The simplest way to do taxes is to have your taxes be purely a function of your income.
My proposed tax law is this:
X = your Annual Income
Y = how much taxes you owe (if the equation returns less than 0 then you owe exactly 0)
Y = (X - $10,000)*(0.30)
We can shift things around by modifying the constants in the equation. $10,000 and 0.30 can be shifted up or down to achieve the desired result.
This is not a flat tax, since you pay no taxes on your first 10,000 dollars of income.
For example someone earning 10,000 a year pays a 0% tax rate, while someone making 20,000 a year pays a 15% tax rate. At 30,000 a year you will pay a 20% tax rate, and at 40,000 a year you are paying 22.5%
A simple tax rate will have a lot of benefit to our economy. Small businesses will easily be able to figure out payroll without paying a ton of money for accountants. This will lead to more small businesses creating new jobs.
In addition to simplifying our income taxes, we should use this same method to simplify all taxes.
Sales tax and property tax should just be converted into income tax and added into the normal income tax.
Business Tax should be a simple variation of this concept like this:
Y = (X - $300,000)*(0.02)
This will at first appear that I am lowering the business tax, however I'm not. Current practice is to tax only the profit, which is normally around 6% of revenue. They tax this at around 35% or 1/3rd. So if your profit is 6% of your revenue and we tax it at 1/3rd then that is approximately 2% of total revenue.
Capital Gains Tax should also be similar to this, but if needed we can do a variation where instead of having a flat dollar amount for exemption you get a percent per year. Take an example. Since inflation is around 2% we wouldn't want to tax you if all you do with your capital is keep up with inflation. In effect you haven't earned anything yet.
Therefore we could say that your tax liability is based on the income you have minus 2% per year.
So if you had $10,000 and invested it for 1 year making an average return of 5% each for a total of $500 then your tax would be:
Y = ((P*I)-(P*0.3))*0.15 or 15% of $300 which is $45