Someone has to explain why gross income is a thing

Let’s pretend for a moment that you’re a baker. I own the bakery, you work for me and I ask you to make a cake. I might say, “I need you to bake me a cake. Make it two layers, with frosting, sprinkles and pretty icing along the edges.”

You say, “OK! Great!” And you get to work. You get all of your ingredients ready and at arm’s reach. You have just enough to make what you need to make a really great cake. But just as you start to work I say, “Oh, but I’m going to need one of those eggs, half of your sprinkles, about a cup of sugar and half a pound of flour. I hope that’s okay. I need it so I can give some smaller cakes to some kids down the street.”

“Oh, okay.” You say. “But, that won’t make for a very good cake for them. And it means I won’t have enough for the cake you requested.”

“Hmm. Well. Just make a cake anyway.” I say. And so you do and it turns out like crap. And the smaller cupcakes I make for the other kids are crap, too.

Now you’re thinking, “Yeah, you’re insane. I can’t make a cake if you take away any of of my ingredients!” Maybe you can do without the sprinkles, but that’s hardly anything in the grand scheme of the cake.

But this is what the government does all the time with benefits and services — it looks at your “gross income”, as opposed to what you actually have to, you know, use. Things like health insurance and other non-government benefits even look at gross income for tax purposes. In this case, the baker had his gross, in that he did have all the ingredients he needed to make a really great cake. But I came by and took some for the benefit of others, a noble goal, but now we’re left with crap. Neither of us gets a good cake now.

Now you’re thinking, “Oh Justin, he wants to have his cake and eat it, too.” Well, yes, actually, I do. Shouldn’t everyone strive for that? I’ve not even been bitten by this problem, either, it just strikes me as dumb.

When I worked at the State and my boss told me I was getting a raise the first thing that popped in my mind was, “Great! Now how much do I really make?” I don’t give a shit if I make a $50,000 dollars a year if I only get to take $30,000 of it home with me to actually spend on food and rent.

Someone has to explain to me why gross income exists. It shouldn’t, because it adds confusion and obfuscation to already complicated matters, which is precisely how you trick people into doing the wrong thing (see: the phone companies).

I wish I could say I had a solution to this problem, but I don’t. My best idea is that you have to do away with tax withholding and send people a bill twice a year — like property taxes. They get their income and they can do whatever, but they have to be prepared. And they would know precisely how much they pay in taxes each year. You show me a guy who has tax withholding and I’ll show you a guy who has no clue how much he pays in income taxes each year.

The existing system is going nowhere positive, but again, this strikes me as dumb. I imagine gross income exists because politicians and companies needed a way to artificially inflate people’s earnings to make them sound like they make more than they really do.

I’m not even ranting about lowering or raising taxes. It’s just that one component to it seems designed from the very beginning to be a way to screw people.

The Justin Harter Tax Plan

Because it’s on my mind as tax time rolls around, I thought it was time to reiterate The Justin Harter Tax Plan:

The Tax Form

  1. How much money did you make? _____________________
  2. What is 8% of that? _________________
  3. Pay us the amount from line #2.

Options

Indicate where you’d like your money to go, up to 4%:

  • NASA __________________
  • K-12  __________________
  • Colleges / Universites __________________
  • Wildlife __________________
  • Museums / Art / Historical Preservation __________________

and so on…

Under The Justin Harter Tax Plan, your 8% is divided in half. 4% goes to a general fund with everyone else’s and that’s the money the politicians can piss away. Want to build a bridge to nowhere? A train no one wants to ride? Have at it. Want to fight a war? Fine. So long as there’s money in that pot.

Let’s pretend you earn $50,000 a year. You’d owe $4,000 in income taxes. If you made a million dollars, you’d owe $80,000 and if you made $10,000, you’d owe $800. For most people this is going to be less than they pay now, but it ensures everyone pays their fair share, too. No deductions, no loopholes, nothin. The whole tax system could fit on an index card. We could fire half the IRS with the savings from simplifying the math alone. This is what will be used to fund the federal government.

“But Justin, how will the government afford things?” A politicians response will be something like “By preventing waste, fraud and abuse!” That never works because no one ever bothers looking into these things. Fraud and abuse happens when no one’s looking. My plan helps eliminate some of the fraud and abuse by making the various government agencies compete for your money.

Since you’d be able to dictate how much of your remaining 4% went to specific departments and agencies, they’d need to earn it. If you made $50,000 and had to pay $4,000 in taxes, $2,000 of it goes into the general pot and the other $2,000 is up to you. Want to go to the moon? Spend your $2,000 and get your friends to fund NASA. Want more federal funding for schools, donate it to education. Want to split it up and give a certain percent of your $2,000 to every agency there is, fine. It’s up to you.

Suddenly, NASA has to make those dollars work harder and smarter so they can convince people to give them more. Schools are going to have to make sure they make their case for more money – no ridiculous statues, fountains and stadiums – but a focus on computers, books and teacher salaries to retain the best and earn more. Yeah, they’ll have to advertise like companies do, but it would make sure more Americans knew what their government was up to.

If a department fails to deliver or just plain sucks, like any other enterprise, they’ll be forced to close and go away unless the politicians want to give them some money from the general pot to keep them going. Think Homeland Security is a pain in the ass? Don’t fund ’em!

Talk about democracy – that’s direct voting on every level of government directly by the people. “We’re sorry, the TSA only received $4.50 this year. Therefore, we’re closing.” We can all go back to flying on planes with nail clippers and shampoo like the good ol’ days.

Then, you never have to hear debates about “I don’t want my tax dollars to pay for that.” or “I don’t approve of such-and-such, it’s a waste, stop funding it.” Here, you won’t be paying for it and you really don’t have to fund it! America gets precisely how much government it, and you, can afford. Heck, if you wanted to donate more than your 8%, go ahead. It’s your money.