What is wrong with having a flat-tax? - Page 2

Kathryn · 10-23-2008, 10:12 AM

Quote:

Originally Posted by Claire

Whoohoo! Another reason to pull out my econ books!

I love it when you pull out your economics text books. You have a way of explaining things in clear, simple terms.

How about a flat tax of say 12% (a slightly higher amount) but with a deductible of 'the poverty line household income' (whatever that is in your area).

Example: The first $30,000 yearly (this is the line where I live) would be tax free. Everything over that would be taxed at 12%. That way it doesn't effect the really poor and no one has to pay tax on the first $30,000 but a slightly higher flat tax for anything over the poverty line?

Would this work? (I really have no idea. I've never taken economics so I'm curious if it would work.)

stxmom · 10-23-2008, 10:15 AM

I like the idea of a flat tax. We currently pay 28%-30% of our income in taxes. I will never understand how it is fair to tax those who work hard to provide well for their family while someone who chooses to not work and provide for their own family pays no taxes.

Claire · 10-23-2008, 10:17 AM

Anything would work if you make it

, but that is not the strict ideal of a flat tax. I like it, but for theorists, it technically is not a flat tax. Plus, I don't think it would help all that much. The rich would like it as they would pay less tax overall and receive the same benefit.

And, like I said, the government would have less revenue to use towards programs that would help the people adversely affected by paying more taxes. Just another thought.

ruthie · 10-23-2008, 10:32 AM

It probably wouldn't matter if we did have a flat tax.

Because the rich are always going to have some kind of loop-hole for them to use to pay less taxes.

The government is going to make sure of that. Because most of the rich are supporting the politicans and they are going to look out for the "hand that feeds them"

aliadam · 10-23-2008, 10:47 AM

I like a flat tax too, but liberals would never go for it. It's a "fair" tax and taxes everyone equally. It's not a tax that taxes the "rich" more and taxes the "poor" none. So it's not "redistributing the wealth".

goodnightmoon · 10-23-2008, 10:51 AM

Quote:

Originally Posted by Claire

Here is an example: Suppose we have a flat tax started at 10% (to make the math easier more than any other reason). If you make $30,000 a year you will be taxed $3,000, which, obviously, would only leave you with $27,000 to live on the rest of the year. If you make $100,000 you will be taxed at $10,000 and will have $90,000 to make ends meet the rest of the year. Obviously, the person at $100K will not be as affected by the tax.

Suppose you have the current tax system (and I am really pulling numbers out randomly and for ease here as well). The lower income person may be taxed at 5% so that would be $1500 and they would be left with $28,500 for the remaining part of the year. The $100K person would be taxed at 25% and would have $75,000 to live on the rest of the year. The idea behind progressive taxes are to make the wealthy pay more of a proportion to not hurt the poor as much. Plus, usually, the government will get more money with progressive taxes as well. (In this example, the government got $13K in a flat tax and $26,500 in a progressive tax system. Again, the numbers were picked for ease more than any other reason.)

Personally, I do not care for the flat tax system because it will hurt the poor. It will be a WHOLE lot easier, sure, but it will not benefit those who need help the most. I do think the IRS needs to be totally rehauled to get rid of a lot of the loopholes we have in the system now. JMO

I still don't think it's 'fair'. Maybe I'm ignorant but couldn't the flat tax be a tool to work harder. You don't have to stay poor (again maybe I have the blinders on and don't see the big picture). Not every wealthy person started off that way. I guess I feel it's all about choices & the willingness to work hard. Why should those who work their buns off have to pay more (percentage wise) just because they make more money. It just doesn't make much sense to me.

aliadam · 10-23-2008, 11:14 AM

Quote:

Originally Posted by goodnightmoon

I still don't think it's 'fair'. Maybe I'm ignorant but couldn't the flat tax be a tool to work harder. You don't have to stay poor (again maybe I have the blinders on and don't see the big picture). Not every wealthy person started off that way. I guess I feel it's all about choices & the willingness to work hard. Why should those who work their buns off have to pay more (percentage wise) just because they make more money. It just doesn't make much sense to me.

I totally agree with you. I'm one of the weird people that doesn't think that people who make more than me should have to support me. But what you're describing involves people being responsible for their own decisions and choices they've made in their life. Who wants to be responsible when you can ask the government to give you a hand out? Well maybe you & me, but certainly not lots of people.

calimari · 10-23-2008, 11:15 AM

Quote:

Originally Posted by aliadam

I like a flat tax too, but liberals would never go for it. It's a "fair" tax and taxes everyone equally. It's not a tax that taxes the "rich" more and taxes the "poor" none. So it's not "redistributing the wealth".

Well, I'm the most liberal one on this board & I've repeatedly said I'm for it.

I really don't get how taxing the rich more, and the poor less (like Claire explained) is redistributing wealth, but taxing the rich less, and the poor more, is not.

aliadam · 10-23-2008, 11:19 AM

Quote:

Originally Posted by calimari

Well, I'm the most liberal one on this board & I've repeatedly said I'm for it.

I really don't get how taxing the rich more, and the poor less (like Claire explained) is redistributing wealth, but taxing the rich less, and the poor more, is not.

And as I've repeatedly said to you, I can't understand how you can be for a flat tax and also constantly say you don't think there's anything wrong with redistribution of wealth. The two just don't go hand in hand at ALL!!! A flat tax taxes everyone the SAME PERCENTAGE. It doesn't tax the poor at 10% (which they'll get all of back) and then tax upper middle class 35%.

bonnotsm9 · 10-23-2008, 11:23 AM

In graduate school I had to take a Tax Policy class. It is possible to have a flat tax with an adjustment for poverty, such as no income below $30,000 taxed or set exemption amounts for each member of a household, say $10,000 a person. Over those amounts income could be taxed at a flat rate for everyone- 10% or 15%. It would simplify the tax code and be much easier to collect and enforce. And govt. revenues would not be reduced.

However, a flat tax, national sales tax, VAT tax, any simpler tax will never be enacted, imo, for one simple reason. Politicians would have to give up power. The tax code is a powerful way to influence people's behavior. Give people a tax deduction or credit for doing something and they will do more of it. Take away a deduction or credit, they will do less of it. Tax people at a higher rate at higher levels of income and they may decide to work less to avoid taxation. It's an incredible manipulator of constituent behavior.

Politicians love power and aren't going to give it up easily. Each presidential election year one of the major platforms for each candidate is how he/she is going to adjust taxation to make it "fair" or "help the economy." Put in place a flat tax, there goes a whole campaign issue.