My Tax Plan

Work with Congress, hopefully with Alabama Senator Richard Shelby (previous author of a Flat-Tax Bill) to establish a new United States Tax Code, establishing a nation-wide flat-tax on gross income.

Included in that legislation and new tax code would be some required definitions, such as definitions of an individual, definitions of a family, and definitions of a business and/or corporation. I recognize that defining a "family" is going to be a hot-issue, and quite potentially divisive. In reality, or legality, I don't think so, for a number of states already define this in their laws and tax codes, and since both the Federal and State Income Tax systems work side-by-side, I would hope to defer to each state to develop their own standard based upon the composition of their internal population because a one-size-fits-all does not work on the national level.

The family standard or definition must be one that is sound in judgement, while precluding abuses or potential manipulation of the system, in other words it must be based upon a familial-bond, as defined by State Code or Law. That definition must allow for the inclusion of the "concept" of the present "Head-of-Household" definition, whereby the familial-bond includes those families who are caretakers and caregivers of parents/grandparents within the residential structure or dwelling unit. That definition must also allow income of minor-children who are employed to be included in the family-income determination.

I have previously stated there would be NO deductions or exemptions within the new system, let me explain how that would be incorporated in My Proposed Flat-Income-Tax Proposal.

The Federal Government already has in place a standard by which they define the "Poverty Level" and many federal programs identify eligibility for Federal Assistance as an income up to and including two hundred percent (200%) of the Poverty Level, based upon family size. That 200-percent of the Poverty Level would be the baseline or foundation of the proposal.

The Federal Government also has in place two different standards for addressing cost-of-living. These are the General Service Administration's published rates for temporary duty per-diem rates for lodging and meals/incidentals; and the locality-pay standard used by many agencies of the federal government. Further investigation as to which of these would produce the greatest benefit for the American People will need to be determined, and it must be balanced with the obvious necessity of providing revenue for the federal government to operate.

Scenario #1-using GSA Per-diem rates. Go to Per Diem Rates and find the per diem rate for where you live. Note: The standard or baseline per diem is $77.00 for lodging and $46.00 for meals and incidentals, or a total of $123.00. Also note: that some areas may have "seasonal" rates because of various tourism issues, find the per diem rate that exists over the majority of the year for your area.

Now divide the sum of the lodging and meals/incidentals amount by $123.00. That will give you a decimal figure of between 1.00 and 2.00.

That resultant number becomes your Adjusted Tax-Exempt Family Income.

Scenario #2-Using the Federal Employees Locality Pay Adjustment. Go to SALARY TABLE 2012-GS and find the GS pay grade and step that is as close as possible to your minimum tax-exempt income. Write down that annual salary rate.

Now go back to 2012 General Schedule (GS) Locality Pay Tables and find where you live (metropolitan area), you may have to find it at Locality Pay Area Definitions. Once you find your locality pay area/region, go to that area's table, and find the same GS pay grade and step you did above. Now divide this new GS pay grade and step, which includes locality pay, by the number you found above and wrote down.

This number will not be less than 1.00 and most likely will not be over 2.00 either. Take this dividend and then multiply it by your minimum tax-exempt income, to get the Scenario #2 adjusted minimum tax-exempt income. This value will most likely be less than using the GSA Per Diem Rate Scenario, because just like when on vacation, your living expenses, are generally higher than when you are at  home.

Which looking at it, just "may" be the path I pursue in my tax plan. But anyway, either set of results shouldn't be more than about $5,000.00 in differnce.

Now again, this only applies to "Income". Which presently is a very broad and widely contested subject as well.

So here's my initial view point on Income:
Income would be defined as:

a. Wages, salary, tips for services provided, (i.e., Employment for which you received a statement from your employer at the end of the year on how much they paid you, like Form W-2, Wage and Tax Statement.)

b. Any "profit or gain" made over and above the amount of an original investment or purchase price, that is not rolled into a replacement investment or purchase of the same type within one year.

c. Income for a "family unit" includes any income from "a" or "b" received by all members of the family unit residing in the residence on a permanent basis, which shall be defined as more than six months of the calendar year.

"Income" does not include funds or property received as an inheiritance from a family member who has passed away, essentially eliminating the so-called "Death Tax".

"Income" does not include benefits received from Social Security (regular and/or disability) or the Veterans Administration as Disability.

Any gross income over the adjusted minimum tax-exempt income would be taxed at a rate of ten (10) percent. By taxing at the gross income over the adjusted minimum tax-exempt income, the long-term result in my position would be that any and all retirement benefits paid would be tax exempt, since as part of your gross income while working, they have been taxed.

As an example, where I live in Geneva County, Alabama, the GSA's per diem rate is the "standard per diem", meaning no locality based increase, and there is no salary adjustment for locality. Therefore, the national standard of poverty, times two (2) (which equals two-hundred percent of the poverty level) would be the basic amount of tax free income for an individual or family. Monterrey County. California has one of the higher GSA per diem rates in California at $134.00 for lodging and $71.00 for meals and incidentals for a total of $205.00 per day. The "standard" rate is $77.00 for lodging and $46.00 for meals and incidentals, for a total of $123.00 per day. Thus the Monterrey County per diem is 167% of the national standard. Whereas the Federal GS-4 Step 1 salary in Monterrey County is approximately 135% higher than the baseline Federal GS-4 Step 1 salary. That said, the poverty-level guideline for a family of four is $23,050.00, which makes the 200% benchmark at $46,100.00. Adjusting that benchmark for cost-of-living equates to either $76,987.00 using the GSA-calculation; or $62,235.00 using the Federal Locality Pay-calculation.

Therefore due to "cost-of-living" a family of four here in Geneva County, Alabama would have it's first $46,100.00 of annual income, non-taxable, and that same family of four if living in Monterrey County, California would have either it's first $76,987.00 or $62, 235.00 of annual income as non-taxable. Income above that amount would then be taxed at a Flat-Rate, which initially I'm thinking to be 10%, but that will require to be reviewed.

As for businesses and corporations, I would have to thoroughly review the Supreme Court's decision pertaining to Citizens United, to fully identify and understand their definition of a "corporate-person" and if the various definitions of a "family" as determined by individual states, conflict or not. As a starting point, I'm working under the "assumption" that they do not conflict, and that a business or corporation, while they may be a "corporate-person" do not meet the basic definition of a familial-relationship, and as such all gross-earnings of a business or corporation would be taxed at a Flat-Rate of 10%.

Future of Non-Profit's
Operating a federally recognized 501(c)(3) tax-exempt non-profit, I understand how important that tax-exempt status is for receiving donations and being able to function, as well as providing or performing the viable service that many do for the general public. Obviously if we proceed as above, and abolish the existing Tax Code, there would be no tax-exempt organizations. However, as I also stated, many of these provide and perform viable services for the community, that the government cannot or does not provide.

Many years ago, the so-called "standard" for purchasing a home, was that the monthly-mortgage should not exceed twenty-eight percent of your monthly income before taxes. Also, years ago, my grandmother, suggested to always pay myself first by trying to put at least ten-percent of my net income into some form of savings for long-term, as well as the frequently-called "rainy-day-emergency-fund". Then there are those in society, who believe that they should also provide a portion of the "fruits-and-labor" towards the betterment of their society, whether that be through their place of worship or into social programs, often the "accepted" amount is also ten-percent (10%).

So based upon the preceding paragraph, you have 28% for housing expense, 10% for personal savings, and then we'll say 10% for the betterment of society, which leaves essentially fifty-two percent (52%) of income to go towards other expenses such as food, clothing, utilities, transportation, insurance, etc. Is that a viable perspective? I'm not totally certain, but based upon today's economy for many individuals it is not. However that is not to say that a minority of the population, such as the upper-level income earners could not achieve such a break-down.

Let's look at the proposal in light of the above family of four in Monterrey County, California using the lower $62, 235.00 of annual income as non-taxable. That equates to a monthly non-taxable income of $5186.25. At twenty-eight percent for housing costs, that equates to $1452.15. Now to add in $518.63 (rounded to nearest penny) for personal/family savings, and another $518.63 towards society improvement, that leaves $2676.84 of non-taxable income towards other basic living expenses. Again, I don't know if that is truly viable.

If we look at that in terms of here in Geneva County, Alabama, you have the base-line $46,100.00 of non-taxable income. That equates to a monthly non-taxable income of $3841.67. At twenty-eight percent for housing costs, that equates to $1075.67. Now to add in $384.17 (rounded to nearest penny) for personal/family savings, and another $ 384.17 towards society improvement, that leaves $1997.66 of non-taxable income towards other basic living expenses. Viable?

As a Service-Connected Disabled Veteran, my non-mortgage expenses equal roughly sixty-percent of my income. However, that does not take into account that I can't put ten-percent into a rain-day fund, nor do I put another ten-percent into the community, financially. Instead, I do what I can by investing my time, playing the organ at church services weekly, for which it is strictly volunteer service, in addition there is the time, energy, labor, and costs associated with maintaining the grounds where we host a Native American Gathering, and the grounds around the Native American Veterans Memorials, including the only memorial dedicated to the thirty-two Native American Recipients of the Congressional Medal of Honor.

William M. Silaghi