Is the Flat Tax the fairest system for everyone?

[GLADIATOR351]

I itemize everything...... paper clips, staples, phone, advertising, long distance, miles, food, the space in my house that my office takes up.......anything I can write off I do. I have even paid my son $10K for the last 2 years and he is only 9. He sure is creative though.
52% of my income got written off this year. I really like my accountant.

same here.. I itemize everything also.... I do not get to write off 52% but, I am able to save a large sum.

 

[vixenbabe]

I'd be outta a job.....

 

[rudedawg]

same here.. I itemize everything also.... I do not get to write off 52% but, I am able to save a large sum.

Self-employed with an S-Corp helps in the 52%. I just hate paying double on everthing and making those monthly payments for estimated taxes.

My accountant told me that if you get over that 52% mark you increase your chances of getting audited.......so we stay around there.

 

[rudedawg]

I'd be outta a job.....

Yes but I am sure with that mind you could be re-trained for something else.

With that body I am sure you could get some type of work.

 

[mrbill]

Matt and bigguns...you are completely mistaken when you say a national sales tax would hurt the poor. It would actually be much more beneficial to the poor than either a flat tax or the current system.

The basics of the system are that below a certain income individuals would be given a tax refund that would eliminate or offset the sales tax they paid depending on income.

Obviously, with a flat tax you can give credits, exemptions, deductions to reduce the tax liability as we do in the current system but this is the very thing that creates complexity in the tax system and all of the costs and problems that go along with collection, enforcement,etc.

The point that you may be missing is that the real issue is not just the tax rate, but it is the method of collection that causes fundamental problems. A flat tax is just the current system with a flatter structure...IT DOES NOT ELIMINATE OR CHANGE THE CURRENT SYSTEM. This is really the key point, if you truly want not only lower rates, but also a fundamental change from taxing Income to taxing consumption, a sales tax system is far superior.

Not only are there significant tax benefits, the economic gain would be tremendous. GDP would increase anywhere from 9-14% according to economic studies done at Harvard, Boston Univ. , etc. Other effects would be increased capital inflow, an immediate interest rate drop of approximately 2% (which by itself would decrease federal borrowing costs by about 75 billion per yr). Compliance costs (est. at up to $600 billion per yr) would drop by more than 90%. The list goes on, but these are some of the major benefits.

The final point I will make is to emphasize that a flat tax is just the same system we have now, with all its inherent problems. The current system is a punitive system that punishes the very qualities we should encourage...hard work, saving, investing.

 

[MattTheSkywalker]

Bill,

The sales tax system doesn't hurt thr poor, as long as they don't buy anything, right?

if you are advocating giving tax refunds to the poor, or any class, you are ensuring the perpetuation of a system that uses tax policy to redistriute wealth, therefore influencing public policy. This is bad politics - lazy politics...the art of getting re-elected, basically: pander to one group, get their support, and then turn around next time and pander to someone else, by creating a tax break that serves them (despite having no public benefit.)

I am proposing a flat tax with NO exemptions, credits or deductions. There would have to be a tax-exempt level (let;s say under $20K) but other than that there would be a truly flat tax.


Couple that with term limits for everything and now you;re talking public service.

 

[mrbill]

Bill,

The sales tax system doesn't hurt thr poor, as long as they don't buy anything, right?

Matt...as with the sales tax system in most states, necessities are exempted from tax (food, medicine, etc.). If someone is "poor" but just can't live without a new color tv, then they pay tax on the purchase. The real strength of the system is that you get to make the choice of if and when to pay a tax. E.G. If money is a little tight this year you can defer your purchases of non-necessities. In this situation you will pay 0 tax, this applies if you are making $1000/yr or $1000000. Your income is irrelevant.

if you are advocating giving tax refunds to the poor, or any class, you are ensuring the perpetuation of a system that uses tax policy to redistriute wealth, therefore influencing public policy. This is bad politics - lazy politics...the art of getting re-elected, basically: pander to one group, get their support, and then turn around next time and pander to someone else, by creating a tax break that serves them (despite having no public benefit.)

I am proposing a flat tax with NO exemptions, credits or deductions. There would have to be a tax-exempt level (let;s say under $20K) but other than that there would be a truly flat tax.

Matt..actually it is not a refund generally ( I just used that term since it is easier than explaining a payroll tax credit. Also, if you propose exempting income under a certain level the effect is the same as a refund...e.g. if you exempt 20,000 in income or if you tax the same $20,000 but then give a refund for the tax taken the net effect is the same. The real problem lies in basing the tax on income, this is what causes many problems.

If you propose your system with no deductions, credits, exemptions this is very punitive to investing, starting or running a business etc. If one is not allowed a deduction for losses or expenses, but is simultaneously taxed on the income this is a strong disincentive to investment. Again, the real problem lies in taxing income.

Finally, the flat tax does not address many of the ancillary issues (such as certain economic effects) that a sales tax does.

I do agree though, that your proposed system would be better than the current system. Although, as I stated previously it is to my personal benefit that the tax system remains as complex as possible.
(soon to be CPA.. )

 

[The Dude]

There are still problems with a flat tax system, especially in regards to lower incomes. Giving the government 10% of your income hurts someone that makes $18,000.00 per year more than someone that makes $40,000.00 per year. There is a basic level of retainable income one needs to have basic necessities and that's where our progressive wealth redistribution system comes into play. There would still have to be an arbitrary point where one pays no or little taxes which just turn it back into a progressive system. Also, the deduction system encourages certain behaviors that we as a society value and also act as a way of influencing economic policy. While I certainly agree the current system needs to be much simpler and I hate paying a high percentage of my income as taxes a simple flat system or sales tax system isn't a panacea.

Ahh, Java, only one problem with that argument. Under every flat tax system I've seen, people earning under $25-40,000 (depends upon the plan and how many deductions are eliminated) would pay nothing. NADA. Many people don't pay taxes today. This system would just raise the bar and include more people in that category.

 

[Sushi X]

how does a person who earns 18k a year get hurt more than a person making 40k a year under the flat tax?

18k x 10%=1800
40k x 10%=4000

same percentage only the person making more pays more money. it's not much more but it's still a bit more, that leaves approximately 36000 dollars for them to live off of whereas the guy making 18k will have 16200 to live off of. people won't pay the same amount but the same percent. that's fair. what we got now is the elite rich getting off with paying almost jack through the countless loopholes in the system. my belief is with the flat tax of say 15%, you can do away with deductions and close loopholes. if we all pay the same percent then we don't need to itemize and deduct.

 

[Kwai-Chang Caine]

Until someone shows me concrete figures proving that a flat tax would provide the government with enough funds to meet its annual budget, it won't get my vote.