The Cost-of-Living Tax Cut

We often talk about what's wrong with the tax code. Here's a simple fix.

Right now, someone earning thirty thousand dollars — barely covering necessities — still owes federal income tax, while a billionaire investor might pay a lower rate on capital gains. The system burdens those with the least to give.

Here's a simple idea: don't tax the first forty-five thousand dollars anyone earns. Why forty-five thousand? That's roughly the actual cost of living for a single adult in a state like Wisconsin, according to MIT's research. This number would be indexed to that research, making it a real cost-of-living measure, not a political one.

We can pay for it with a modest surtax on income over one million dollars annually. A person making thirty-five thousand gets significant relief. A person making thirty-five million barely notices the difference. We can build a system that works for everyone, not just the wealthy.

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The proposal. Don't tax the first $45,000 anyone earns — roughly the cost of living for a single adult in Wisconsin. Fund it with a modest surtax on income over $1 million. This is a Patriotic Millionaires policy proposal designed to shift the tax burden away from those earning below the cost of living and toward those who can most easily afford it. (Patriotic Millionaires)

The MIT Living Wage Calculator. Developed by Dr. Amy K. Glasmeier at MIT, the Living Wage Calculator estimates the hourly wage needed to meet basic needs (housing, food, transportation, healthcare, childcare) in every county and metro area in the U.S. For Wisconsin, the living wage for a single adult varies by county — approximately $21.24/hour in Racine County ($44,179/year), with similar figures statewide. The $45,000 figure in the script is a reasonable statewide approximation. Data last updated February 15, 2026. (MIT Living Wage Calculator)

Current tax treatment of low-income workers. A single filer earning $30,000 in 2026 would owe federal income tax on income above the standard deduction ($15,700 for 2026). On $14,300 of taxable income, they'd owe approximately $1,430 in federal income tax (10% bracket). Meanwhile, a billionaire whose income comes primarily from long-term capital gains pays a maximum rate of 20% — lower than the 22% marginal rate that kicks in at $47,150 for ordinary income. (IRS)

Indexing to cost of living vs. politics. Currently, the standard deduction and tax brackets are adjusted annually for inflation (CPI). The proposal would instead index the tax-free threshold to the MIT Living Wage Calculator — a research-based measure of actual living costs — rather than a political negotiation. This prevents the threshold from being eroded by inflation or manipulated by Congress.

The Wisconsin connection. Wisconsin's minimum wage is $7.25/hour ($15,080/year for full-time work) — less than one-third of the MIT living wage. About one million Wisconsin workers earn less than a living wage. There is not a single county in Wisconsin where $20/hour qualifies as a living wage. (Racine County Eye, May 2026)

Related PM scripts: The Minimum Wage, Who Actually Pays, Two Tax Codes, The 50-Year Experiment

Related CM scripts: CM-49 (Why Rich Towns Get Better Schools — property tax as wealth tax)