The budget of the United States shall be established in five year increments. The budget of the United States shall be balanced. Persons making less than $25,000 per year shall not be subject to federal income tax. (Note: the same Social Security formula mentioned in previous tenets will be used to determine the total amount a citizen will be allowed to make before paying taxes. In essence, as the cost of living goes up, the more money that can be made before taxes kick in.) Taxes for citizens making more than $25,000 a year shall be taxed at a progressively higher rate as their income rises. Tax rates will rise in taxable increments of $25,000. Congress will set the tax rate based on their five year budget and the rate will include a 7% emergency fund over the agreed upon budget. If, at the end of five years, the fund goes unused, 20 % of the surplus will be returned to the citizenry each year that the fund goes unused in the same percentage as they were taxed.
There are three fundamental differences between this budget method and the current budget method. First, the budget must be balanced. Second, although the tax rate will increase as income increases, it will be the same, incrementally, for everyone as they go through the various tax brackets. It follows below:
0 – $25K = no tax
25K – 50K = 15 percent – but only on the amount over 25K (the first 25K is not taxed)
50K – 75K = mixed – no tax on first 25K, 15 percent for 2nd increment, 17 percent for 3rd increment
In essence the tax rate will rise 2 percent every 25K until it reaches a maximum rate of 50 percent.
This is different from the current method because currently the brackets are designed completely differently and once you are in a particular bracket you pay a tax based on the entire amount you make, not the incremental approach taken here.
Third, because the budget must be balanced the tax rate will be flexible. When the 5 year budget is determined, the tax rate for those 5 years will be based on that budget. This will certainly put pressure on lawmakers to limit the size of the budget, but requirements from other tenets will prevent lawmakers from harming the poor in order to save the rich money.
If unexpected emergencies require expenditures beyond the ability of the emergency fund, a temporary surplus tax will be necessary to again balance the budget.
One of the other expectations of this style of budget is that it will greatly limit the number of wars we engage in because we will all pay for it in real time. The current method of ‘borrowing’ money for wars allow us to ignore the reality that sooner or later the bill comes due.