[hedora]

Computing tax rates against a moving average of the last 5 years income is a simple and elegant way to have the same effect.

Young people would have lower rates while they’re establishing themselves, people with windfalls would end up paying rates in line with their annual compensation (instead of just maxing out the brackets with a big percentage of their income).

Also, people with sustained high income would be taxed at a much higher rate than upwardly mobile members of the middle class.

Similarly, low income people with intermittent income would have a much better chance at building their savings.

Finally, it defeats all sorts of timing strategies, so people could make major financial decisions without first hiring a cpa.

[sokoloff]

That's interesting. In essence (assuming no tax law changes), you claim 20% of your income for the current year over each of the next 5 years for tax purposes. Has very nice properties for initial wage earners as you say.

Downsides: results in a 3x income tax charge if an income earner dies suddenly (assuming you want to settle their estate in less than 5+ years). Acts as a loan from the feds to the taxpayer, resulting in income taxes due after you stop working (perhaps you became disabled or got fired [or die, as above]), and results in deferral of income tax receipts to the government during the transition.

Overall, I really like it.