http://www.newtek.com/cool/staff/arnie/funthink-flattax.html (Amiga Plus Extra No. 5/97, 05/1997)
Last Updated: 2/13/96
a) if the flat tax rate is 17%?
b) if the flat tax rate is 22%?
(hint: Assume Stevie is VERY conservative and puts his money in a savings accoutn which 'earns' only 5.56% per year)
Answer:
Stevie currently pays a 30% tax rate on his income from investments. From his $450 million, he gets $25 million a year. If none of that income is sheltered he will have a tax bill of 7.5 million per year.
a)
Under the 17% flat tax he has proposed, Stevie will not owe any tax on income from investments from investments or inheritances, so Stevie saves 7.5 million a year, and needs three and a quarter years to recover his campaigning expenses from tax savings.
b)
This is a trick question sort of... the answer is the same as that of part a, 3.25 years.
Note that realistic expectations of his investment returns will halve his payback time, or better.