Income Tax Problems and Solution with 2 or 1 Simple Linear Formula
A. Background and purpose of tax simplification:
Income tax is relatively complex issue with different factors. There are two extremely political trends. One is that one-group lawmakers like to raise taxes and view tax simplification to conflict with raising public tax revenues. Tax systems may become more complex with multiple tax brackets, many-page withholding tables, many formulas and tax tables, which increase tax system complexity, time and costs. Another group lawmakers like to use a flat tax rate, which is too simple, rough and unfair to treat complex income tax issues. A flat tax rate such as 5% or 17% can not resolve related problems about income tax fairness, revenue, basic living costs, education, public services and other. We need to simplify our tax systems without a flat tax rate.
Federal and state income tax calculation systems usually have up to 12 tax brackets, multiple taxable income ranges, xx-page Withholding Tables, xx withholding formulas, Tax Table (x or xx pages), unsmooth tax rate changes, 2 tax systems for companies and individuals separately, and related tax computations, which are complex. All tax systems are usually changed yearly, which have caused these tables and formulas to be very complex. Tax brackets for the US federal individual income tax systems are often changed over time such as 7 in 2013-2025, 6 in 2010, 5 in 2000, 15 in 1980, 24 in 1950, 56 in 1920, 7 in 1913, 3 in 1864 or 2 in 1862 (1-56) (Reference #1).
Our tax research goal is to have a technical simplification with 1 existing formula and 2 or 1 linear formula for federal or state tax systems, which provides a balanced, fair, simple, and long-term solution. Then existing multiple brackets, 45-224 formulas, and xx-page withholding tables can be eliminated. There are 15 benefits to save billions (or millions) of dollars (Research papers: A and B).
A. Federal Tax Simplification by 98.7% reduction: www.academicstar.us/UploadFile/Picture/2023-5/20235518550488.pdf
B. State Tax Simplification by 90%-99% reduction: www.scitcentral.com/documents/be5648da4795008d9893b752b9226c8f.pdf
C: https://taxsimplecenter.net
* Research: One-Page Simplification for Payroll, W-2 Report and Federal/State Tax Return
B. Methods: We have done our tax simplification research with 15 publications at http://taxsimplecenter.net/publication.html (list). When 2 tax rates are set, a straight rate line is the most simple, effective and fair. Existing flat and curve or step tax rates with less or more tax brackets are unfair and complex with rough or cliff problem. Figure 1 / Comparison
* Smooth tax rate changes: www.scitcentral.com/documents/be5648da4795008d9893b752b9226c8f.pdf (3. Tax Rate Change Speed, ......)
Research Papers: Existing Personal Tax System and Simplification (Partial) .
Existing System __ Simplification _
State Bracket# Status# Formula# Withholding Tables Tax Table Checking Tool Matched by Checking Tool
AR 12 1 72 (12×6) 80 pages 5 pages No 2 brackets/formulas Yes
CA 9 5/3 216 (9×3×8) 29 pages 5 pages No 2 or 3 brackets/formulas Yes
..............................................................................................................................................................................................................
KS 3-8 2 48 (3×2×8) 22 pages 8 pages No 2 brackets/formulas Yes
MD 8 2 112 (8×2×7) 18 pages 7 pages No 2 brackets/formulas Yes
MN 4 4 96 (4×4×6) 18 pages 6 pages No 2 brackets/formulas Yes
MO 10/9 1 54 (9×6) 10 pages 1 page No 2 brackets/formulas Yes
NY 8 5/3 144 (8×3×6) 11 pages 8 pages No 2 or 3 brackets/formulas Yes
WI 4 3 72 (4×3×6) 26 pages 6 pages No 2 brackets/formulas Yes
Federal 7 5/4 224 (7×4×8) 21 pages 12 pages No 3 brackets/formulas Yes .
Example: Such as for Single or Married filing separately with taxable incomes (TI) not over $100,000, existing (2018*) federal tax rate formula, difference, change and withholding table comparisons are:
Taxable incomes Existing tax system LG tax rate simplification Taxable incomes Existing rate Proposed rate Difference
0 - $9,525 10% for TI not over $9,525 (0 -$100,000) $1,000 0.1 0.10083 0.0008
$9,525 - $38,700 (952.5+0.12 (TI-9,525)) / TI $20,000 0.11045 0.1166 0.0062
$38,700 - $82,500 (4,453.50+0.22 (TI-38,700)) / TI TI/1,204,819/S + 0.1 $50,000 0.13879 0.1415 0.0027
$82,500 - $100,000 (14,089.50+0.24 (TI-82,500)) / TI $75,000 0.16586 0.16225 - 0.0036
Tax rate change Unfair flat/curve rates w/o smoothness Fair tax rates w/smoothness $100,000 0.182895 0.183 0.0001
Withholding Tables 21 pages with 0-10 Allowances None
Formulas 224 (7×4×8) 4 (3+1)
* At taxable incomes are at 0-$100,000*S-$300,000*S, tax rates are changed: 10%-18.3%-26.9%-37% for 2018, 10%-18.17%-26.73%-37% for 2019 or 10%-18.1%-26.6%-37% for 2020 by IRS. Standard deductions are changed from $12,000xS (S=1, 1.5 or 2) to $12,200xS or $12,400xS in 2018-2020. Tax status (S) is 2, 1 or 1.5.
Withholding / Income tax = (Income ± Adjustments - (Deductions + Exemptions) ÷ F) × Tax rate - Tax credits ÷ F
C. Tax Simplification Benefits:
1. Our tax simplification research has shown that 2 or 1 simple linear formulas and 1 existing formula to match and replace existing complex tax calculation systems such as federal 7 (up to 56 during 1900-2024) tax brackets, 28 taxable income (TI) ranges, 224 (7x4x8) formulas, 21-page Withholding Tables and 12-page Tax Table. Its simplification is by more than 98% (1-3/224). Link: Research Paper
2. One-Page Form to Combine W-2, Federal and State Tax Returns Together: Link: Table 3 (38 lines) or Link: Table 5
Postcard or Half-Page Form for Federal or State Tax Return: Link: Tables 1-3
3. Tax simplification may have 15 benefits to save billions (or millions) of dollars for federal or state level Link: Research Paper (Table 7)
By simplifying the federal tax code, the reform would potentially save U.S. taxpayers more than $100 billion/year. Link
4. Federal and State Tax Simplification for Fair and Simple Tax Rate and Saving (PPT)
5. Major benefits for different parties
_____________________________________________________________________________________
For Lawmakers: To convert complex factors and options into one simple technical factor and have
no more struggle about detail tax bracket #, different TI ranges and tax rates. Balance
budget is #1 factor to be considered.
Taxpayers: To let more than 50% taxpayers to not file simple tax returns and save time and costs.
Companies: To not need 21-page Withholding Tables and many formulas taxes for payrolls.
IRS: To process more simple and less complex tax returns during busy tax season,
inspect more tax returns, reduce costs and collect more potential taxes.
Value To save billions (or millions) of dollars for federal or state level.
____________________________________________________________________________________
D. Tax simplification area:
Americans spend 8.9 billion hours/year complying with IRS filing requirements and cost $409 billion/year (Reference #2). By simplifying the federal tax code, the reform would potentially save U.S. taxpayers more than $100 billion/year. Link
Tax simplification is needed for following areas:
1. Tax calculation is simplified to match/reduce existing 7 (or 4-12) tax brackets and taxable income ranges to 2 or 3, eliminate many-page withholding tables with 0-10 allowances, give simple numbers for different tax statuses, and provide a checking tool for reducing calculation mistakes;
2. Standard deductions are increased to include exemptions together, which have been done by the Tax Cuts and Jobs Act (2018) for individuals and couples;
3. Itemized deduction may be simplified or eliminated. Neutral tax revenue may be reached by reducing top tax rate and reducing bottom tax rate with tax simplification, which may benefit for all taxpayers fairly;
4. Various credit, exemption and earned income tax credit for children may be simplified or combined together;
5. Various exemption, credit, retirement contribution and distribution, and social security benefit for seniors may be simplified or combined together. Simple tax return form is provided for seniors’ tax simplification;
6. Alternative Minimum Tax (AMT), which applies to about 4 million tax returns, may be eliminated or simplified;
7. Some "complex" political problems, which may cause social conflicts, are converted into "simple" technical issues;
8. When 2 rates are set, simple effective (linear) tax rates between the two points with a straight line are fair and simple, which may be applied for such as tax rates, social security benefit rates, working family credit rates, homestead credit refund rates, and earned income tax credit rates. Existing flat and curve rates or step (cliff) rates with less or more brackets are unfair and complex; and
9. Existing two tax systems, which are about 13 months apart, may be simplified and combined together to provide one common system or format for all related parties to have tax simplification fairly and simply.
There are usually two tax systems in an existing tax system: (1) Tax Rate Schedules and lengthy tax withholding tables (such as federal 21 pages, KS 22 pages or MO 10 pages) are used for employers to estimate income taxes and (2) Tax Table (federal 12 pages) and Tax Computation are used for taxpayers to correct tax estimations and file tax returns. Federal Publication 15 (Employer's Tax Guide) has 69 pages. Publication 15-A (Supplement to Pub. 15, Employer's Tax Guide) has 73 pages. The differences between the two tax systems add tax complexity, require every taxpayer to file a tax return and cause potential tax fraud crimes. 1040 Instruction has 108 pages. 1040A Instruction has 92 pages. 1040EZ Instruction has 48 pages. Most state tax systems are in similar situations. All tax reform, budget balance, tax system and code simplifications are important.
One effective (linear) tax rate range with a straight line can be used to replace several existing tax brackets with flat and curve tax rates comparably (see the figures at the bottom parts of Federal and State websites). Linear relationship is the most fair and simple without connecting with taxable incomes for its changing slope, which provides a good foundation for “Fair and Simple Tax Rates for Big Saving”. The LG tax rate system can offer15 benefits to help lawmakers, taxpayers, companies and governments.
Reference #1: https://taxfoundation.org/historical-income-tax-rates-brackets/
Reference #2: https://taxfoundation.org/compliance-costs-irs-regulations
Would you please join me to sign or support a public petition to simplify our tax systems and save our tax revenue (billions of dollars)
www.change.org/p/income-tax-simplification-to-save-our-tax-revenue-billions-of-dollars
For more information or question/comment, please contact us at johnlee@taxsimplecenter.net or johnlee1040@yahoo.com
A. Background and purpose of tax simplification:
Income tax is relatively complex issue with different factors. There are two extremely political trends. One is that one-group lawmakers like to raise taxes and view tax simplification to conflict with raising public tax revenues. Tax systems may become more complex with multiple tax brackets, many-page withholding tables, many formulas and tax tables, which increase tax system complexity, time and costs. Another group lawmakers like to use a flat tax rate, which is too simple, rough and unfair to treat complex income tax issues. A flat tax rate such as 5% or 17% can not resolve related problems about income tax fairness, revenue, basic living costs, education, public services and other. We need to simplify our tax systems without a flat tax rate.
Federal and state income tax calculation systems usually have up to 12 tax brackets, multiple taxable income ranges, xx-page Withholding Tables, xx withholding formulas, Tax Table (x or xx pages), unsmooth tax rate changes, 2 tax systems for companies and individuals separately, and related tax computations, which are complex. All tax systems are usually changed yearly, which have caused these tables and formulas to be very complex. Tax brackets for the US federal individual income tax systems are often changed over time such as 7 in 2013-2025, 6 in 2010, 5 in 2000, 15 in 1980, 24 in 1950, 56 in 1920, 7 in 1913, 3 in 1864 or 2 in 1862 (1-56) (Reference #1).
Our tax research goal is to have a technical simplification with 1 existing formula and 2 or 1 linear formula for federal or state tax systems, which provides a balanced, fair, simple, and long-term solution. Then existing multiple brackets, 45-224 formulas, and xx-page withholding tables can be eliminated. There are 15 benefits to save billions (or millions) of dollars (Research papers: A and B).
A. Federal Tax Simplification by 98.7% reduction: www.academicstar.us/UploadFile/Picture/2023-5/20235518550488.pdf
B. State Tax Simplification by 90%-99% reduction: www.scitcentral.com/documents/be5648da4795008d9893b752b9226c8f.pdf
C: https://taxsimplecenter.net
* Research: One-Page Simplification for Payroll, W-2 Report and Federal/State Tax Return
B. Methods: We have done our tax simplification research with 15 publications at http://taxsimplecenter.net/publication.html (list). When 2 tax rates are set, a straight rate line is the most simple, effective and fair. Existing flat and curve or step tax rates with less or more tax brackets are unfair and complex with rough or cliff problem. Figure 1 / Comparison
* Smooth tax rate changes: www.scitcentral.com/documents/be5648da4795008d9893b752b9226c8f.pdf (3. Tax Rate Change Speed, ......)
Research Papers: Existing Personal Tax System and Simplification (Partial) .
Existing System __ Simplification _
State Bracket# Status# Formula# Withholding Tables Tax Table Checking Tool Matched by Checking Tool
AR 12 1 72 (12×6) 80 pages 5 pages No 2 brackets/formulas Yes
CA 9 5/3 216 (9×3×8) 29 pages 5 pages No 2 or 3 brackets/formulas Yes
..............................................................................................................................................................................................................
KS 3-8 2 48 (3×2×8) 22 pages 8 pages No 2 brackets/formulas Yes
MD 8 2 112 (8×2×7) 18 pages 7 pages No 2 brackets/formulas Yes
MN 4 4 96 (4×4×6) 18 pages 6 pages No 2 brackets/formulas Yes
MO 10/9 1 54 (9×6) 10 pages 1 page No 2 brackets/formulas Yes
NY 8 5/3 144 (8×3×6) 11 pages 8 pages No 2 or 3 brackets/formulas Yes
WI 4 3 72 (4×3×6) 26 pages 6 pages No 2 brackets/formulas Yes
Federal 7 5/4 224 (7×4×8) 21 pages 12 pages No 3 brackets/formulas Yes .
Example: Such as for Single or Married filing separately with taxable incomes (TI) not over $100,000, existing (2018*) federal tax rate formula, difference, change and withholding table comparisons are:
Taxable incomes Existing tax system LG tax rate simplification Taxable incomes Existing rate Proposed rate Difference
0 - $9,525 10% for TI not over $9,525 (0 -$100,000) $1,000 0.1 0.10083 0.0008
$9,525 - $38,700 (952.5+0.12 (TI-9,525)) / TI $20,000 0.11045 0.1166 0.0062
$38,700 - $82,500 (4,453.50+0.22 (TI-38,700)) / TI TI/1,204,819/S + 0.1 $50,000 0.13879 0.1415 0.0027
$82,500 - $100,000 (14,089.50+0.24 (TI-82,500)) / TI $75,000 0.16586 0.16225 - 0.0036
Tax rate change Unfair flat/curve rates w/o smoothness Fair tax rates w/smoothness $100,000 0.182895 0.183 0.0001
Withholding Tables 21 pages with 0-10 Allowances None
Formulas 224 (7×4×8) 4 (3+1)
* At taxable incomes are at 0-$100,000*S-$300,000*S, tax rates are changed: 10%-18.3%-26.9%-37% for 2018, 10%-18.17%-26.73%-37% for 2019 or 10%-18.1%-26.6%-37% for 2020 by IRS. Standard deductions are changed from $12,000xS (S=1, 1.5 or 2) to $12,200xS or $12,400xS in 2018-2020. Tax status (S) is 2, 1 or 1.5.
Withholding / Income tax = (Income ± Adjustments - (Deductions + Exemptions) ÷ F) × Tax rate - Tax credits ÷ F
C. Tax Simplification Benefits:
1. Our tax simplification research has shown that 2 or 1 simple linear formulas and 1 existing formula to match and replace existing complex tax calculation systems such as federal 7 (up to 56 during 1900-2024) tax brackets, 28 taxable income (TI) ranges, 224 (7x4x8) formulas, 21-page Withholding Tables and 12-page Tax Table. Its simplification is by more than 98% (1-3/224). Link: Research Paper
2. One-Page Form to Combine W-2, Federal and State Tax Returns Together: Link: Table 3 (38 lines) or Link: Table 5
Postcard or Half-Page Form for Federal or State Tax Return: Link: Tables 1-3
3. Tax simplification may have 15 benefits to save billions (or millions) of dollars for federal or state level Link: Research Paper (Table 7)
By simplifying the federal tax code, the reform would potentially save U.S. taxpayers more than $100 billion/year. Link
4. Federal and State Tax Simplification for Fair and Simple Tax Rate and Saving (PPT)
5. Major benefits for different parties
_____________________________________________________________________________________
For Lawmakers: To convert complex factors and options into one simple technical factor and have
no more struggle about detail tax bracket #, different TI ranges and tax rates. Balance
budget is #1 factor to be considered.
Taxpayers: To let more than 50% taxpayers to not file simple tax returns and save time and costs.
Companies: To not need 21-page Withholding Tables and many formulas taxes for payrolls.
IRS: To process more simple and less complex tax returns during busy tax season,
inspect more tax returns, reduce costs and collect more potential taxes.
Value To save billions (or millions) of dollars for federal or state level.
____________________________________________________________________________________
D. Tax simplification area:
Americans spend 8.9 billion hours/year complying with IRS filing requirements and cost $409 billion/year (Reference #2). By simplifying the federal tax code, the reform would potentially save U.S. taxpayers more than $100 billion/year. Link
Tax simplification is needed for following areas:
1. Tax calculation is simplified to match/reduce existing 7 (or 4-12) tax brackets and taxable income ranges to 2 or 3, eliminate many-page withholding tables with 0-10 allowances, give simple numbers for different tax statuses, and provide a checking tool for reducing calculation mistakes;
2. Standard deductions are increased to include exemptions together, which have been done by the Tax Cuts and Jobs Act (2018) for individuals and couples;
3. Itemized deduction may be simplified or eliminated. Neutral tax revenue may be reached by reducing top tax rate and reducing bottom tax rate with tax simplification, which may benefit for all taxpayers fairly;
4. Various credit, exemption and earned income tax credit for children may be simplified or combined together;
5. Various exemption, credit, retirement contribution and distribution, and social security benefit for seniors may be simplified or combined together. Simple tax return form is provided for seniors’ tax simplification;
6. Alternative Minimum Tax (AMT), which applies to about 4 million tax returns, may be eliminated or simplified;
7. Some "complex" political problems, which may cause social conflicts, are converted into "simple" technical issues;
8. When 2 rates are set, simple effective (linear) tax rates between the two points with a straight line are fair and simple, which may be applied for such as tax rates, social security benefit rates, working family credit rates, homestead credit refund rates, and earned income tax credit rates. Existing flat and curve rates or step (cliff) rates with less or more brackets are unfair and complex; and
9. Existing two tax systems, which are about 13 months apart, may be simplified and combined together to provide one common system or format for all related parties to have tax simplification fairly and simply.
There are usually two tax systems in an existing tax system: (1) Tax Rate Schedules and lengthy tax withholding tables (such as federal 21 pages, KS 22 pages or MO 10 pages) are used for employers to estimate income taxes and (2) Tax Table (federal 12 pages) and Tax Computation are used for taxpayers to correct tax estimations and file tax returns. Federal Publication 15 (Employer's Tax Guide) has 69 pages. Publication 15-A (Supplement to Pub. 15, Employer's Tax Guide) has 73 pages. The differences between the two tax systems add tax complexity, require every taxpayer to file a tax return and cause potential tax fraud crimes. 1040 Instruction has 108 pages. 1040A Instruction has 92 pages. 1040EZ Instruction has 48 pages. Most state tax systems are in similar situations. All tax reform, budget balance, tax system and code simplifications are important.
One effective (linear) tax rate range with a straight line can be used to replace several existing tax brackets with flat and curve tax rates comparably (see the figures at the bottom parts of Federal and State websites). Linear relationship is the most fair and simple without connecting with taxable incomes for its changing slope, which provides a good foundation for “Fair and Simple Tax Rates for Big Saving”. The LG tax rate system can offer15 benefits to help lawmakers, taxpayers, companies and governments.
Reference #1: https://taxfoundation.org/historical-income-tax-rates-brackets/
Reference #2: https://taxfoundation.org/compliance-costs-irs-regulations
Would you please join me to sign or support a public petition to simplify our tax systems and save our tax revenue (billions of dollars)
www.change.org/p/income-tax-simplification-to-save-our-tax-revenue-billions-of-dollars
For more information or question/comment, please contact us at johnlee@taxsimplecenter.net or johnlee1040@yahoo.com