9 tax brackets can be reduced to 3 with 67% reduction.
Table 6 LG Tax System for Matching 2017 California Individuals with 1%-12.3% (3 tax brackets)
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TI*F/S TI*F/S Range TI LG tax rate formula Tax rate Range check Tax (TI*rate)
0-100,000 0.01+TI*F/1,769,911.5*S 0.01-0.0665
100,000-500,000 0.059475+TI*F/14,234,875*S 0.0665-0.0946
500,000 0.123 – 14,200*S / TI*F 0.0946-0.123
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The existing “Over $551,473, tax is $53,606.76 plus 12.3% of excess taxable income (TI) over $551,473” (53,606.76+0.123(TI-551,473)=0.123*TI-14,224.42), tax rate at $500,000 is 9.46% (0.123-14,200/500,000) in the 2017 CA tax system. It is converted into 0.123-14,200*S/(TI*F). The proposed Table 6 with F (filing factor) and S (tax status) numbers can be used to replace withholding and tax tables compatibly and simply.
Tax reform
For a tax reform such as from 1.1%-9.1%-14.63% to 1%-9%-14.6%, its total tax is decreased by -0.001∑TIm-0.0003∑TIn-175 n. For another tax reform such as from 1.1%-9.1%-14.63% to 1.5%-9.5%-15%, its total tax (S=1) is increased by 0.004∑TIm+0.0037∑TIn+75 n. During a tax reform, TI*F/S ranges can be kept in most cases. Tax rate ranges are adjusted according to a tax target. Then LG tax rate formulas are adjusted according to TI*F/S and tax rate ranges automatically. These "complex" political issues of tax brackets, rates, and taxable income ranges are converted into simple technical issues.
Tax connection with the federal tax system
CA tax system connects with the federal tax returns. When a state and federal tax systems connect each other, there are some challenges such as (1) more inspections are involved; (2) when a government has done a tax reform, another government often also needs to change or reform; and (3) there may be serious tax conflict each other after a significant tax reform. Federal tax returns are complex and difficult to be inspected by a state. Tax rates and tax codes may be adjusted to overcome the connection between two governments.
C. Existing and LG tax systems for Missouri individuals (10 tax brackets are reduced to 2)
Existing Missouri personal tax system has 10 tax brackets with marginal tax rates at 1.5%, 2%, 2.5%, 3%, 3.5%, 4%, 4.5%, 5%, 5.5% and 6% and Tax Table (Table 1) for individuals. MO Tax Chart and withholding tables (10 pages) are used for employers to estimate withholding income taxes. Tax Tables and Tax Computation are used for employees to figure out income taxes to correct above estimations. The differences between the two existing tax systems need all taxpayers to file tax returns even with low taxable incomes and standard deductions.
Table 1 Existing Missouri Individual Tax Table
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Taxable Income (TI) Tax is TI Tax is TI Tax is
At least But less than TI range
0 100 0 100 200 2 …..…..
500 600 8 600 700 10 ………
2,000 2,100 36 2,100 2,200 39 …..…..
…..….. 8,900 9,000 312 9,000 315
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When the LG tax system is used, only 2 tax brackets are needed (Table 2), which reduces existing 10 tax brackets to 2 (80% reduction) with compatible results and has a tax rate range check for each TI range and makes tax calculation, analysis, modification, reform, and projection easily. The 10-page withholding tables are not needed with 98% reduction. The following figure at the bottom part of this website shows their tax rate differences between the LG and existing tax systems, which are very compatible (almost no difference). Taxable income are: 1=$500, 2=$2,000, 3=$4,000, 4=$5,000, 5=$6,000, 6=$7,000, 7=$8,000, 8=$9,000, 9=$10,000, 10=$100,000, and 11=$20,000,000 in the following figure.
Filing factor (F) is 52, 26, 24, 12, 4, 2 or 1, which is based on weekly (W), bi-weekly (2W), semi-monthly (SM), monthly (M), quarterly (Q), semi-yearly (SM) or yearly (Y). It is used for employers to calculate income withholding taxes. The 10 pages of MO withholding tables can be replaced by the filing factor F simply and compatibly. F=1 is used for tax returns. Tax status (S) is 2 for Married Filing Jointly or 1 Single/Married Filing Separately.
The existing “Over $9,000, tax is $315 plus 6% of excess taxable income (TI) over $9,000” (315+0.06(TI-9,000)=0.06*TI-225) in the existing MO tax system is converted into 0.06-225/(TI*F). The proposed Table 2 with F (filing factor) number can be used to replace withholding table (10 pages) and tax table compatibly and simply.
Table 2 LG Tax System for MO individuals with tax rate range check (10 tax brackets are reduced to 2)
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TI*F Yearly Taxable Income TI Tax rate formula Tax rate Tax rate Tax
Over Not over range check
0 10,000 0.015+TI*F/444,444.4 0.015-0.0375
10,000 0.06 - 225 / (TI*F) 0.0375-0.06
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Tax analysis, projection and reform
Tax calculation, analysis, modification, reform and projection can be done by the LG tax system simply. Here m and n are individual numbers during the two TI ranges. When the existing tax computations and Tax Table are used, total tax, tax analysis, modification, reform, and projection are long and complex with more significant time and costs for related parties.
Total Tax=0.015∑Tim+∑(TI)2m/444,444.4+0.06∑Tin-225*n
For a tax system reform with existing MO tax system, a tax goal and related factors (tax rates, tax brackets, and taxable income ranges at least) need to be considered at the same time, which are complex. To consider the four factors at the same time makes a tax reform difficultly. With the LG tax system, only total tax difference is considered by adjusting tax rate ranges. There is no change for the two yearly taxable income ranges. For a tax reform such as from 1.5%-3.75%-6% to 1%-3.25%-5.6%, its total tax is decreased by -0.005∑TIm-0.004∑TIn+50 n. For another tax reform such as from 1.5%-3.75%-6% to 1.75%-4%-6.25%, its total tax (S=1) is increased by 0.0025∑TI. During a tax reform, TI*F yearly taxable ranges can be kept the same in most cases. Tax rate ranges are adjusted according to a tax target. The LG tax rate formulas are adjusted according to TI*F and tax rate ranges automatically. "Complex" political issues of tax brackets, rates, and taxable income ranges are converted into simple technical issues. Then a tax reform process can be simplified.
People with low-mid incomes, standard deductions and non-complex tax situations may not file normal tax returns
When LG Tax System (Table 2) is used for replacing current Tax Chart, withholding tables (10 pages) and Tax Table, employers may calculate and pay accurate withholding taxes to MO government yearly for many taxpayers with one-income source, low-mid incomes, standard deductions/credits, non-complex tax situations. They may have option to do file normal tax returns with or without modification. Taxpayers with such as a taxable income (TI/S) less than $100,000 for S=1 (or $200,000 for S=2/Married filing combined) with standard deductions and non-complex tax situations may use tax withholding reports with or without modification. Also when tax refunds are less than such as $100, then these taxpayers may delay their tax refunds to next year for saving tax processing time/cost. Accurate withholding tax reports for most low-mid incomers may be received by MO government before Feb 15. For a large refund such as more than $5,000, tax inspection may be needed to reduced or avoid potential tax mistakes or crimes. Only taxpayers with taxable incomes (TI/S) such as more than $100,000 for S=1 (or $200,000 for S=2) or tax differences more than $3,000 need to file normal tax returns and attach necessary tax documents. MO Dept of Revenue will not need to process so many tax returns during busy tax season and have more time to inspect tax returns with high tax differences/incomes and mobile workers/companies and collect more taxes. Tax return format may be simplified in postcard form or less than one page.
Tax connection with the federal tax system
MO tax system connects with the federal tax returns and standard deductions. A filing status (S) has exemption and standard deduction such as $2,100 and $6,300 for Single or $4,200 and $12,600 for Married filing combined, which can be simplified with $8,400*S (S is 1 for Single/Married filing separate, 2 for Married filing combined/Qualifying widow(er) with dependent child or 1.5 for Head of Household) as MO filing status standard deductions. Federal tax return (not exceed $5,000 for individual filer or $10,000 for Married filing jointly) is deducted currently.
When a state and federal tax systems connect each other, there are some challenges such as (1) more inspections are involved; (2) when a government has done a tax reform, another government often also needs to change or reform; and (3) there may be serious tax conflict each other after a significant tax reform. Federal tax returns are complex and difficult to be inspected by a state. Tax rates and tax codes may be adjusted to overcome the connection between two governments and have a stable tax projection, which helps a projected tax reform for a tax goal and avoids too many unpredictable factors to be involved during a tax reform process.
D. Existing and LG tax systems for Iowa individuals (9 tax brackets are reduced to 3 or 2)
Existing Iowa personal tax system has 9 tax brackets with marginal tax rates of 0.36%-8.98% and 5-page Tax Tables for individuals. IA Tax Rate Schedule is used for employers to estimate withholding income taxes. Tax tables and computation are used for employees to figure out income taxes to correct above estimations. The differences between the two existing tax systems need all taxpayers to file tax returns even with low taxable incomes and standard deductions.
When the LG tax system is used, only 3 or 2 tax brackets are needed (Table 1), which reduces existing 9 tax brackets to 3 or 2 (78-67% reduction) and does not need the 5-page tax table (96% reduction) with compatible results. A tax rate range check is used checking each TI range. Then tax calculation, analysis, modification, reform, and projection become easy and practical. All related parties can use the same tax system simply.
The existing “Over $71,910, tax is $4,544.07 plus 8.98% of excess taxable income (TI) over $71,910” (4,544.07+0.0898(TI-71,910)=0.0898*TI-1,913) in the existing IA tax system is converted into 0.0898-1,910/(TI*F). The proposed Table 1 with F (filing factor) number can be used to replace withholding tables (13 pages) and tax tables (5 pages) compatibly and simply.
Table 1 Slope LG Tax System for Matching 2018 IA Individual Tax Rate Schedules and Tables
TI=Taxable income. Filing factor (F) of 1, 2, 3, 12, 24, 26 or 52 on yearly, … bi-weekly or weekly basis for
employers to do withholding taxes. F=1 is for tax returns. (9 tax brackets are reduced to 3)
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TI*F Yearly Taxable Income TI Tax rate formula Tax rate Tax rate Tax
Over Not over range check
0 20,000 0.004+TI*F/555,555.6 0.004-0.04
20,000 100,000 0.032325+TI*F/2,605,863 0.04-0.0707
100,000 0.0898 - 1910 / (TI*F) 0.0707-0.0898
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Current 9 tax brackets may also be reduced to 2 for 0-$100,000 at 0.4%-7.07% with 0.004+TI*F/1,499,250. Then tax analysis and projection are:
Total Tax=0.004Sum(TI)m+Sum(TI)2m/1,499,250+0.0898Sum(TI)n-1910*n
With existing IA 9 tax brackets and tax system, tax analysis, projection and reform are difficult to do. Tax brackets, rates and TI ranges in a tax reform are “struggle” political issues currently, which can be converted into simple technical issues with the LG tax system. To such as 0.5%-7.17%-9%, total tax is increased by 0.001∑TIm+0.0002∑TIn+80n or to 0.32%-6.99%-8.9%, total tax is decreased by -0.0008∑TI.
When taxpayers have standard deductions, non-complex tax situations, and taxable incomes (TI*F/S<$100,000), they may not file normal tax returns with or without modification (withholding reports). IA dept of revenue needs to process much less tax returns (50%) during busy tax season and can have more time to inspect tax returns with high tax differences/refunds/TI and mobile workers/companies for reducing costs and collecting more taxes.
E. Existing and LG tax systems for Kansas individuals with 2 tax brackets and Tax Reform Simplification
Kansas had a difficult time with numerous tax reform bills in 2017. Several tax reform bills with tax rates of 5%, 2.9-5.6%, 3-5.6%, 3-5.7%, and 3.1-5.7% with 1-5 tax brackets were discussed and voted on in 2017. The two passed tax reform bills were vetoed by the Governor. Then Kansas House and Senate passed the SB No. 30 (with 3 tax brackets) by overriding the veto. The lawmakers had limited time to discuss and deliberate SB No. 30, as its passage allowed them to end the 2017 session on its 113th day, though normally sessions are 100 days/year or less.
For a tax system reform with existing KS tax system, total tax difference (tax goal) and related factors (tax rates, tax brackets, and taxable income ranges at least) need to be considered at the same time, which are complex and cause complex tax calculation, reform, process, and projection at higher costs. A final goal is how to meet a tax goal or balanced budget. To consider the four factors at the same time makes a tax reform difficultly.
For smooth tax rate changes, 5-10 tax brackets should be needed with an existing state tax system. Our purpose is to simplify the tax reform process with smooth tax rate changes and less tax brackets at lower costs. With the LG tax system, only total tax difference is considered by adjusting tax rate ranges simply and fairly. A simple tax return may be designed (see below).
Comparing HI (12 tax brackets and 12-page Tax Table), MO (10 tax brackets) and IA (9 tax brackets), Kansas has simple 2-3 tax brackets. But KS has 22-page tax withholding tables and 8-page tax table currently, which are complex. The linear and gradual (LG) tax rate system with simple/fair tax rate formulas, slope and smooth tax rate changes, 2 tax brackets/ranges, and F/S numbers is proposed for KS tax calculation, analysis, reform and projection with good efficiency and 12 benefits (http://taxsimplecenter.net) such as:
(1) Replacing the existing two tax systems (estimation/collection with 30 pages) with the LG tax system. 3 or more tax brackets will not be used. Partial tax processing time and costs to KS government, companies and taxpayers can be reduced;
(2) Providing simple tax return form for KS. Many incomers with non-complex tax situations may not file tax returns with tax withholding reports (to employees by Jan 31 or to government by Feb 15) with or without modification;
(3) Reducing potential tax mistakes and fraud crimes by comparisons before sending tax refunds;
(4) KS Dept of Revenue will not need to process so many tax returns during busy tax season and have more time to inspect tax returns with high tax differences/incomes and mobile workers/companies and collect more taxes; and
(5) Saving more than $100 million/year for Kansas with saving analysis.
"Proposal for Kansas Individual Income Tax Simplification and Cost Reduction" was presented to KS Special Committee on Assessment and Taxation on December 8, 2017. www.kslegislature.org/li/b2017_18/committees/non_standing/#Commission
www.kslegislature.org/li/b2017_18/committees/ctte_spc_2017_special_committee_on_assessment_an_1/documents/
2018_ks_tax_simplification_proposal.pdf
Kansas Tax Formula (Simplification) Bill HB 2788 (March 21, 2018): http://kslegislature.org/li/b2017_18/measures/hb2788/
In 2018, KS tax system is SB 30 (2018). Further tax withholding tables (22 pages) and Tax Table (8 pages) are usually made according to SB 30 (2018), which are complex. The following Table 1 matches tax rates of 3.1-5.25-5.7% (3 tax brackets) in SB 30 (2018), tax withholding tables (22 pages) and Tax Table (8 pages) with 99% reduction reasonably and compatibly. Two tax rate ranges are good enough. Then KS can always use two tax brackets without any struggle about tax bracket numbers (1-5) in the future.
About 80% of Kansan tax returns use the standard deductions now. Employers may file actual withholding taxes and withholding reports for many employees with low/mid incomes, standard deductions, and non-complex tax situations when employees provide actual tax information. Then many taxpayers have option to not file tax returns with withholding reports as tax returns with or without modification.
TI is taxable income. F (filing period) is used by employers (such as 26, 24, 12, 4 or 1 to calculate income withholding taxes on bi-weekly, semi-monthly, monthly, quarterly or yearly basis). F=1 is for tax returns. S (tax status) is 2 for married filing jointly or 1 for other statuses.
The existing “Over $30,000, tax is $1,252.5 plus 5.7% of excess taxable income (TI) over $30,000” (1,252.5+0.057(TI-30,000)=0.057*TI-457.5) in the existing KS tax system is converted into 0.057-457.5*S/(TI*F). The proposed Table 1 with F (filing factor) and S (tax status) numbers can be used to replace withholding table (22 pages) and tax table (8 pages) compatibly and simply.
Table 1 LG Tax Rate System for KS government, companies, and taxpayers (2018)
_____________________________________________________________________________________________
TI*F/S TI*F/S range TI LG tax rate formula Tax rate Tax rate check Tax (TI*rate)
0 - 50,000 0.031+TI*F/(2,967,359*S) 0.031-0.04785
50,000 0.057-457.5*S/(TI*F) 0.04785-0.057
_____________________________________________________________________________________________
Total Tax=0.031Sum(TIa+TIc)+(Sum(TI2)a+2Sum(TI2)c)/5,934,718+0.057Sum(TIb+TId)-457.5(2b+d)
Here a and b are tax return numbers for married filing jointly and c and d are for other tax statuses. Besides payroll and tax calculation simplifications, tax analysis, reform, and projection can be done simply.
For a tax reform, tax rate ranges in Table 1 can be reformed simply, such as from 3.1-5.7% to 3.4-6% or 2.8-5.6%, to meet a tax goal or balancing budget. Then related LG tax rate formula(s) will be changed according to tax rate and Yearly TI/S ranges. Only two tax brackets or tax rate ranges are needed for a state individual tax system. We do not need to change Yearly TI/S, which can be in simple numbers. A tax reform with reforming its tax rate ranges to meet a tax goal with the LG tax system is much easy than the existing tax system with reforming tax rates, brackets, and ranges (3 factors) to meet related tax goal or balanced budget.
For a tax reform such as from 3.1%-4.785%-5.7% to 3.4%-5.085%-6.0%, its total tax is increased by 0.003∑TI. For another tax reform such as to 2.8%-4.685%-5.6%, its total tax (S=1) is reduced by -0.003∑TIc+∑(TI2)c/25,000,013-0.001∑TId. Then these "complex" political issues of tax brackets, rates, and taxable income ranges are converted into simple technical issues.
A simple tax return form may be designed with 1/2 page or postcard (see below). For taxpayers with non-complex tax situations, TI*F/S <$100,000 and standard deductions, they may not need to file normal tax returns to save processing time and cost. Tax withholding reports (from employers) with or without modification may be used to replace tax returns. About 80% tax returns in KS use standard deductions.
Slope Tax Rates for Big Saving: 2018_federal_state_tax_simp_reform.pdf
F. 2017 Kansas individual tax return calculator
2017 Kansas individual tax return calculator is based on the following table with tax rate ranges at 2.9%-3.9%-5.2% to match existing 2017 tax system. Tax information of status, AGI, modification, deductions, exemptions, credits, and withheld tax are inputted. Then KS taxable income, tax rate, tax and tax balance (refund or own) will be calculated automatically. Please open the link of 2017 tax return calculator at:
2017_kansas_tax_return_calculator.exe
Table 1 LG Tax Rate System for Matching 2017 KS Tax Returns
_____________________________________________________________________________________________
TI*F/S Yearly TI/S TI LG tax rate formula Tax rate Tax rate check Tax (TI*rate)
0 - 30,000 0.029+TI*F/(3,000,000*S) 0.029-0.039
30,000 0.052-390*S/(TI*F) 0.039-0.052
_____________________________________________________________________________________________
TI is taxable income. F (filing period) is 1 for tax returns. S (tax status) is 2 for married filing jointly or 1 for other statuses.
Total Tax=0.029Sum(TIa+TIc)+(Sum(TI2)a+2Sum(TI2)c)/6,000,000+0.052Sum(TIb+TId)-390(2b+d)
G. LG tax system for 2018 state/federal individual withholding tax/payroll calculator and withholding report
Existing tax withholding table (KS: 22 pages or Federal: 21 pages) and tax table (CA: 12 pages, HI:12 pages, KS: 8 pages or Federal: 12 pages) can be not needed with 99% reduction. Withholding reports may be used by many employees to replace tax returns with non-complex tax situations and by a government to compare with tax returns before sending out tax refunds.
F. 2017 Kansas individual tax return calculator (for employees)
E. Existing and LG tax systems for Kansas individuals with 2 tax brackets and Tax Reform Simplification
D. Existing and LG tax systems for Iowa individuals (9 tax brackets are reduced to 3 or 2)
C. Existing and LG tax systems for Missouri individuals (10 tax brackets are reduced to 2)
B. Existing and LG tax systems for California individuals (10 tax brackets are reduced to 4, 3 or 2)
A. Existing and LG tax systems for Hawaii individuals (12 tax brackets are reduced to 4, 3 or 2)
Figures: Comparison of Existing State and LG Tax Systems (Compatible results) and Tax Return in 1/2-page or Postcard Form
State tax systems may be different from one flat tax rate to multiple tax brackets (from 1 to 12) in different states. A flat tax rate is too simple, making it difficult to cover different taxable incomes reasonably. Tax systems with more tax brackets (such as 4-12) are smooth and complex, which take more time and costs, for individuals, businesses and governments. Many states have more tax brackets such as AR has 6 tax brackets, AZ (5), CA (10), CT (7), DE (6), HI (12), ID (7), GA (6), KY (6), IA (9), ID (7), MD (8), MO (10), MT (7), ND (5), NJ (6), NY (8), OH (9), OK (6), VT (5) or WV (5) and multi-page tax withholding tables and tax tables. Complex tax bracket numbers, tax withholding tables, and tax tables are often changed over time.
The LG tax system balances the two factors with 2 or 3 tax brackets/ranges and slope tax rates, provides a self-checking tool, and analyzes tax data easily for state tax systems, which make tax and tax rate calculations, analysis, reform and projection more reasonable and quick. Saving with the LG tax system may be worth $100-$600 million/year for a state (from small to large state) compared to an existing state tax system with 2-12 tax brackets, tax rate schedules/charts, tax withholding tables, tax tables, and tax computations. For smooth tax rate changes, 5-10 tax brackets should be needed with the existing state tax systems. One slope tax rate range can replace several existing tax brackets compatibly (see the figures at the bottom part of this website). When an existing system has more tax brackets, which mean more smooth tax rates, their compatible results are even better simply and fairly. Linear slope is the most simple and reasonable without connecting with taxable incomes, which provides a good foundation of “Slope Tax Rates for Big Saving”. Also a simple tax return form may be designed in postcard format or half page (see the end part of this website).
A. Existing and LG tax systems for Hawaii individuals (12 tax brackets are reduced to 4, 3 or 2)
Hawaii personal tax system has 12 tax brackets (1.4%-11%) and 3 filing statuses (Tax Table and Schedule I, II and III), which is the most complex state personal tax system in the all states in the US. Tax Rate Schedules are used for employers to estimate income withholding taxes. Tax Tables and Tax Computation are used for employees to figure out income taxes to correct above estimations. When LG Tax System is used, the complex system may be simplified significantly with 3 or 2 (preferred 2) tax brackets. Two tax rate ranges/brackets should be good enough for a tax rate range less than 0.15 (15%). If a state has special needs, then three tax rate ranges/brackets may be considered. All U.S. states have a tax rate range less than 0.15 (<15%) currently. HI has the tax rate range of 9.6% (11%-1.4%).
HI has the two tax systems for employers to estimate taxes and for employees to calculate accurate taxes for tax returns. HI withholding tables and Tax Table (12 pages) are complex. The two tax systems need all taxpayers to file tax returns even many taxpayers have one-income source, low incomes, standard deductions and non-complex tax situations. The LG tax system can also offer many taxpayers with one-income source, low incomes, standard deductions and non-complex tax situations have the option to not file their tax returns or use W-2 (LG) reports as tax returns with or without minor modifications because a government can receive tax withholding reports with detail tax data (as mini tax returns) by Jan 31 or Feb 15.
Table 1 Existing HI Tax Rate Schedules (12 tax brackets)
________________________________________________________________________________________________________
I. Single and Married Filing Separately II. Married Filing Jointly III. Head of Household
0 - $2,400 1.4% of TI 0 - 4,800 1.4% of TI 0 - 3,600 1.4% of TI
$2,400 - $4,800 34+3.2%(TI-2400) 4,800-9,600 67+3.2%(TI-4800) 3,600-7,200 50+3.2%(TI-3600)
$4,800 - $9,600 110+5.5%(TI-4800) 9,600-19,200 221+5.5%(TI-9600) 7,200-14,400 166+5.5%(TI-7200)
$9,600-$14,400 374+6.4%(TI-9600) 19,200-28,800 749+6.4%(TI-19200) 14,400-21,600 562+6.4%(TI-14400)
…………………….. …………………. …..……………
175000-200000 13879+10%(TI-175000) ………………….
Over 200,000 16379+11%(TI-200000) Over 400,000 ……… Over 300,000 24568+11%(TI-300000)
________________________________________________________________________________________________________
Table 2 Existing HI Tax Table for Married filing jointly (12 pages)
__________________________________________________________________________________
Taxable Income (TI) Tax is Taxable Income Tax is Taxable Income Tax is
At least But less than TI range TI range
0 - 50 0 50 - 100 1 ……..…..
6,000-6,050 106 6,050-6,100 108 …………
…..………… 99,900-99,950 6,751 99,950-100,000 6,755
___________________________________________________________________________________
LG Tax System for Hawaii Individuals (4, 3 or 2 tax brackets)
The existing two tax systems (Tax Rate Schedules and Tax Table/Tax Computation) can be combined into one simple LG tax system, which is shown in Table 3 for Hawaii individuals. The tax brackets are reduced from 12 to 4, 3 or 2 (67-83% reduction). Then these tables are not needed. The new LG tax system has the tax rate checking tool and simple taxable income ranges. Their tax rate results from the existing HI tax system and the LG tax system are compatible with very minor differences, which is shown by the following figure.
Table 3 LG Tax System with Range Check for Matching Existing Hawaii Individual Tax Rates
I-Single or Married filing separately, II-Married/RDP filing jointly or qualifying widow(er) or III-Head of household
__________________________________________________________________________________________________
Status Yearly Taxable Income TI LG tax rate formula Tax rate Range check Tax (TI*rate)
I/1 0 - 20,000 0.014+TI*F/509,165 0.014-0.054
I/2 20,000-50,000 0.04375+TI*F/2,097,902 0.053-0.068
I/3 50,000-200,000 0.06281+TI*F/10,478,519 0.068-0.082
I/4 200,000 0.11 – 5,621 / TI*F 0.081-0.11
II/1 0 - 40,000 0.014+TI*F/1,009,081.7 0.014-0.054
II/2 40,000-100,000 0.04435+TI*F/4,307,250.5 0.053-0.068
II/3 100,000-400,000 0.0628+TI*F/20,942,408.4 0.068-0.082
II/4 400,000 0.11 – 11,242 / TI*F 0.081-0.11
III/1 0 - 30,000 0.014+TI*F/763,747.5 0.014-0.054
III/2 30,000 - 75,000 0.04376+TI*F/3,149,790 0.053-0.068
III/3 75,000-300,000 0.06279+TI*F/15,704,979 0.068-0.082
III/4 300,000 0.11 – 8,432 / TI*F 0.081-0.11
__________________________________________________________________________________________________
Filing factor (F) is 52, 26, 24, 12, 4, 2 or 1, which is based on weekly (W), bi-weekly (2W), semi-monthly (SM), monthly (M), quarterly (Q), semi-yearly (SM) or yearly (Y). F is used for employers to file income withholding taxes. F=1 is used for tax returns.
Tax Rate Comparison of existing and LG Tax Systems
The tax rate differences between the existing HI and LG tax systems for Single/Married filing separately are compared with very compatible results, which are shown by the following figure visually. These minor differences mean the tax rate results from the two tax systems are matched each other, which make the LG tax system much simple and practical. Other filing statuses have similar situations.
Options of tax returns
When employers, employees and HI government use the same LG tax system for income withholding taxes and tax returns, many taxpayers with non-complex tax situations may provide accurate tax tax information, which results accurate tax withholding reports from employers (similar as W-2 Form/1099 with all necessary tax data) as mini tax returns. Taxpayers with TI/S such as less than $50,000 or tax differences less than $3,000 and one-income source, standard deductions or non-complex tax situations may use tax withholding reports with or without modification. Withholding tax reports for most low incomers may be received by Jan 31 or Feb 15. Tax return format can be simplified in postcard form.
Tax rates may be simplified to 3 taxable income ranges with 0.014-0.053, 0.053-0.081 and 0.081-0.11 simply and practically. The tax rate difference between the taxable incomes of $20,000 and $200,000 is only 2.8%. HI tax system is shown in Table 4 with 3 tax brackets or Table 5 with 2 tax brackets, which can be used by HI government, employers and employees. F=1 is for tax returns. F (such as 26, 24 or 12) is used for employers to calculate withholding taxes. The three statuses have different numbers of 1, 2 or 1.5.
Table 4 LG Tax System with F and S Numbers for Matching Existing Hawaii Individual Tax Rates (3 tax brackets)
S=1 for Single or Married filing separately, S=2 for Married filing jointly or qualifying widow(er) and S=1.5 for Head of household
___________________________________________________________________________________________
TI*F/S TI*F/S Range TI LG tax rate formula Tax rate Range check Tax (TI*rate)
0 - 20,000 0.014+TI*F/(512,820.5*S) 0.014-0.053
20,000-200,000 0.04978+TI*F/(6,206,896.6*S) 0.053-0.082
200,000 0.11-5,600*S/(TI*F) 0.082-0.11
___________________________________________________________________________________________
Total ax=0.014 Sum TI1+Sum (TI2)1/512820.5+0.04989 Sum TI2+Sum (TI2)2/6428571.4+0.11 Sum TI3 - 5800 n
The existing “Over $200,000, tax is $16,379 plus 11% of excess taxable income (TI) over $200,000” (16379+11%(TI-200000)=0.11*TI-5,621) and tax rate at $200,000 is 8.19% in the existing HI tax system are converted into 0.11-5,600*S/(TI*F). The proposed Table 4 or 5 with F (filing factor) and S (tax status) numbers can be used to replace withholding and tax tables compatibly and simply.
Table 5 LG Tax System with F and S Numbers for Matching Existing Hawaii Individual Tax Rates (2 tax brackets)
S=1 for Single or Married filing separately, S=2 for Married filing jointly or qualifying widow(er) and S=1.5 for Head of household
___________________________________________________________________________________________
TI*F/S TI*F/S Range TI LG tax rate formula Tax rate Range check Tax (TI*rate)
0 - 100,000 0.014+TI*F/(1,960,784.3*S) 0.014-0.065
100,000 0.11-4,500*S/(TI*F) 0.065-0.11
___________________________________________________________________________________________
Total ax=0.014 Sum TI1+Sum (TI2)1/1960784.3+0.11 Sum TI3 - 4500 n
Tax reform: For a tax system reform with existing HI tax system, tax goal and related factors (tax rates, tax brackets, and taxable income ranges at least) need to be considered at the same time, which are complex and make a tax reform difficultly. With the LG tax system, only tax goal is considered to adjust tax rate ranges. There is no change for TI*F/S ranges. For a tax reform from 1.4%-6.5%-11% to 1.6%-6.7%-11.2%, its total tax is increased by 0.002∑TI. If reforming to 1%-6.2%-10.7%, its total tax (S=1) is reduced by -0.004∑TIm+∑(TI2)m/100,000,244-0.003∑TIn. A tax reform with reforming its tax rate ranges to meet a tax goal with the LG tax system is much easy than with the existing tax system to meet related tax goal or balanced budget. Then tax brackets, rates, and taxable income ranges are converted from "complex" political issues to simple technical issues.
B. Existing and LG tax systems for California individuals (10/9 tax brackets are reduced to 4, 3 or 2)
California individual tax system is relatively complex with 10 tax brackets (1.1%, 2.2%, 4.4%, 6.6%, 8.8%, 10.23%, 12.43%, 13.53% and 14.63%) in 2015. 2017 CA tax rates are from 1% to 12.3% with 9 tax brackets. Some states have flat tax rates, which are too simple and cannot cover different taxable incomes reasonably. Some states have more tax brackets (4-12) and multi-page withholding and tax tables.
California Tax Rate Schedules and tax withholding tables are used for employers to estimate withholding taxes. Then Tax Table (< or =$100,000) and Tax Rate Schedules and used for employees to figure out accurate taxes for their tax returns. The two sets of Tax Rate Schedules with related tables and Tax Table require every taxpayer to file their tax returns. There are 3(5) filing statuses. The CA existing tax rate schedules are shown in the following table (Table 1) with 10 tax brackets, which may be simplified significantly by LG Tax System (Tables 3, 4 and 5) from 10 tax brackets to 3 or 2. The new tax system can offer many taxpayers with one-income source, low incomes, standard deductions or non-complex tax situations have the option to not file their tax returns or use W-2 (LG) reports with or without minor modifications because of accurate withholding taxes. Also the government can receive tax withholding reports by Jan 31 or Feb 15.
California Personal Tax Table (5 pages)
Tax status: 1 or 3 (Single; Married/RDP Filing
Separately), 2 or 5 (Married/RDP Filing Jointly;
Qualifying Widow(er)) or 4 (Head of Household)
__________________________________________
Least Over Status 1 or 3 2 or 5 4
$1 $50 $0 $0 $0
51 150 1 1 1
......................................................................
99,951 100,000 ..................................
__________________________________________
OVER $100,000, MUST COMPUTE TAX USING
THE TAX RATE SCHEDULES
LG Tax System for California Individuals (4, 3 or 2 tax brackets)
Existing California Tax Rate Schedules, tax withholding tables and tax table can be simplified by the LG tax system, which can be used for employers, taxpayers and CA government with significant simplification, which is shown in Tables 3 or 4. The 10/9 tax brackets are reduced by 60% or more reduction. The new LG tax system has the tax rate checking tool and simple taxable income ranges. Their tax rate results from the existing CA tax system and the LG tax system are very compatible with very minor differences, which is shown by the following figure at the end part of this website.
When status numbers are considered, the existing CA tax calculation system with 15 pages (tax withholding table and Tax Table) is simplified with less than 1/4 page (Table 3 or 4). For taxpayers, a status number (S) is 1, 1.5 or 2. Related computer programs for withholding taxes, tax withholding reports and tax returns have been designed to do automatically.
A simple tax return form may be designed with 1/2 page or postcard (see below: 2017 or 20xx CA tax return form by the LG tax system). For taxpayers with non-complex tax situations, TI*F/S <$100,000 and standard deductions, they may not need to file normal tax returns to save processing time and cost. Tax withholding reports (from employers) with or without modification may be used to replace tax returns.
Table 3 LG Tax System with S and F Numbers for California Individuals (4 tax brackets)
S (tax status)=1 for X-Single (or Married/filing separately), =2 for Y-Married/filing jointly (or qualifying widow(er))
or =1.5 for Z-Head of household. F (fling period) =1 (Tax Return), =26 (bi-weekly) or =12 (monthly withholding))
____________________________________________________________________________________________
TI*F/S TI*F/S Range TI LG tax rate formula Tax rate Range check Tax (TI*rate)
0-100,000 0.011+TI*F/1,562,500*S 0.011-0.075
100,000-250,000 0.06433+TI*F/9,375,000*S 0.075-0.091
250,000-500,000 0.0758+TI*F/16,447,368*S 0.091-0.1062
500,000 0.1463 – 20,050*S / TI*F 0.1062-0.1463
____________________________________________________________________________________________
There are only 1.6% (0.091-0.075) and 1.52% (0.1062-0.091) between $100,000-250,000-500,000. When the two tax brackets are simplified and combined into one range with 3.12% tax rate difference, the 4 tax brackets can be further simplified to 3 or 2 reasonably and practically, which is shown in Table 4 or 5. CA has a tax rate range 13.53% (14.63%-1.1%).
Table 4 LG Tax System with S and F Numbers for California Individuals (3 tax brackets)
____________________________________________________________________________________________
TI*F/S TI*F/S Range TI LG tax rate formula Tax rate Range check Tax (TI*rate)
0-100,000 0.011+TI*F/1,562,500*S 0.011-0.075
100,000-500,000 0.0672+TI*F/12,820,513*S 0.075-0.1062
500,000 0.1463 – 20,050*S / TI*F 0.1062-0.1463
____________________________________________________________________________________________
Total ax=0.011∑TI+∑(TI2)I/1562500+0.0672∑TI+∑(TI2)/12820513+0.14631∑TI-20050 n
Table 5 LG Tax System with S and F Numbers for California Individuals (2 tax brackets)
____________________________________________________________________________________________
TI*F/S TI*F/S Range TI LG tax rate formula Tax rate Range check Tax (TI*rate)
0-250,000 0.011+TI*F/3,125,000*S 0.011-0.091
250,000 0.1463 – 13,825*S / TI*F 0.091-0.1463
____________________________________________________________________________________________
Total Tax=0.011∑TIm+∑(TI2)m/3125000+0.14631∑TIn-13825 n (for S=1)
2017 CA tax rates are from 1% to 12.3%. Its 9 tax brackets can be reduced to 3 with 67% reduction.
Table 6 LG Tax System for Matching 2017 California Individuals with 1%-12.3% (3 tax brackets)
____________________________________________________________________________________________
TI*F/S TI*F/S Range TI LG tax rate formula Tax rate Range check Tax (TI*rate)
0-100,000 0.01+TI*F/1,769,911.5*S 0.01-0.0665
100,000-500,000 0.059475+TI*F/14,234,875*S 0.0665-0.0946
500,000 0.123 – 14,200*S / TI*F 0.0946-0.123
____________________________________________________________________________________________
The existing “Over $551,473, tax is $53,606.76 plus 12.3% of excess taxable income (TI) over $551,473” (53,606.76+0.123(TI-551,473)=0.123*TI-14,224.42), tax rate at $500,000 is 9.46% (0.123-14,200/500,000) in the 2017 CA tax system. It is converted into 0.123-14,200*S/(TI*F). The proposed Table 6 with F (filing factor) and S (tax status) numbers can be used to replace withholding and tax tables compatibly and simply.
Tax reform
For a tax reform such as from 1.1%-9.1%-14.63% to 1%-9%-14.6%, its total tax is decreased by -0.001∑TIm-0.0003∑TIn-175 n. For another tax reform such as from 1.1%-9.1%-14.63% to 1.5%-9.5%-15%, its total tax (S=1) is increased by 0.004∑TIm+0.0037∑TIn+75 n. During a tax reform, TI*F/S ranges can be kept in most cases. Tax rate ranges are adjusted according to a tax target. Then LG tax rate formulas are adjusted according to TI*F/S and tax rate ranges automatically. These "complex" political issues of tax brackets, rates, and taxable income ranges are converted into simple technical issues.
Tax connection with the federal tax system
CA tax system connects with the federal tax returns. When a state and federal tax systems connect each other, there are some challenges such as (1) more inspections are involved; (2) when a government has done a tax reform, another government often also needs to change or reform; and (3) there may be serious tax conflict each other after a significant tax reform. Federal tax returns are complex and difficult to be inspected by a state. Tax rates and tax codes may be adjusted to overcome the connection between two governments.
C. Existing and LG tax systems for Missouri individuals (10 tax brackets are reduced to 2)
Existing Missouri personal tax system has 10 tax brackets with marginal tax rates at 1.5%, 2%, 2.5%, 3%, 3.5%, 4%, 4.5%, 5%, 5.5% and 6% and Tax Table (Table 1) for individuals. MO Tax Chart and withholding tables (10 pages) are used for employers to estimate withholding income taxes. Tax Tables and Tax Computation are used for employees to figure out income taxes to correct above estimations. The differences between the two existing tax systems need all taxpayers to file tax returns even with low taxable incomes and standard deductions.
Table 1 Existing Missouri Individual Tax Table
______________________________________________________________________
Taxable Income (TI) Tax is TI Tax is TI Tax is
At least But less than TI range
0 100 0 100 200 2 …..…..
500 600 8 600 700 10 ………
2,000 2,100 36 2,100 2,200 39 …..…..
…..….. 8,900 9,000 312 9,000 315
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When the LG tax system is used, only 2 tax brackets are needed (Table 2), which reduces existing 10 tax brackets to 2 (80% reduction) with compatible results and has a tax rate range check for each TI range and makes tax calculation, analysis, modification, reform, and projection easily. The 10-page withholding tables are not needed with 98% reduction. The following figure at the bottom part of this website shows their tax rate differences between the LG and existing tax systems, which are very compatible (almost no difference). Taxable income are: 1=$500, 2=$2,000, 3=$4,000, 4=$5,000, 5=$6,000, 6=$7,000, 7=$8,000, 8=$9,000, 9=$10,000, 10=$100,000, and 11=$20,000,000 in the following figure.
Filing factor (F) is 52, 26, 24, 12, 4, 2 or 1, which is based on weekly (W), bi-weekly (2W), semi-monthly (SM), monthly (M), quarterly (Q), semi-yearly (SM) or yearly (Y). It is used for employers to calculate income withholding taxes. The 10 pages of MO withholding tables can be replaced by the filing factor F simply and compatibly. F=1 is used for tax returns. Tax status (S) is 2 for Married Filing Jointly or 1 Single/Married Filing Separately.
The existing “Over $9,000, tax is $315 plus 6% of excess taxable income (TI) over $9,000” (315+0.06(TI-9,000)=0.06*TI-225) in the existing MO tax system is converted into 0.06-225/(TI*F). The proposed Table 2 with F (filing factor) number can be used to replace withholding table (10 pages) and tax table compatibly and simply.
Table 2 LG Tax System for MO individuals with tax rate range check (10 tax brackets are reduced to 2)
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TI*F Yearly Taxable Income TI Tax rate formula Tax rate Tax rate Tax
Over Not over range check
0 10,000 0.015+TI*F/444,444.4 0.015-0.0375
10,000 0.06 - 225 / (TI*F) 0.0375-0.06
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Tax analysis, projection and reform
Tax calculation, analysis, modification, reform and projection can be done by the LG tax system simply. Here m and n are individual numbers during the two TI ranges. When the existing tax computations and Tax Table are used, total tax, tax analysis, modification, reform, and projection are long and complex with more significant time and costs for related parties.
Total Tax=0.015∑Tim+∑(TI)2m/444,444.4+0.06∑Tin-225*n
For a tax system reform with existing MO tax system, a tax goal and related factors (tax rates, tax brackets, and taxable income ranges at least) need to be considered at the same time, which are complex. To consider the four factors at the same time makes a tax reform difficultly. With the LG tax system, only total tax difference is considered by adjusting tax rate ranges. There is no change for the two yearly taxable income ranges. For a tax reform such as from 1.5%-3.75%-6% to 1%-3.25%-5.6%, its total tax is decreased by -0.005∑TIm-0.004∑TIn+50 n. For another tax reform such as from 1.5%-3.75%-6% to 1.75%-4%-6.25%, its total tax (S=1) is increased by 0.0025∑TI. During a tax reform, TI*F yearly taxable ranges can be kept the same in most cases. Tax rate ranges are adjusted according to a tax target. The LG tax rate formulas are adjusted according to TI*F and tax rate ranges automatically. "Complex" political issues of tax brackets, rates, and taxable income ranges are converted into simple technical issues. Then a tax reform process can be simplified.
People with low-mid incomes, standard deductions and non-complex tax situations may not file normal tax returns
When LG Tax System (Table 2) is used for replacing current Tax Chart, withholding tables (10 pages) and Tax Table, employers may calculate and pay accurate withholding taxes to MO government yearly for many taxpayers with one-income source, low-mid incomes, standard deductions/credits, non-complex tax situations. They may have option to do file normal tax returns with or without modification. Taxpayers with such as a taxable income (TI/S) less than $100,000 for S=1 (or $200,000 for S=2/Married filing combined) with standard deductions and non-complex tax situations may use tax withholding reports with or without modification. Also when tax refunds are less than such as $100, then these taxpayers may delay their tax refunds to next year for saving tax processing time/cost. Accurate withholding tax reports for most low-mid incomers may be received by MO government before Feb 15. For a large refund such as more than $5,000, tax inspection may be needed to reduced or avoid potential tax mistakes or crimes. Only taxpayers with taxable incomes (TI/S) such as more than $100,000 for S=1 (or $200,000 for S=2) or tax differences more than $3,000 need to file normal tax returns and attach necessary tax documents. MO Dept of Revenue will not need to process so many tax returns during busy tax season and have more time to inspect tax returns with high tax differences/incomes and mobile workers/companies and collect more taxes. Tax return format may be simplified in postcard form or less than one page.
Tax connection with the federal tax system
MO tax system connects with the federal tax returns and standard deductions. A filing status (S) has exemption and standard deduction such as $2,100 and $6,300 for Single or $4,200 and $12,600 for Married filing combined, which can be simplified with $8,400*S (S is 1 for Single/Married filing separate, 2 for Married filing combined/Qualifying widow(er) with dependent child or 1.5 for Head of Household) as MO filing status standard deductions. Federal tax return (not exceed $5,000 for individual filer or $10,000 for Married filing jointly) is deducted currently.
When a state and federal tax systems connect each other, there are some challenges such as (1) more inspections are involved; (2) when a government has done a tax reform, another government often also needs to change or reform; and (3) there may be serious tax conflict each other after a significant tax reform. Federal tax returns are complex and difficult to be inspected by a state. Tax rates and tax codes may be adjusted to overcome the connection between two governments and have a stable tax projection, which helps a projected tax reform for a tax goal and avoids too many unpredictable factors to be involved during a tax reform process.
D. Existing and LG tax systems for Iowa individuals (9 tax brackets are reduced to 3 or 2)
Existing Iowa personal tax system has 9 tax brackets with marginal tax rates of 0.36%-8.98% and 5-page Tax Tables for individuals. IA Tax Rate Schedule is used for employers to estimate withholding income taxes. Tax tables and computation are used for employees to figure out income taxes to correct above estimations. The differences between the two existing tax systems need all taxpayers to file tax returns even with low taxable incomes and standard deductions.
When the LG tax system is used, only 3 or 2 tax brackets are needed (Table 1), which reduces existing 9 tax brackets to 3 or 2 (78-67% reduction) and does not need the 5-page tax table (96% reduction) with compatible results. A tax rate range check is used checking each TI range. Then tax calculation, analysis, modification, reform, and projection become easy and practical. All related parties can use the same tax system simply.
The existing “Over $71,910, tax is $4,544.07 plus 8.98% of excess taxable income (TI) over $71,910” (4,544.07+0.0898(TI-71,910)=0.0898*TI-1,913) in the existing IA tax system is converted into 0.0898-1,910/(TI*F). The proposed Table 1 with F (filing factor) number can be used to replace withholding tables (13 pages) and tax tables (5 pages) compatibly and simply.
Table 1 Slope LG Tax System for Matching 2018 IA Individual Tax Rate Schedules and Tables
TI=Taxable income. Filing factor (F) of 1, 2, 3, 12, 24, 26 or 52 on yearly, … bi-weekly or weekly basis for
employers to do withholding taxes. F=1 is for tax returns. (9 tax brackets are reduced to 3)
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TI*F Yearly Taxable Income TI Tax rate formula Tax rate Tax rate Tax
Over Not over range check
0 20,000 0.004+TI*F/555,555.6 0.004-0.04
20,000 100,000 0.032325+TI*F/2,605,863 0.04-0.0707
100,000 0.0898 - 1910 / (TI*F) 0.0707-0.0898
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Current 9 tax brackets may also be reduced to 2 for 0-$100,000 at 0.4%-7.07% with 0.004+TI*F/1,499,250. Then tax analysis and projection are:
Total Tax=0.004Sum(TI)m+Sum(TI)2m/1,499,250+0.0898Sum(TI)n-1910*n
With existing IA 9 tax brackets and tax system, tax analysis, projection and reform are difficult to do. Tax brackets, rates and TI ranges in a tax reform are “struggle” political issues currently, which can be converted into simple technical issues with the LG tax system. To such as 0.5%-7.17%-9%, total tax is increased by 0.001∑TIm+0.0002∑TIn+80n or to 0.32%-6.99%-8.9%, total tax is decreased by -0.0008∑TI.
When taxpayers have standard deductions, non-complex tax situations, and taxable incomes (TI*F/S<$100,000), they may not file normal tax returns with or without modification (withholding reports). IA dept of revenue needs to process much less tax returns (50%) during busy tax season and can have more time to inspect tax returns with high tax differences/refunds/TI and mobile workers/companies for reducing costs and collecting more taxes.
E. Existing and LG tax systems for Kansas individuals with 2 tax brackets and Tax Reform Simplification
Kansas had a difficult time with numerous tax reform bills in 2017. Several tax reform bills with tax rates of 5%, 2.9-5.6%, 3-5.6%, 3-5.7%, and 3.1-5.7% with 1-5 tax brackets were discussed and voted on in 2017. The two passed tax reform bills were vetoed by the Governor. Then Kansas House and Senate passed the SB No. 30 (with 3 tax brackets) by overriding the veto. The lawmakers had limited time to discuss and deliberate SB No. 30, as its passage allowed them to end the 2017 session on its 113th day, though normally sessions are 100 days/year or less.
For a tax system reform with existing KS tax system, total tax difference (tax goal) and related factors (tax rates, tax brackets, and taxable income ranges at least) need to be considered at the same time, which are complex and cause complex tax calculation, reform, process, and projection at higher costs. A final goal is how to meet a tax goal or balanced budget. To consider the four factors at the same time makes a tax reform difficultly.
For smooth tax rate changes, 5-10 tax brackets should be needed with an existing state tax system. Our purpose is to simplify the tax reform process with smooth tax rate changes and less tax brackets at lower costs. With the LG tax system, only total tax difference is considered by adjusting tax rate ranges simply and fairly. A simple tax return may be designed (see below).
Comparing HI (12 tax brackets and 12-page Tax Table), MO (10 tax brackets) and IA (9 tax brackets), Kansas has simple 2-3 tax brackets. But KS has 22-page tax withholding tables and 8-page tax table currently, which are complex. The linear and gradual (LG) tax rate system with simple/fair tax rate formulas, slope and smooth tax rate changes, 2 tax brackets/ranges, and F/S numbers is proposed for KS tax calculation, analysis, reform and projection with good efficiency and 12 benefits (http://taxsimplecenter.net) such as:
(1) Replacing the existing two tax systems (estimation/collection with 30 pages) with the LG tax system. 3 or more tax brackets will not be used. Partial tax processing time and costs to KS government, companies and taxpayers can be reduced;
(2) Providing simple tax return form for KS. Many incomers with non-complex tax situations may not file tax returns with tax withholding reports (to employees by Jan 31 or to government by Feb 15) with or without modification;
(3) Reducing potential tax mistakes and fraud crimes by comparisons before sending tax refunds;
(4) KS Dept of Revenue will not need to process so many tax returns during busy tax season and have more time to inspect tax returns with high tax differences/incomes and mobile workers/companies and collect more taxes; and
(5) Saving more than $100 million/year for Kansas with saving analysis.
"Proposal for Kansas Individual Income Tax Simplification and Cost Reduction" was presented to KS Special Committee on Assessment and Taxation on December 8, 2017. www.kslegislature.org/li/b2017_18/committees/non_standing/#Commission
www.kslegislature.org/li/b2017_18/committees/ctte_spc_2017_special_committee_on_assessment_an_1/documents/
2018_ks_tax_simplification_proposal.pdf
Kansas Tax Formula (Simplification) Bill HB 2788 (March 21, 2018): http://kslegislature.org/li/b2017_18/measures/hb2788/
In 2018, KS tax system is SB 30 (2018). Further tax withholding tables (22 pages) and Tax Table (8 pages) are usually made according to SB 30 (2018), which are complex. The following Table 1 matches tax rates of 3.1-5.25-5.7% (3 tax brackets) in SB 30 (2018), tax withholding tables (22 pages) and Tax Table (8 pages) with 99% reduction reasonably and compatibly. Two tax rate ranges are good enough. Then KS can always use two tax brackets without any struggle about tax bracket numbers (1-5) in the future.
About 80% of Kansan tax returns use the standard deductions now. Employers may file actual withholding taxes and withholding reports for many employees with low/mid incomes, standard deductions, and non-complex tax situations when employees provide actual tax information. Then many taxpayers have option to not file tax returns with withholding reports as tax returns with or without modification.
TI is taxable income. F (filing period) is used by employers (such as 26, 24, 12, 4 or 1 to calculate income withholding taxes on bi-weekly, semi-monthly, monthly, quarterly or yearly basis). F=1 is for tax returns. S (tax status) is 2 for married filing jointly or 1 for other statuses.
The existing “Over $30,000, tax is $1,252.5 plus 5.7% of excess taxable income (TI) over $30,000” (1,252.5+0.057(TI-30,000)=0.057*TI-457.5) in the existing KS tax system is converted into 0.057-457.5*S/(TI*F). The proposed Table 1 with F (filing factor) and S (tax status) numbers can be used to replace withholding table (22 pages) and tax table (8 pages) compatibly and simply.
Table 1 LG Tax Rate System for KS government, companies, and taxpayers (2018)
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TI*F/S TI*F/S range TI LG tax rate formula Tax rate Tax rate check Tax (TI*rate)
0 - 50,000 0.031+TI*F/(2,967,359*S) 0.031-0.04785
50,000 0.057-457.5*S/(TI*F) 0.04785-0.057
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Total Tax=0.031Sum(TIa+TIc)+(Sum(TI2)a+2Sum(TI2)c)/5,934,718+0.057Sum(TIb+TId)-457.5(2b+d)
Here a and b are tax return numbers for married filing jointly and c and d are for other tax statuses. Besides payroll and tax calculation simplifications, tax analysis, reform, and projection can be done simply.
For a tax reform, tax rate ranges in Table 1 can be reformed simply, such as from 3.1-5.7% to 3.4-6% or 2.8-5.6%, to meet a tax goal or balancing budget. Then related LG tax rate formula(s) will be changed according to tax rate and Yearly TI/S ranges. Only two tax brackets or tax rate ranges are needed for a state individual tax system. We do not need to change Yearly TI/S, which can be in simple numbers. A tax reform with reforming its tax rate ranges to meet a tax goal with the LG tax system is much easy than the existing tax system with reforming tax rates, brackets, and ranges (3 factors) to meet related tax goal or balanced budget.
For a tax reform such as from 3.1%-4.785%-5.7% to 3.4%-5.085%-6.0%, its total tax is increased by 0.003∑TI. For another tax reform such as to 2.8%-4.685%-5.6%, its total tax (S=1) is reduced by -0.003∑TIc+∑(TI2)c/25,000,013-0.001∑TId. Then these "complex" political issues of tax brackets, rates, and taxable income ranges are converted into simple technical issues.
A simple tax return form may be designed with 1/2 page or postcard (see below). For taxpayers with non-complex tax situations, TI*F/S <$100,000 and standard deductions, they may not need to file normal tax returns to save processing time and cost. Tax withholding reports (from employers) with or without modification may be used to replace tax returns. About 80% tax returns in KS use standard deductions.
Slope Tax Rates for Big Saving: 2018_federal_state_tax_simp_reform.pdf
F. 2017 Kansas individual tax return calculator
2017 Kansas individual tax return calculator is based on the following table with tax rate ranges at 2.9%-3.9%-5.2% to match existing 2017 tax system. Tax information of status, AGI, modification, deductions, exemptions, credits, and withheld tax are inputted. Then KS taxable income, tax rate, tax and tax balance (refund or own) will be calculated automatically. Please open the link of 2017 tax return calculator at:
2017_kansas_tax_return_calculator.exe
Table 1 LG Tax Rate System for Matching 2017 KS Tax Returns
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TI*F/S Yearly TI/S TI LG tax rate formula Tax rate Tax rate check Tax (TI*rate)
0 - 30,000 0.029+TI*F/(3,000,000*S) 0.029-0.039
30,000 0.052-390*S/(TI*F) 0.039-0.052
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TI is taxable income. F (filing period) is 1 for tax returns. S (tax status) is 2 for married filing jointly or 1 for other statuses.
Total Tax=0.029Sum(TIa+TIc)+(Sum(TI2)a+2Sum(TI2)c)/6,000,000+0.052Sum(TIb+TId)-390(2b+d)
G. LG tax system for 2018 state/federal individual withholding tax/payroll calculator and withholding report
Existing tax withholding table (KS: 22 pages or Federal: 21 pages) and tax table (CA: 12 pages, HI:12 pages, KS: 8 pages or Federal: 12 pages) can be not needed with 99% reduction. Withholding reports may be used by many employees to replace tax returns with non-complex tax situations and by a government to compare with tax returns before sending out tax refunds.
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