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Appendix 2
Revenue, Income, and Inheritance Tax Calculation

Recall that three issues—the setting by the demos members of the corporate and business, the personal income, and the inheritance tax scales—require the line graph voting input method. A vertical line along the left edge of the graph, the vertical axis, would be labeled at intervals from bottom to top with percentage tax rates, i.e., 0%, 1%, 2%, 3%, etc. A horizontal line along the bottom edge of the graph, the horizontal axis, would be labeled from left to right with annual gross revenue or income amounts or with inheritance amounts, i.e., $0, $1,000, $10,000, $100,000, $1,000,000, etc.

The single line displayed on the graph, the percentage tax rate line, would represent the current consensus of the demos electorate on the issue. A demos member would vote on the issue by selecting various parts of the tax rate line and coloring them green, yellow, and red to indicate which portions of the line and, therefore, the tax rate should be increased (green), kept at their current level (yellow), or decreased (red).

Given a simple sliding-scale tax rate with no exemptions, the most obvious manner of calculating the amount of a given taxpayer’s tax would be to simply locate the dollar amount of the taxpayer’s gross revenue or personal income for the tax year or of an inheritance along the horizontal axis of the graph, note the percentage tax rate of the point on the tax rate line vertically above this amount, and then simply multiply this percentage rate (expressed as a decimal number) times the dollar amount to calculate the tax. Done!

This is not the manner in which the tax amount due would actually be calculated. The method of calculation that would be used is presented below.

But, for the moment, let us stick with the tax calculation method just described. The demos member would not need to do any calculations to determine the amount of tax due. The demos voting terminal would calculate the tax for the member. The demos issue’s page would allow the demos member to simply type the dollar amount of revenue or income for the year or of an inheritance into a small box, and, given the current demos consensus, the percentage tax rate and the amount of tax due would be immediately displayed. In addition, as a visual aid, uniquely-colored lines, say, light blue, would extend vertically from the specified dollar amount on the horizontal axis to the intersection point on the tax rate line and from there horizontally left to the vertical axis tax rate scale. Or, at tax time, the taxpayer may simply look up the dollar amount in the appropriate tax agency’s tax table to see the amount of tax owed.

It should be understood that the demos would be used for voting on issues including the setting of the tax rates for each of the three sources of tax revenue. It would not be used for the calculation of one’s actual taxes. The voting terminal could only show the tax rate and the amount of tax due for a given dollar amount given the current consensus of the demos. A voter may find this to be a useful tool when coloring various sections of the percentage tax rate line green, yellow, and red when casting a vote on tax rates or to merely satisfy curiosity. Although the tax rates currently shown by the demos would likely be very close to what the rates will be at tax time, the actual tax rates for a given year would be set when the tax revenue collection agency used the demos consensus at some predetermined time, the same time each year, for the creation of its tax tables for the year.

With these things in mind, let us now examine the actual method by which each taxpayer’s tax would be calculated. It may be that this is not a new idea and we may be merely reinventing the wheel, but this idea came spontaneously to this writer while examining the question of fairness in the calculation of taxes.

The source of the dollar amount to be taxed doesn’t matter. Whether it is from revenue, income, or inheritance, the demos’ three tax scale issues’ pages have a similar appearance and the tax calculation method is the same.

The question of fairness in taxation is rather nebulous. We may and do honestly disagree as to what manner of taxation is fair. Some people consider any and all taxation to be unfair and would ban it entirely. Some people believe certain exemptions are necessary to achieve fairness. Some people favor a flat tax. Other people favor a simple sliding-scale, i.e., a progressive, tax. For the demos a simple sliding-scale tax with no exemptions has been embraced.

While we may in our society consider to be fair the principle that the more one has benefited economically the larger the tax burden one should bear even to the extent of bearing a higher tax rate, i.e. a progressive tax rate, there is a much fairer method of sliding-scale or progressive tax calculation than the one described above. Wealthier taxpayers, who generally know what is to their advantage, will no doubt realize that it is primarily as a matter of fairness to them that the tax computation method described below was devised. (Given the hard time the wealthy have been given in this book, the inclusion of a new method of calculating sliding-scale taxes that is fairer in a way that is beneficial to these poor souls may seem surprising. But, as has been written elsewhere, this work is not about socking it to the rich. It is about fairness and equity for all.)

The question may be raised as an issue of fairness, why should a company or individual earning during a given tax year a dollar amount, say, twice as large as some other company or individual have to pay at a higher tax rate for every dollar earned? Wouldn’t it be more fair for the company or individual to pay the same rate as the other taxpayer for the dollar amount that is equal to that of the other taxpayer and then pay taxes at a higher rate only for the dollar amount earned in excess of the other taxpayer? But there aren’t just two taxpayers; there are millions of them. Can a simple, sliding-scale and yet more equitable tax calculation principle involving millions of taxpayers be devised in which a company or individual earning a greater amount does not have to pay at a higher tax rate for every dollar earned?

Yes. The tax computational method that would be used by the IRS and the demos is as follows: The first dollar earned or inherited during the tax year by every taxpayer of a given tax revenue source—corporate and business, personal income, or inheritance—would be taxed at exactly the same rate. Every taxpayer who earned a second dollar during the tax year would have that second dollar taxed at the same rate, and, depending on the percentage tax rate scale set by the demos for the issue, the tax rate levied against the second dollar may be the same as but more likely slightly higher than the rate levied against the first dollar. Every taxpayer who earned a third dollar would have that third dollar taxed at the same rate, which may be the same as but more likely slightly higher the rate levied against the second dollar. Each taxpayer would continue to be taxed in this dollar-at-a-time manner until the taxpayer had no more earned or inherited dollars to be taxed.

Surprisingly, we may use exactly the same line graph described elsewhere in this work and again at the beginning of this appendix. Basically, what we need to do is to alter how we see and use the dollar amount horizontal axis of the graph. Rather than seeing, say, a $10,000 dollar amount as a lump sum to be taxed at a single rate, imagine 10,000 vertical lines rising up from the horizontal dollar amount axis from its one dollar point to its $10,000 point to meet the tax percentage rate line at 10,000 points along the line. Each point along the horizontal axis represents one of the 10,000 individual dollars to be taxed, and each intersection point along the tax rate line represents the rate at which its related dollar would be taxed. The total tax due would equal the sum of the taxes levied on the individual dollars.

This method of calculating taxes would involve many calculations. Before the age of computers this method of calculating taxes would have been absurd. But now we do have computers capable of lightning-fast calculations and monitors capable of displaying beautiful graphic representations of calculated results. It is time for our method of calculating taxes to catch up with our calculation capabilities.

As for the taxpayer, the method for determining the amount of tax due on a given dollar amount remains exactly the same as that described in the first tax calculation method above. The demos issue’s page would allow the demos member to simply type the revenue, income, or inheritance dollar amount into a small box, and, given the current demos consensus, the average or overall percentage tax rate and the amount of tax due would be immediately displayed. (With this tax calculation method—each dollar being taxed at a different rate—determining the amount of tax due involves a lot of computer calculations, but the average or overall percentage tax rate levied is determined by a simple calculation. It equals the dollar amount of tax due divided by the dollar amount being taxed times 100.) Or, at tax time, the taxpayer may simply look up the dollar amount in the appropriate tax table to see the amount of tax owed.

While a person who believes any taxation at all or any kind of progressive taxation to be unfair would not be placated by this method of calculating taxes, and a taxpayer may still get steamed about a tax burden, this method of tax calculation would at least achieve tax fairness in the sense that if a taxpayer earned or inherited, say, $100,000 during a tax year, the taxpayer would pay the same tax on the 1,000^th dollar as every other taxpayer who earned or inherited a 1,000^th dollar and the same tax on the 100,000^th dollar as every other taxpayer who earned or inherited a 100,000^th dollar.

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Appendix 2 Revenue, Income, and Inheritance Tax Calculation

Appendix 2
Revenue, Income, and Inheritance Tax Calculation