Before even starting we need to understand that "deficit spending" is merely the result of not collecting enough in taxes to fund the Congressionally authorized expenditures. Currently all deficits relate to general expenditures because Social Security/Medicare have a dedicated tax source that has collected trillions of dollars in excess of authorized expenditures. In 2015 we had about $2.282 trillion in gross general tax revenues and $2.721 trillion in general expenditures resulting in a deficit of $439 billion dollars. https://en.wikipedia.org/wiki/2015_United_States_federal_budget#Receipts While there are ( different federal general tax revenue sources identified the personal income tax ($1,534 billion), corporate income tax ($449 billion), and Estate/Gift Tax ($18 billion) all relate to "income" and represent roughly 88% of all federal general tax revenue and must be the focus for balancing expenditures and revenue. We're also going to consider the fact that Congress determines the authorized expenditures, not us, and Congress doesn't seem to have any problem with "spending money" (sarcastically stated) but does have a serious problem with collecting enough revenue to fund the expenditures and prevent deficit spending. This proposal is about collecting the revenue necessary as opposed to cutting the spending to ensure that we don't have deficit spending which increases the national debt. So let's start with the basics: PERSONAL INCOME TAXES: 1. Eliminate the Capital Gains Tax. It makes absolutely no sense to create the invidious classifications of "earned income v unearned income" where the unearned income is taxed at roughly 1/2 the tax rate when compared to earned income. It's all income and it all spends the same so let's just tax "income" without any invidious differentiation of what the source of the income might be. 2. Eliminate Tax Credits Tax credits are a payment from the general tax revenues to the taxpayer that have been nefariously rolled into the tax codes which reduces the general revenue. While Congress may have reasons for the payments to the taxpayers these should be a part of the annual authorizations expenditures and not hidden within the tax revenue source. 3. Eliminate All Individual Tax Deductions The purpose of tax deductions was to reduce "gross income" to "net taxable income" where the necessary and mandatory expenditures of the household were "deductible" while only "disposable income" (that is income above the "necessary and mandatory" expenditures) was subject to federal income taxation. Unfortunately over time the "deductions" have been corrupted by the politicians so include "discretionary spending" by the households so let's get rid of it. 4. Create A Tax Exemption Based Upon Median Household Income ($53,657 in 2014) Retaining the principle behind that Tax Deductions that only "disposable income" (i.e. income in excess of the necessary and mandatory expenditures of the household) should be subject to the income tax the Exemption from Taxation is proposed to replace itemized tax deductions. The exemption amount is based upon two different sources: Firs is the right to "support and comfort" based upon the labor of the person based upon the Natural Right of Property as argued by John Locke in his Second Treatise of Civil Government, Chapter 5. http://www.constitution.org/jl/2ndtr05.txt Second is the MIT Living Wage Calculator that establishes the minimum necessary mandatory expenditures of the household. http://livingwage.mit.edu/pages/about In an effort to consolidate the ideology of the Natural Right of Property as expressed by John Locke and the MIT Living Wage Calculator that quantifies the actual "minimum necessary mandatory expenditures of the household" that varies by location slightly within the United States this proposal settles on "median household income" as the basis for the Household Exemption amount. Basically it covers the minimum necessary and mandatory expenditures of the household with a few dollars left over for "comfort" depending upon frugal budgeting by the household. The median household income changes annually and would be adjusted annually. It also varies by household composition and adjustments based upon family size and composition is to be accounted for. 5. Eliminate the Inheritance and Gift Tax All inheritance and gifts to the person/household are a form of income and will be taxed as income. There will be no special tax rates for either gifts or inheritance but instead they will simply be identified as "income" for tax accounting purposes. 6. Create a Voluntary "Once in a Lifetime" Tax Exemption of Up To $5 million Regardless of source the person/household can exempt all income for one year up to $5 million. All income for that year above the $5 million will be taxed at the tax rate established for the year. This could relate to a large inheritance, a large gift, lottery winnings, a signing bonus, or even regular wages from employment but it can only be exercised once by the "primary income earner" on the tax return. 7. Corporate Tax Rate Same as Personal Income Tax Rate The corporate tax rates would be the same rates as the personal income tax rates and applied to net income (i.e. income above the actual cost of production and/or providing the service) of the corporation. It never made sense that a sole proprietorship paid the personal income tax rate while a corporation paid a different tax rate. 8. The Personal and Corporate Income Tax Rate is Based Upon the Annual Authorized General Expenditures of Congress This is how we ultimately prevent deficit spending because the tax rate fully funds the expenditures. It's also relatively easy to calculate the tax rate because we roughly divide the gross domestic income (GDI) in half to account for the Exemption on Median Income and divide that by the authorized general expenditures (although this ignores revenue from corporate taxation). By way of example in 2013, a year where we had $680 billion in deficit spending, the GDI was $14.4 trillion and the general expenditures were about $2.6 trillion so we need only divide the $2.6 trillion by $7.2 trillion and the tax rate would have been 36.1% but remember that this tax rate is only imposed on personal income above the median income of $51,939 for 2013 that is Exempted from taxation on this proposal. We can also note that this is an extremely high estimate of the tax rate because corporate income tax revenue is not being accounted for. In reality the tax rate would have been closer to 29% for 2013 when corporate income taxes are accounted for. http://www.indexmundi.com/facts/united-states/gross-domestic-income https://en.wikipedia.org/wiki/2013_United_States_federal_budget#Total_receipts In any case the tax rate would have been exceptionally high to ensure a balanced budget in 2013 IMHO and that fact alone would have provided a motivation for Congress to reduce the authorized expenditures and currently Congress doesn't really have that motivation because expenditures are unrelated to the tax rates being imposed upon Americans.