THE CAL SIMPLE TAX PLAN

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UNITED CALIFORNIANS  

FOR TAX REFORM  

info@CalSimpleTax.org   

 

THE CALIFORNIA SIMPLE TAX

Economic Impact on Single Taxpayers

The Franchise Tax Board reports that 85 percent of California Single Taxpayers earn less than our $50,000 income limit and would therefore qualify to use our optional plan.  So how would our plan affect their taxes?

During the 1996 presidential primary election the Orange County Register examined the taxes paid under current law by five families and contrasted this with what they would have paid under the various Flat Tax plans. We have created similar but fictitious families to demonstrate the financial impact the CAL Simple Tax plan might have on you or someone you know.

A young, single worker whose income is $22,880

Our hypothetical worked earns $11.00 per hour, rents, and claims the standard deduction. Under the current Tax Code he would pay $381, while under our plan he would owe $396. Professional tax preparers would typically charge him $75 or more to file his Federal and State tax returns. He might save up to $25 in these fees by filing himself using our 540-Simple tax form - more than making up the additional $15 due in taxes under our plan.

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A senior pensioner whose income is $23,314

Our senior pensioner is 74 year old. She receives a monthly income of $1030 from Social Security as well as dividends and interest of $10,954 on her investments. Under the current Tax Code she would pay no state taxes. Under our plan she would owe $98. The taxes our pensioner owes are much lower than the single worker in our previous example because the income from Social Security Distributions is not taxed by California. Professional tax preparers would typically charge over $200 to file her Federal and State tax returns. She might save up to $70 in these fees by filing herself using our 540-Simple tax form.

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A single mother whose income is $46,181

Our single mother is a head of household with a college age son. She rents and claims the standard deduction. Under the present Tax Code she would owe $698 in state taxes. Under our plan, which does not offer a child tax credit, she would owe $904. Professional tax preparers would typically charge her $200 or more to file her Federal and State tax returns. She might save up to $70 in these fees by filing herself using our 540-Simple tax form.

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A single white-collar worker whose income is $47,881

Our single homeowner is manager at a local supermarket. He claims $15,190 in mortgage interest and property tax deductions. Under the present Tax Code he would pay $1158. Under our plan he would owe $1021. Professional tax preparers would typically charge $230 to file his Federal and State tax returns. He might save up to $75 in these fees by filing himself using our 540-Simple tax form as well as saving $137 in state taxes.

In summary, our plan distributes the tax burden evenly and fairly based on total income, not how that income is spent or the age of the taxpayer or how many children are in the family.

  • Under our plan, the tax burden in the examples above as a percentage of income was 1.73%, 0.42%, 1.96%, and 2.13%.  

  • Under the present California tax code, the tax burden in the examples above as a percentage of income was 1.67%, 0.00%, 1.51%, and 2.42%.

  • The marginal tax rate under our plan is a constant 2.5% while in the examples above the current tax code imposed marginal tax rates of 4, 0, 4, and 8 percent.

The IRS estimates that the time required by taxpayers to collect the necessary records, study, prepare, and submit a 1040 Form at 15 to 25 hours. The California 540 Form is not a lot simpler. We expect, however, that you will find the time it takes you to prepare our Form 540-Simple will be measured in minutes rather than hours.

We hope that you will be pleased with the tax savings you may expect from our plan as well as the savings both in time and record keeping. You may also save money you have previously given to a professional tax preparer as well.

TRY THIS!   

Once you've computed your new "Simple Tax" with our proposed Form 540-Simple, compare the result to what you paid in state taxes in 2002. Be sure to include the cost of a professional tax preparer if you used one.

 

 

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