By Matt Sly
In 2017, Republicans held up an index card and said the tax code should be simple enough to fit on one. Then they passed a 185-page bill that added new deductions (Section 199A), new phase-outs, and a sunset provision that guaranteed we’d have the whole fight again in 2025. The index card was a prop.
This is not a prop. This is a companion proposal to the Lifetime Gains Framework, which redesigns how America taxes capital gains. This essay tackles the other side of the ledger: how we tax ordinary income. The goal is the same: radical simplification that makes the system fairer, more transparent, and dramatically easier to administer.
The core insight is simple. The income tax rate table (the thing most people think of when they think “taxes”) is ugly but basically functional. Seven brackets, progressive rates, fine. The complexity lives in everything bolted around it: the standard deduction, itemized deductions, filing status rules, and the dozens of special provisions that interact with each other in ways that nobody fully understands. Strip that away, replace it with a clean rate table and a 0% bracket, and you eliminate most of the complexity without changing what most Americans owe.
The standard deduction is a hack. It was introduced in 1944 as a wartime simplification measure to reduce the number of taxpayers who had to itemize. It worked. But eighty years later, it has calcified into a load-bearing wall that distorts the entire system.
Here is how it works: the government defines a taxable income, then immediately subtracts a flat amount ($31,500 for married couples in 2025) before applying rates. This means the first $31,500 in income is effectively untaxed. Sounds progressive, right?
The problem is that a deduction’s value scales with your marginal rate. The standard deduction saves a household in the 12% bracket about $3,780. The same deduction saves a household in the 37% bracket about $11,655. That is three times the tax benefit for earning six times the income. A 0% bracket doesn’t have this problem. Zero percent of $30,000 is $0 for everyone, regardless of what you earn above it.
Most modern tax systems already figured this out. The UK has a “personal allowance” (a 0% bracket). Australia has a tax-free threshold. Germany uses a 0% zone. The United States is the outlier, clinging to a deduction-based system that is both more complex and more regressive than the alternative.
Then there’s itemized deductions, which layer a second set of problems on top of the first.
The mortgage interest deduction costs the Treasury roughly $25-30 billion per year. It is sold as a homeownership incentive. It is actually a subsidy for borrowing. A family that saves diligently and buys a house with cash gets nothing. A family that stretches into a $750,000 mortgage gets a tax break. The incentive is backwards.
And it doesn’t even work. The U.S. homeownership rate is roughly 66%. Canada’s is roughly 67%. Canada has no mortgage interest deduction. The UK eliminated theirs in 2000. Neither country’s housing market collapsed. The TCJA already half-killed the MID by doubling the standard deduction (the number of itemizers claiming mortgage interest dropped from roughly 33 million to 13 million). Nobody noticed.
The state and local tax deduction (SALT) is a federal subsidy for high-tax state governments, delivered through the personal returns of high-income taxpayers. The charitable deduction is worth $3,700 to someone in the 37% bracket and $1,200 to someone in the 12% bracket for the same $10,000 donation.
Every deduction in the tax code has this structural problem. A deduction’s value is proportional to your marginal rate. This means every deduction is, by construction, worth more to wealthier filers. There is no principled technical reason to deliver tax benefits as deductions. Credits and 0% brackets don’t have this problem. The only reason deductions persist is political: the beneficiaries are organized and loud.
The proposal: eliminate all of them.
No more standard deduction. No more itemizing. No more choosing between them. No more Schedule A. No more mortgage interest deduction, SALT deduction, medical expense deduction, or any of the other line items that exist primarily to make April complicated.
With deductions gone, the rate table does all the work. Here is what it looks like (married filing jointly):
| Income | Rate |
|---|---|
| $0 - $30,000 | 0% |
| $30,000 - $130,000 | 12% |
| $130,000 - $300,000 | 22% |
| $300,000 - $750,000 | 35% |
| $750,000+ | 43% |
Single filer brackets are half these thresholds.
The 0% bracket replaces the standard deduction. For households earning under $130,000 (roughly 75% of American households), the tax savings from the 0% bracket equal or exceed what the standard deduction provided. Five brackets instead of seven. No deductions to calculate. No choice between standard and itemized. The rate table is the tax code.
Note: These are preliminary estimates based on bracket math and standard distributional models. They have not been scored by CBO or JCT. The numbers are directionally correct but should be treated as stakes in the ground, not final calibration.
How this compares to current law (married filing jointly, income tax only):
| Household Income | Current Law | New System | Difference |
|---|---|---|---|
| $50,000 | $2,576 | $2,400 | -$176 |
| $100,000 | $8,576 | $8,400 | -$176 |
| $150,000 | $17,400 | $16,800 | -$600 |
| $250,000 | $40,200 | $38,800 | -$1,400 |
| $500,000 | $118,700 | $114,300 | -$4,400 |
| $750,000 | $206,200 | $201,800 | -$4,400 |
| $1,000,000 | $298,700 | $309,300 | +$10,600 |
| $2,000,000 | $668,700 | $739,300 | +$70,600 |
The crossover point is approximately $800,000 in household income. Below that, you pay less. Above it, you pay more. Nobody earning under $250,000 sees a tax increase.
One thing the current rate table gets badly wrong: there is a 10-percentage-point jump from 12% to 22% at roughly $96,000 (MFJ), which nearly doubles the marginal rate for a moderate earner. Then the jump from 22% to 24% is only 2 points across $100,000 of income. This shape is the result of political horse-trading, not design. The proposed table smooths this somewhat, though a fully linear rate was tested and creates revenue problems at the low end.
Eliminating all deductions raises an obvious question: what about the things deductions were actually meant to encourage or protect? Most deductions (the mortgage interest deduction, SALT) are subsidies for specific financial choices that don’t need federal encouragement. Two areas genuinely do: charitable giving and catastrophic medical costs. In both cases, the current deduction is the wrong mechanism. A credit is better.
Charitable giving credit. Replace the charitable deduction with a 50% credit on donations, capped at 5% of tax liability. A $1,000 donation generates a $500 credit whether you earn $50,000 or $5,000,000. Under the current deduction, that same $1,000 is worth $370 to someone in the 37% bracket and $120 to someone in the 12% bracket. The credit democratizes the incentive. The 5% liability cap ensures charity cannot become a dominant tax avoidance strategy (95% of your liability is untouchable), dramatically limiting the benefit of very large gifts relative to current law. For a deeper treatment of the donor-advised fund tension and the interaction with appreciated asset donations, see the charitable giving companion page.
Medical cost credit. Replace the itemized medical expense deduction with a 30% refundable credit on medical expenses above a $5,000 threshold. Under current law, the medical deduction only helps the roughly 13% of filers who itemize, and only on expenses exceeding 7.5% of AGI. A family earning $60,000 with a $15,000 medical emergency gets almost nothing. Under the credit, they get $3,000. The credit is fully refundable, meaning it helps even filers with zero tax liability (the people most likely to be crushed by medical costs). Over time, as the Universal Savings Account is widely adopted (with its tax-free medical withdrawals at any age), the need for this credit may diminish. But until that transition is complete, eliminating medical cost protection without a replacement is not an option.
Both credits are available to every filer. Neither requires itemization. Both replace a regressive deduction (worth more to wealthier filers) with a mechanism that provides equal or greater benefit to middle- and lower-income households.
The current system has five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Surviving Spouse. Each has different bracket thresholds, different phase-out rules, and different interactions with credits and deductions. Head of Household alone has its own bracket table, its own standard deduction amount, and its own set of qualifying rules.
With all deductions eliminated and phase-outs gone, most of this complexity evaporates. What remains:
That’s it. Head of Household becomes unnecessary when dependent-related benefits are delivered through a universal child payment rather than through filing status. Qualifying Surviving Spouse is absorbed by the same logic. Married Filing Separately persists only as a mechanical option for separated couples, not as a separate bracket structure.
The standard deduction and all itemized deductions. Schedule A disappears. No more choosing between standard and itemized. The 0% bracket replaces the standard deduction more progressively and more simply. The charitable and medical deductions are replaced by targeted credits (see above). The mortgage interest deduction and SALT deduction are eliminated outright.
The mortgage interest deduction. A subsidy for borrowing that doesn’t increase homeownership. Already half-dead after the TCJA. This finishes the job.
The SALT deduction. A federal subsidy for high-tax state residents that primarily benefits high-income households. Eliminated entirely.
The charitable deduction. Replaced by a 50% credit capped at 5% of tax liability. The incentive to give is preserved and democratized; the tax avoidance potential is sharply limited.
The medical expense deduction. Replaced by a 30% refundable credit on expenses above $5,000. Available to all filers, not just the 13% who itemize.
The pass-through deduction (Section 199A / QBI). This 20% deduction for pass-through business income expired at the end of 2025. It was a carve-out that primarily benefited high-income business owners and added substantial complexity (the rules for “specified service trades or businesses” alone were Byzantine). This proposal does not renew it. Small business owners are more than compensated by the simplified rate table, FICA reform (15.3% down to 8% for the self-employed), and the Lifetime Gains Framework’s $2.5 million tax-free exemption on business sale proceeds.
Three filing statuses. Head of Household, Qualifying Surviving Spouse, and the practical distinction of Married Filing Separately all become unnecessary.
Dozens of phase-out calculations. Every eliminated deduction had its own phase-out range, its own income definition, and its own interaction effects. The new system has no phase-outs in the rate table. Income goes in, tax comes out.
This proposal has losers, and I want to be direct about who they are.
High earners in expensive coastal markets lose the most. They lose the mortgage interest deduction on large mortgages, the SALT deduction (which was already capped at $10,000 by the TCJA), and they face a higher top rate (43% vs. 37%). A household earning $1.5 million in San Francisco or New York will pay meaningfully more. This is by design. The current system’s deductions disproportionately subsidize high-cost-of-living choices made by high-income households.
The tax preparation industry loses complexity. The $11 billion tax-prep market depends on a system that requires professional navigation. Five brackets, no deductions, and no phase-outs make professional preparation optional for most households.
Real estate and mortgage lending lobbies lose their most powerful tax incentive. The National Association of Realtors spent $84 million on lobbying in 2023. They will fight this. But the evidence is clear: removing the mortgage interest deduction does not reduce homeownership. It reduces the subsidy for larger mortgages.
People make financial decisions based on existing tax rules. A household that bought a home partly because of the mortgage interest deduction shouldn’t have that rug pulled on day one.
The transition principle: existing commitments are honored with a sunset. Mortgages originated before the enactment date continue to qualify for the interest deduction for the remaining life of the loan (or refinance, whichever comes first). New mortgages issued after enactment have no deduction.
This is not a phase-in. The new rate table takes effect on day one. The transition provisions are narrow and temporary, applying only to commitments already made.
The bracket restructuring alone is roughly revenue-neutral to modestly positive (an estimated +$10-70 billion annually). Revenue lost from tax cuts below $750,000 (approximately $50-80 billion) is offset by revenue gained from the 43% top rate above $750,000 (approximately $90-120 billion). Eliminating the mortgage interest deduction recovers roughly $25-30 billion. Eliminating the SALT deduction recovers roughly $10-15 billion (partially already captured by the $10,000 TCJA cap). The charitable credit costs less than the current deduction (preliminary savings of $20-40 billion, depending on behavioral response). The medical credit is roughly comparable in cost to the current deduction (~$10-12 billion).
The income tax reform is designed as a simplification and fairness play, not a major revenue raiser. The heavy revenue lifting is done by the Lifetime Gains Framework ($85-200 billion per year from capital gains reform). Together with companion reforms to FICA and child benefits, the full system is simpler, fairer, and meaningfully revenue-positive.
Note: All revenue figures are preliminary estimates. Formal scoring by JCT/CBO would be required for legislative purposes. Behavioral responses (changes in housing decisions, labor supply) could meaningfully affect these estimates in either direction.
This essay covers one piece of the Fair and Simple Tax Act. The rate table, deduction elimination, and replacement credits stand on their own, but they’re designed to work with companion proposals:
Each can be enacted independently. Together, the entire tax code for a typical American household fits on an index card. Not as a slogan. As a fact.
Matt Sly is a software entrepreneur with twenty years of experience building products used by millions. The income tax reform proposal is part of the Fair and Simple Tax Act, a comprehensive approach to modernizing the U.S. tax system.
Revenue estimates are preliminary. All policy positions and framework design are the author’s own.