>It would be hard to convince me that a system that doesn't allow a reasonable tax-free allowance would work well. With an allowance:
>(a) Everyone receives the same benefit. In fact, arguably, the higher earners receive most benefit since they would otherwise be paying the higher rate on the amount.
>(b) The cost of collecting (under your structure) less than $150 from a huge number of people would probably result in an increase in the size of the IRS - certainly not reducing it by 90% !

In the U.S. you can actually receive more back on your tax refund than you paid because of child credits. A single Mom who makes minimum wage and has 1 child will receive thousands more in tax refunds than she pays in and it only goes up from there (with more children). Receiving 1% of the first 15k is an improvement if you can believe it!!!

The reason the IRS would reduce by 90%+ is because audits become very, very simple to conduct if there are no deductions to prove/disprove.

>I also don't buy into the argument against child benefits/allowances. Again high and low earners benefit equally and, at the lower end of the scale, it can mean that children are not raised in poverty.

In the the U.S. there are plenty of housing assistance and food assistance programs to ensure children don't go homeless and/or hungry. Unfortunately a child doesn't get to choose their parents and there will always be way too many children raised in very, very bad environments (not just homeless/hungry but abuse too). There is nothing we can do about that. Sad but true.


>BTW I read this : http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html?x=0
>If I got it right then a family with two children would earn $50K before paying tax in the US. A rough calculation for a UK family in the same circumstances:
>
>Gross Income : £32,000
>Allowance : £7,500
>Taxable Income: £24,500 @ 20% : £4,900
>Child Allowance recd: £1,700
>
>Net paid to govt : £3,200 ( i.e 10% of gross income)
>
>Applying your structure to a $50K earner I calculate that they'd be paying $6,650 - so, given the effect of UK VAT, maybe about the same ?

I think we should consider a national sales tax, also referred to as a consumption tax, because it encourages savings. In fact the Fair Tax book advocates eliminating all income tax and switching to a sales tax only system. It's an interesting read and did you know that a few of the world's largest economies are already run on a sales tax only system? It's true: Texas and Florida have no income tax.