With the big discussion going on The Fair Tax, I was wondering if someone would care to enlighten me (and really, all of us) about the pros and cons of the Flat Tax? It would probably be an interesting discussion.
I can see some serious drawbacks on the Fair Tax from the other thread, but what about the Flat Tax? It seems like it would be pretty simple and pretty fair.
(When I say Flat Tax I mean a straight percentage of income tax that everybody pays. No more of the richest people paying a pathetically small percentage.)
-Katarain
Posted by El JT de Spang (Member # 7742) on :
I think that #1 is the main concern. For a flat tax to really work, a lot of the current tax exemptions would have to go away.
14% is the number I've heard. But it would have to be 14% of your gross income, no deductions. This will prevent the rich from hiding their earnings and using all kinds of loopholes to avoid paying taxes.
Of course if the government was a little more careful with what they spend the money on, maybe people wouldn't resent paying taxes so much.
Posted by Dagonee (Member # 5818) on :
quote:But it would have to be 14% of your gross income, no deductions.
Here's the problem - there's a huge gray area in defining "deductions." For example, if I buy bulk fertilizer, package it up, and sell it to small gardeners, I doubt anyone would think I should pay tax on the total amount I took in. Surely I would be allowed to deduct the cost of the bulk fertilizer, right? And the cost of the bags. These are the easy cases.
But what about the cost of gas for trips to pick up the bulk fertilizer and deliver the product to customers? I also should be allowed to deduct that, right?
Now, what if I need to buy a truck to do this? Should I be allowed to deduct the truck expenses? If I use it for nothing else, I think most people would say, sure.
But now suppose this is part time. It's far more economical for me to use the truck for business and personal use. Should I be allowed to deduct part of the truck expenses? All of the expenses? None of the expenses?
It doesn't take long before you've got a pretty complex system set up just to handle the "easy" cases.
Posted by Tante Shvester (Member # 8202) on :
Both the flat tax and the national sales tax are both regressive. The taxes are felt most heavily by the poor, because they have a much smaller percentage of their income as disposable income.
Posted by Jhai (Member # 5633) on :
The Economist has covered the "flat-tax revolution" as they call it, quite well in this article: http://tinyurl.com/awbef There's a number of eastern European countries that have implemented a flat tax and are doing quite well.
There are huge benefits to a flat tax. The cost of administering our current tax system is 10-20% of the revenue that it pulls in. That's up to half of the current budget deficit, right there.
A flat tax can be pretty progressive if you don't have to pay taxes before hitting a certain income level.
Anyways, read the article. It's really informative on this issue.
Posted by Shawshank (Member # 8453) on :
As to what El said- about gov't spending money on stupid things, has anyone ever read Vote to Kill? It's a pretty humorous but revealing book about some gov't spending... I'll give a few examples.
As part to pass the 1990 Clean-Air Act, some pork was handed out. For instance "19.8 million to study the methane emissions from cows to determine how much methane is given off when they burp, pass gas, defecate, etc."
Between 1986 and 1989 there were estimated 1,800 plastic surgeries done free of charge at the expense of the U.S. Navy.
And 73 million dollars were given to our nation's beekeepers.
As to the feasibility to a flat tax- I don't see how it could work in the system we have now at all. I don't think it could ever work- for the reasons Dag brought up. But one can dream can't we?
Posted by Katarain (Member # 6659) on :
How about if along with the flat tax only applying to incomes over a certain amount, there is a system of standard deductions? Everyone can deduct, but you can't itemize.
There could be standard personal deductions, standard tuition deductions, and a standard business deduction (a percentage of business earnings.)
Would that work?
Posted by fugu13 (Member # 2859) on :
I am in favor of a modified flat tax proposal. I favor a very high standard exemption, two brackets (say, one for over the minimal exemption of at least 30 to 35 grand, and one for over 1 million dollars, just to name some vague numbers), no corporate taxes, and extremely minimal deductions, if any.
Posted by Sopwith (Member # 4640) on :
Shawshank, might I address each of the three examples you threw out there?
The $19.8 million to study the methane expulsions of cows actually was somewhat important. With the vast herds of domestic cattle in the US (not to mention other countries), there can be a huge amount of methane produced and released into the atmosphere. The study also added to our knowledge of the digestive systems of cattle which carried over into agri-business with modifications to cattle diet.
The Navy's plastic surgeries free of charge? Do they say what kind of plastic surgeries were done? It's easy to think of breast implants and face lifts, but it's probably closer to the truth that these were burn treatments, cleft pallate surgeries, scar removals and the like, all for Navy personnel and their dependents, as part of their benefits package. One couldn't simply walk onto a Naval base and ask for a pair of bolt-ons for their wife.
Thirdly, $73 million for beekeepers is a drop in the bucket compared to important bees, both domestic and wild, are to our economy. Sure, honey is an important food group and beeswax has many commercial uses.
Do you realize how much of our agricultural well-being depends on pollination purely from bees? Ten years ago, a parasite that infested the breathing tubes of bees threatened to wipeout 70% of the wild bees in the South. The impact would have been huge. The pickle industry alone would have gone under as honeybees are the only pollinators of cucumber plants.
One man's pork is often just that same man's lack of understanding. Of course, sometimes it's just plain old pork. Of the three cases above, the weakest is the cows/methane one, but it still had a group of scientists behind it that thought it was really, really important.
Posted by TomDavidson (Member # 124) on :
quote: As part to pass the 1990 Clean-Air Act, some pork was handed out. For instance "19.8 million to study the methane emissions from cows to determine how much methane is given off when they burp, pass gas, defecate, etc."
You know, part of my wife's salary comes from grants for this research. Would you like me to explain why it's NOT actually a silly waste of taxpayer money?
Yeah, I know, it's easy for ignorant people to hear that we're spending money to do serious research on "cow farts" and conclude that government is out of control. But it's considerably harder for them to reach that conclusion once they're no longer ignorant.
Posted by El JT de Spang (Member # 7742) on :
How about the study on ketchup flow rate?
Anyone want to defend that one?
Or the unbelievably high military and defense spending (specifically R&D) - 90% of which never produces anything? I know it's necessary, but a little overkill I think.
Posted by Katarain (Member # 6659) on :
Ketchup Flow Rate?? What the heck is THAT about?
Anyway.. back to the original topic... all I really want is for the rich to pay their fair share. Was is the Fair Tax thread where I read that the richest 100 people pay about 8% of their income in taxes? Maybe it was wnd.com. I dunno.. But anyway, that makes me mad! And I don't just feel that way because I'm poor right now. I will be in a higher tax bracket someday, and I'll pay my darn taxes and just be happy that it won't be as much of a personal burden as it was last year when I had to pay taxes on 8 grand, just because half was "self-employment."
So if the Flat Tax can make that happen, then that's good. I thought maybe the Fair Tax could do it, but from reading the other thread--it certainly doesn't look like it.
I don't want to punish the rich. I just want all of us to pay the same percentage and be done with it. And a standard deduction should make it so that the very poor don't pay anything.
-Katarain
Posted by Dagonee (Member # 5818) on :
quote:and a standard business deduction (a percentage of business earnings.)
Not really. Some types of businesses have much higher expenses per dollar taken in than others.
Posted by DarkKnight (Member # 7536) on :
I think the rich do pay a lot in taxes already. 80% of all federal taxes are paid by the top 20% of wage earners.
Here's why the federal government spent money to measure ketchup flow rate: it regulates ketchup flow rate. Seriously.
Ketchup grades are determined in part by their flow rate, which is mandated and measured by the FDA. Whether or not the FDA should be determining whether or not a ketchup can call itself "fancy" is another issue -- but once we as a society decided that we needed our ketchup provably fancy, money became required to verify its fanciness.
Posted by DarkKnight (Member # 7536) on :
There is a big difference between our two links, Adam. You are showing wealth while I am talking about wage earners. Wage earners have earned the money and are being taxed on what they earned. Your link is citing just wealth distribution which is different. Yes, top wage earners can have a lot of wealth, but that does not mean that all wealthy people are wage earners. You could inherit a huge fortune and not actually have a job.
Posted by fugu13 (Member # 2859) on :
adam: we have an income tax, not a wealth tax.
Posted by TomDavidson (Member # 124) on :
Which is a bit of a shame, but don't get me started on that one. Posted by Jim-Me (Member # 6426) on :
Well, by the time it gets to be wealth, it should have been taxed a few times already.
Also, property taxes are, in fact, taxes on wealth, though they are, of course, not federal.
Posted by Dagonee (Member # 5818) on :
Yes, but until it's sold, the IRS doesn't tax your house (which has gone up faster than the market recently), other land, real property, or even the underlying value of securities.
Posted by fugu13 (Member # 2859) on :
Jim-Me: the federal government isn't allowed to exact property taxes.
Posted by fugu13 (Member # 2859) on :
Or a wealth tax, for that matter.
Posted by Dagonee (Member # 5818) on :
I'm actually curious as to whether a federal property tax would be struck down, now.
It probably would, and I certainly don't want to give them any ideas, but I bet someone could think of a clever way get at least some dissents from SCOTUS.
Posted by fugu13 (Member # 2859) on :
That would require some serious effort . . . I mean, its certainly a direct tax, and its not divided up among the states by population!
Posted by Katarain (Member # 6659) on :
How about if we do away with taxing all together?
Instead, we all give to the programs that we really believe in. We could "sponsor" them. It'll be great, really!
And we can pay tolls on the roads.
Woo.
Posted by fugu13 (Member # 2859) on :
Yeah, and the poor could pay to educate and feed themselves, and . . . wait . . .
Posted by Dagonee (Member # 5818) on :
quote:That would require some serious effort . . . I mean, its certainly a direct tax, and its not divided up among the states by population!
You underestimate my powers.
Think of an income tax deduction or credit based on existing wealth.
I'm pretty sure I could work the math out to make it equivalent.
Posted by Katarain (Member # 6659) on :
The rich could have $10,000 a plate dinners in homage to the starving. They seem to enjoy the irony.
Posted by katharina (Member # 827) on :
quote:once we as a society decided that we needed our ketchup provably fancy, money became required to verify its fanciness.
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