Why do you hate girl scouts and senior citizens?!
The problem here is that there is no objective way to define “fair”. Two people can have wildly different opinions on what the “fairest possible manner” is. That’s why tax policy is primarily a political issue, and not a monetary one.
The problem here is that we are NOT starting from scratch.
Ed
This will work.
It’s fair, and poorer folks will make out much better than they are now.
You do the best you can. If everyone pays the same percentage, it’s hard to imagine that that isn’t somehow fair.
Yeah, and look where it’s gotten us. It should NOT be a political issue, and the less political we can make it the better. Think of the tax code as a serioius of buttons that politicians can push. The fewer buttons, the less political. The flat tax has 2 buttons (general deduction, and percent tax above that deduction). I can’t even begin to count the number of buttons our current tax code contains.
The button analogy works just as well the other way around, too. It just as useful to be concerned about how many of a politician’s buttons that lobbyists can push.
That just makes the problem more difficult, not impossible. We’re not “starting form scratch” on anything, so if you use that excuse, then you squelch all reform on all issues.
Because it IS a massive tax cut for the rich, and for most of the rest of us, a tax HIKE (if it’s to be revenue neutral, that’s obvious).
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I see that you envy the WSJ’s “lucky duckies” - those who work but don’t earn enough to pay taxes. I don’t think that the segment you fear is either particularly large nor politically powerful. Even if it were an election swinging element, I think current politics show that being small in number but very generous is far more influential than the converse. I don’t think I see the public policy benefit to making poor folks life more difficult just so they hate the government.
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A flat tax is no “simpler” than a tax scheme under a progressive rate of taxation with any arbitrary number of marginal tax rates. (except maybe in the case of a flat tax of 10% on all income regardless of source, no deductions, no losses, no credits, or anything else allowed). Just flip to the lookup table and cross reference. All done. (Granted, a more complex scheme would require the faceless government beaurocrat to spend a half-hour rather than five minutes to set up the spread sheet, but so be it).
The complexity is in the calculating taxable income. If you want to eliminate all deductions, income types and what not have at it. I’m a single guy who rents. I’ll even chastize the lynch mob coming after you for taking away the mortgage interest deduction
Double amen. Let’s not confuse flat tax rates with tax simplification. Income from wages is really easy to tax, what gets confusing is things like owning rental property. Would anyone suggest that you not be able to deduct the costs of maintainance and improvements from the income from rents? Should those all show up in one year or be spread over several years? Should we allow depreciation of the property or not? What happens when you sell the property, do you get to deduct what you paid for the property?
Same with stocks, bonds, saving accts, etc.
That said, we could and should simplify the tax system. Just don’t believe that a flat tax accomplishes that.
I, for one, don’t think that its fair at all. Low income earners have to devote more of their income to subsistence. Middle income earners are under pressure to buy a residence, provide health insurance for their family, and get their kids through college. High income earners don’t have to worry about making as many tradeoffs to pay for subsistence, housing, health insurance, and college. They should not be punished because they are wealthy, but I think it is fair for those who are on the top of the economic ladder to take up some slack for those who are trying to make ends meet. Call it a form of noblesse oblige.
You and I will obviously never agree on this point, to be sure, but that underscores that fairness is subjective. A flat tax may be viewed as “fair” in terms of statistics, but I do not view it as fair in terms of society.
Hence the (rather large, if necessary) person deduction. Set it as high as you think it needs to be, then tax everything above that amount. And given the fact that the very poor receive welfare, how much more nobless obige is needed?
But I think it is incumbent on those who propose multiple tax brackets to explain how that system is more fair than a flat tax. And it has to be done quantititively, not just by a handwaving argument along the lines of “well, the rich should pay more”.
Is it that mysterious? Short version: Some expenses are necessities, some are luxuries. Food, clothing, and shelter have to be paid for before extra cars and European vacations. The poor use up most, or all, of their income on necessities. The rich have some left over. A flat tax requires the poor to go without before the rich see any tangible effects on their lives at all.
Do you really think that taking $2K from someone making $20K has a comparable effect on their life as taking $20K from someone making $200K has on theirs? Of course not. A progressive tax rate isn’t “punishing success”, it’s simply *not * punishing the *lack * of it.
It’s worth noting that the US is already moving towards a flatter tax system, given Bush’s various tax “reform” measures:
Guys, I think you’re missing the effect of a large personal deduction. Your person making $20K won’t be paying $2K on a 10% flat tax, they’ll first deduct something like $15K and pay a final tax of $500. The guy making $200K subtracts his $15K deduction and pays $18,500 tax.
Bump the rate to 20% and the poor guy pays $1,000, the rich guy pays $37,000. Rich man makes 10x the income, pays 37x the tax.
Was that directed at me? No one here is talking about a flat tax w/o some kind of significant exemption on the first X amount of income. As I said, set X be as high as you think it needs to be. $20k, $30k, whatever.
Yes, JM, that was for you. It’s the first step in the logic of multiple brackets. I oversimplified by separating necessities and luxuries. They’re actually on a scale (ref. Maslow). Rignt above food, clothing, and shelter would be the expenses needed to actually improve one’s lot in life - transportation, education, medical care, etc.
The further down the scale you go, the more it hurts - and the higher you go, the *less * it hurts. At some point there’s nothing else you can buy, no change in your life, just some numbers on a net-worth sheet. Why should you get to keep that in favor of depriving someone else of something tangible and important? You don’t have to agree, but that’s the idea.
You dismiss the topic of where to make your exemption as “whatever”, but that certainly isn’t good enough. What logic would you use to set the cutoff? At what level is it okay to deprive someone but not someone else? Is $30K enough to live on and still make a better life? $50K? What?
“So where’s the government going to get the money, you ask? Why, from them that’s got it, I suppose.” -Will Rogers
If it’s perfectly ok to set up the flat tax such that it produces the same tax burden distribution curve as the current progressive tax, what’s the point of doing so?
And it’s already been pointed out, but the process of determining taxable income is 95% of the process, at least with the US Federal Income tax and most state income tax forms. None of the deduction mayhem that is the bane of the current system would be affected.
While on it’s face, the flat tax makes a lot of sense to me, proponents always seem so circumspect about their support for it that I have to wonder where’s the catch…
If the flat tax doesn’t change anything, why do you want it?
Poor guy is down to $19K, and that makes a helluva difference to him. The rich guy making $200K is down to $163K but nothing in his life really changes.
And, under a flat tax system, the single mother with two kids trying to manage a mortgage, health insurance, donate to charity and education expenses while making $20,000 will pay the same tax as a single person with no kids who works at the Gap. In my mind, the single mother deserves a break for having to raise a couple kids, pay off a mortgage, and all that other stuff. A flat tax, by definition, does not distinguish between those who spend their money on education or buying a home and those who spend their money on PS2 games and beer.
I simply think that there are certain types of economic activity that build stronger communities, stronger societies, and a stronger country. It has nothing to do with a mushy feeling that I like single mothers better than slacking teenagers – it’s not the person who matters here, it is the economic activity in which they are engaged.
The tax code should give a break to those who undertake those kinds of beneficial activities, because it provides an financial incentive for folks to do things that benefit a larger number of people. Face it: home ownership doesn’t just help the people who live in the house, it helps communities.
The tax code can help encourage this kind of beneficial economic activity. A flat tax can’t do that. If folks think that there is no difference between people spending their money on charity and people spending their money on beer, well, I just don’t get it. I think the people who buy houses, put their kids through college, and donate to charities should get a little break on their taxes. That’s fair to me.
John Mace, I saw your point about justifying progressive taxation. I’d be happy to respond at some other point, but it seems like a bit of a diversion from an in-depth discussion of the flat tax.
So, what WOULD be a fair amount to tax the rich man? He’s already paying $37K, that’s apparently a drop in his bucket. Shall we go to $100K?
The rich will always have more than the poor, feel free to take more from them, but don’t be mad that they’re still rich after they pay taxes.
That’s why we have progressive tax brackets.
As opposed to the Fair Tax: Nay.
As opposed to the current boondoggle taxing system: Hell, Yes!!
As much as I’d like to see the Fair Tax implemented, if all I can get is the flat tax, I’ll take it.