Sources:
http://www.milefoot.com/math/businessmath/taxes/fit.htm https://www.fulleredu.com/taxstats/fed-income-tax/individuals/standard-deduction.php ​https://www.tax-brackets.org/federaltaxtable/1968 http://www.usinflationcalculator.com/inflation/historical-inflation-rates/
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The State is set to lose some $4.3 billion per year in revenue when the income tax rate falls on January 1 from its current 5% to 3.75%. Although waste certainly remains, there is not enough to cut to substantially offset the large revenue drop. Past due bills will again accrue and cuts will have to be made to core services as the State's finances remain precarious for the foreseeable future.
At the same time, taxpayers have done their part to contribute an additional $7 billion per year since 2011 and there is strong desire to lower the rate as promised. How then do we maintain a sustainable budget while reducing the tax burden? Rather than lower the tax rate, we should instead increase the personal exemption. The personal exemption is currently $2,175 and is subtracted for yourself, your spouse, and your dependents to determine your taxable income. For a family of three, that works out to $6,525 of income that is exempt from tax. If we leave the tax rate at 5% but increase the personal exemption to the poverty level for a family of three, they would have $6,600 per person or $19,800 of income that is exempt from tax. If that same family makes the median household income of $57,000, the income tax they pay will actually be less than they would pay at the 3.75% tax rate while those that make less save more. Even those with the highest incomes will see at least a $220 per person drop in income taxes over the current 5% rate. How does this help? It reduces the $4.3 billion revenue drop by 35% to $2.8 billion, restoring $1.5 billion annually to vital services. It provides tax relief to all from the current 5% rate. It provides tax relief to more than half of taxpayers from even the 3.75% rate. And it helps those living near poverty by reducing the amount of their income subject to tax. There is certainly more work to be done to achieve a sustainable budget, from further reducing waste to improving the business climate to creating jobs, but this and many more proposals should be brought to the table for discussion. |