This is the real purpose of flat tax proposals - it has very little to do with either fairness (which is hugely subjective) or simplicity (as described, a flat tax is minimally simpler than a progressive one).
It’s all about the (untested, but at least initially plausible) belief that the reason folks support a large government is because they think someone else pays for it. And that if they are faced with a larger tax bill they will vote for less spending. I’m not sure if there is any evidence of this or not.
It is not possible to cut taxes and balance the budget without cutting or reducing spending programs most Americans will insist on keeping. It is unfortunate that the GOP has to learn this every one or two decades.
Who is this “their” that you are talking about? I’m sure you can find a few nuts who might think this, but there is nothing in Libertarian philosophy that would back it up.
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“A few nuts”? It would be harder to find libertarians who don’t think like that. They really love blaming the victim; if you are poor or sick or injured or defrauded, it’s all your fault and nothing like that would ever happen to them.
But that’s exactly what a flat tax is; hugely raising taxes on ordinary people in order to finance lower taxes on the wealthy.
I’m not a supporter of a flat tax, but just looking at this statement in a vacuum, how does the notion that the progressive tax rates on higher income brackets are the only thing that “pays for the government” as it is now square with the widely held belief that rich people don’t pay their “fair share” of taxes?
Because they have most of the money in the country, and the country is falling further and further into debt because they keep having their taxes lowered.
By defining “fair share” to take into account both marginal utility and the fact that the wealthy have benefited the most from our system of government, generally. And sometimes mixing in a utility argument (the “the rich have the most to lose by a collapse of the government” argument).
Alternatively, one merely looks at the fact that “the rich” pay lower rates now than they used to and yet the country had a better fiscal outlook under the previous tax regime. The pragmatic view, if you will.
In the value system of Republicans and libertarians the ideal human being is a self made man who started out from humble circumstances, and founded a thriving company out of a shoe box.
There are many fewer people like this than the number of those who like to pretend.
I have a friend who teaches public school in California. So does her husband. Their children attend the University of California. My friend calls herself a libertarian. I have tried to explain to her that under a libertarian government she and her husband would either lose their jobs, or they would take deep pay cuts, and that tuition for their children would increase greatly.
She does not get it, and tells me that all they have to do is cut welfare benefits for blacks and Hispanics. When I ask what percentage of the state budget in California goes to welfare payments she cannot answer, but she persists in her self destructive political ideology.
Thank you. I had always wondered what the number would be. One would think that every discussion about a flat tax would include this number, but it usually doesn’t.
Any revenue neutral tax change must have winners and losers. For every dollar someone pays less, someone else has to pay more. Inertia alone is enough to stop a flax tax from being a feasible solution.
Bollocks. If someone was indeed advocating lower taxes but no lower spending, you’d have a point. But Libertarians do not in fact advocate that. They advocate lower taxes AND lower spending.
More bollocks.
Most Libertarians would be quite fine with cutting the military budget at least in half, if not quite a bit more; that takes care of about 15-20% of the entire budget right there.
They’d be quite fine with massive cuts and/or outright elimination of damn near every federal agency you can name, saving billions.
They’d want to eliminate corporate welfare and tax breaks to government-favored businesses and industries, saving billions.
They’d want to end prosecution and imprisonment for victimless-crime laws; more billions.
And of course, that’s not even touching the big-ticket entitlements of SS, Medicare and Medicaid.
Now if you want to take about *mainstream republicans *advocating lower taxes but not specifying what lower spending they want, you’ve got a point. But it’s baloney w/r/t Libertarians, or for that matter the more committed fiscal conservatives (e.g. Paul Ryan and the Tea Party), it’s simply not true.
If you want to say those plans are politically untenable at the present moment, you may well be right. But it doesn’t make them hypocritical, and it doesn’t mean they will be politically untenable forever and ever.
I’d be willing to bet that 20 years ago a stated plan to run trillion-dollar deficits would not have been regarded as politically untenable; and yet it has proven to be so. I see no reason to think we have reached some sort of end state where opinion has frozen forever.
Now fix the rate at a flat 23% for everyone. That means every single filer who has an income over $35,351 has his taxes lowered as does every married couple filing jointly with an income under $70,701 and every head of household with an income under $47,351.
But you’re saying total revenue will stay the same? That seems to imply you’re expecting to make up a lot of revenue from the increased taxes on the people making lower amounts. Leaving subjective issues of “fairness” out of it, I have to question if there’s that much money out there.
Look at two single filers making $8700 and $388,350 respectively. The first guy’s taxes went from $870 to $2001 (an increase of $1131). The second guy’s taxes dropped from $112,683.50 to $89,320.50 (a decrease of $23,363). Are you saying that guys like the first guy outnumber guys like the second guy twenty to one?
(Let’s jump back to the fairness issue for a moment. Is it really fair to say that twenty guys making $8700 a year should have their taxes raised so one guy making $388,350 a year can have his taxes lowered?)
I don’t have the figures in front of me so I’m just speculating. But I’m wondering if the numbers were cooked so proponents could arrive at a rate that was less than 25%. That would make people in the $35,351 – $142,700 range believe their taxes would be lowered under a flat tax system and make converts out of them. (And I realize none of these these people are actually paying a 25% rate.) If you came up with a flat tax rate of 27% you’d be telling that same large group that their taxes were going up. A 23% rate sounds more like a selling point to me than a realistic figure.
But this just brings up the issue that always dogs Libertarians; the difference between how politics works in theory and how it works in practice.
Lowering taxes is always popular. Lowering spending is usually unpopular. This leads to the reality that it’s a lot easier to get a tax decrease enacted into law than it is to get a spending decrease enacted.
Libertarians can promise that they’d be different from the Republicans and the Democrats. They can promise that if they were elected, they’d stand by their political platform and do the right thing even if it was unpopular.
But you can’t blame some of us from wondering how true that would be. My suspicion is that if there were three hundred Libertarians in Congress, they’d end up lowering taxes and talking about lowering spending. And that’s what creates a trillion dollar deficit.
I dunno. I think the “fair share” rhetoric is stupid political BS. It’d be enough for me if democrats just came out and said honestly, “We need to raise taxes on the wealthy because they’re the ones with the money.”
I know they advocate that, and it’d be great if they can lower spending. When they do, they can cut taxes. Until then, switching to a flat tax is politically and economically untenable. And yet, I hear about it all. the. time. I hear about it like it’s a solution to all of our problems, when it’s nothing of the sort. It’s something we should talk about after we solve all our problems.
According to the CBO, the effective tax rate for all quintiles runs around 10%. The top 10% pays around 20%.
So when someone like Hall & Rabushka runs the numbers (and they have, and they update them sometimes), they find that you can have a flat tax with a standard allowance around 20%:
Allowance for Family of Four / Tax Rate to stay even:
$12,500 / 15%
$22,500 / 19%
$34,500 / 23%
Their book is online, it covers deductions, business taxes as well, etc.
Yes - this is a big tax simplification activity, and it would slaughter a bunch of sacred cows. People who claim that the math does not work have not even looked at the math.
The folks proposing flat taxes have to argue for the chagne, the people who are assumign the status quo WRT spending do not have to make an argument for assuming the status quo.
There are virtually no advantages to a flat tax for the poor unless you have a large exemption, in which case, it doesn’t affect them at all because most of them are not subject to taxes at all. You would have to increase the EITC or throw in some sort of prebate to make it work out better for them.
You have the same problem when you have an exemption.
A lot of it isn’t even a matter of "what is income’ a lot of it is “when is that income taxed”
But if they can only get the lower taxes, they’ll almost always take it.
Frankly, we can’t balance the budget with everything else you have mentioned without addressing SS/medicare/medicaid so let me know when you get that problem sorted out and I’ll register as a Libertarian. Its like trying to get under the NBA salary cap by focusing on your $250K benchwarmers and promising to deal with your $30 million point guard “at some point in the future”.
Concepts of fairness are not entirely subjective.
A flat tax is pretty hard to defend. I hear more about consumption taxes than flat taxes. They’re just as bad if not worse policywise than a flat tax but its a bit easier to defend.
Why? Is there some kind of rule that says a person who explicitly advocates co-related policies A and B must keep silent about B until A is enacted? ISTM that it’s perfectly fair to use one thing to sell the other, like sugar with the medicine: “a flat tax would be great, and we can have one if we cut spending.”
Again; your criticism is perfectly fair towards those who advocate a flat tax but do not give a credible accounting of how a flat tax would fund the level of government spending they endorse: but libertarians are not those people.
And I’m taking it as a given that you are equally upset with those progressives who want high spending but do not explicitly state their desire to raise taxes to match; and of course are even more upset with those – such as the President – who want higher spending but actively oppose the middle-class tax hikes needed to pay for it.
Those people have their tax liability on some of their income lowered. Their tax liability on the rest goes up considerably. Your tables don’t include the standard deduction, or the (potentially even greater) itemized deduction.
Bear in mind that median household income is only about $45,000. That means the effective increase applies to half the population.
For the record, I’m certainly not in favor of the flat tax as generally proposed.
