A new Day for the tax code?

Before Stockwell Day was a screamingly ineffective campaigner for Prime Minister of Canada, he was the treasurer of Alberta; and back in those days, when I was a graduate student in BC, he came up with the simplest and best tax system I’ve yet run across.

Alberta Treasurer Stockwell Day is proposing to de-link Alberta’s provincial tax system from its federal counterpart. Instead of Albertans paying provincial tax on a percentage of their federal tax payable, a tax on a tax, they will instead pay a single rate of 11% on their taxable income, a tax on income.

This move to flatter taxation is to be applauded and Mr. Day has ensured that the move is beneficial to all income groups. [Part and parcel] with the planned move to the single rate tax is a substantive increase in the provincial basic personal exemption and spousal exemption to $11,620 up from $7,131 and $6,055 respectively. And Mr. Day has pledged to index the exemption to inflation to ensure that the hidden tax increase known as “bracket creep” is vanquished from the Alberta landscape. . . .

Alberta has now ensured that those with incomes under 11,620 pay a rate of 0% and everyone else pays 11% on their income above the basic personal exemption. So the effective provincial rate on someone earning $30,000 is 6.7% and the effective rate on someone at $100,000 is 9.7%.

Tweak the numbers to fit the current American situation, but the basic idea is right on: put all income into one bowl, exempt the first $X per person, and tax all the rest at the same rate. Cut the tax form down to a page, make the tax code transparent, drastically reduce the IRS payroll (and trim a lot of corporate bureaucracies as well) . . . what’s not to like?

Oh, yeah, and boost the economy, too.

Photo © 2006 Thorfinn Stainforth.  License:  Creative Commons Attribution-Share Alike 3.0 Unported.