# How would you reform the US national income tax system? **URL:** \ **Category:** Great Debates\ **Created:** [February 18, 2003, 6:02pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925 "2003-02-18T18:02:01Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![capacitor](https://avatars.discourse-cdn.com/v4/letter/c/e47774/32.png) [@capacitor](https://boards.straightdope.com/u/capacitor)\ **Post date:** [February 21, 2003, 12:57am UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/41 "2003-02-21T00:57:30Z")
Under flat tax no decucts, I pay 500 more on taxes. Yeah right that’s fair. ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [February 21, 2003, 3:16am UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/42 "2003-02-21T03:16:07Z")
> [@](#): > > \*Originally posted by Debaser \* > You need to read my posts. I said that the lowest earners will not pay any tax. Then I guess you need to read mine. You dealt with that at the end of your post; I responded at the end of mine. There’s some other stuff you clearly didn’t read either, but I’ll get to that along the way. > [@](#): > > How would figuring out what the flat tax _is_ be challenging? You pick a number that would generate the same amount of gov’t revenue that the current tax system is now, and go with it. Where’s the extreme challenge? You need to explain what you mean here for me to disagree or agree with it. I think **Boo** and **DrDeth** have at least touched on this. But one problem when people hold property and generate income in complex ways, is deciding just what _is_ ‘income’ for the purpose of tax - _any_ tax. I was a tax professional, to a modest extent, over 20 years ago. If I still were, I’m sure I could give you examples. But I’m _way_ rusty here. > [@](#): > > RT: For instance, do you tax capital gains the same as regular income, even though they’re very different? > > Debaser: This thread is talking about _income tax_. Read the OP. Making a flat tax would improve the complexity problems and unfairness of the income tax. Other taxes are a seperate issue. Next time you look at a Form 1040, may I refer you to Schedule D, I think it is. :rolleyes: > [@](#): > > It doesn’t matter. > > I just used that illustration to show that the system has unintended consequences. I don’t care if it undermines marriage or not. Well, if you’re using the example to show that the system has unintended consequences, but you don’t know or even care whether there are any unintended consequences in your example, then exactly why am I wasting my time debating you? > [@](#): > > What it does do is make married people pay more taxes than if they were single. Actually, it makes some married couples pay less than if they were single, and makes other married couples pay more than if they were single. > [@](#): > > This is wrong. You keep talking about right, wrong, fair, and unfair, as if you had their definitions in your back pocket. Maybe you do, but you can’t just _assert_ that you do. > [@](#): > > RT: It will be simple and efficient, certainly. It is your opinion that it will be fair, but that’s **all** it is. > > Debaser: Well, if you agree that it would be simple and efficient and fair, then why not do it? I mentioned that there were times when you didn’t read my post very well. I pointed out that it was only your **opinion** that it was fair. > [@](#): > > RT: For instance: the Federal government has a $2.1 trillion budget. We have 300 million Americans. (I may be off by a few hundred billion dollars and maybe 10 million people, but bear with me.) That’s $7000 per man, woman, and child. Why isn’t it ‘fair’ for income taxation to be the sole means of taxation, and for each family to pay their $7K per person per year, up front? What’s unfair about that? (We shouldn’t consider the consequences, right?) > > Debaser: I don’t know what this strawman is supposed to have to do with anything so I will ignore it. My apologies for making my logic so difficult to follow. I was presenting an alternative system of taxation that was as obviously, blatantly, and unquestionably ‘fair’ as yours - but very different in its structure and effects. I’m trying to get you to consider (1) that ‘fair’ is in the eye of the beholder, and (2) that different ‘fair’ systems can play out very differently. (And if ‘fair’ can mean two or more very different things at the same time, then doesn’t that explode the notion of ‘fairness’ as a well-defined concept?) > [@](#): > > Deductions have caused the mess we are in with the tax code, not exemptions. Just because I am for a national deduction doesn’t mean that I would be for 10,000 different kinds of exemptions. I don’t know by what logic you have linked the two. And I don’t know by what logic you’ve _separated_ them. (Is it because deductions are on Schedule A, and exemptions fall elsewhere on the return? Damned if I know. They basically _act_ the same - they are both amounts by which you reduce your income before calculating the tax on it. You’ve produced _no_ evidence that deductions, but not exemptions, are responsible for the messy tax code. > [@](#): > > Having **one, simple, flat rate** exemption would be a fair and efficient and easy way to give the poorest earners a break. BUAHAHAHAHAHAHAHA!!! OK, I take that back. With a $50K exemption, that will be true. But **DrDeth** made a valid point - the rates on the rich will go down noticeably under a flat tax system, so _someone_ has to get hammered to make up for it. If it isn’t the poor, I guess it’s the middle class or upper middle class. But if we’re not arguing about the spending side (and by agreement, we’re not), any change in the tax system, by definition, produces winners and losers. Which gets us back to what is ‘fair’. Are you sure that rich people are paying too much? Are you sure the upper middle class is not paying enough? I’m not sure about either one. Maybe my sense of what’s ‘fair’ differs from yours. Once again, there’s no absolutes here; that’s why there’s this thing called ‘politics’ where we work stuff like this out. We resort to that because people don’t always see eye to eye, even about first principles. And politics is greatly preferable to civil war. ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [February 21, 2003, 3:30am UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/43 "2003-02-21T03:30:26Z")
BTW, **Debaser** , any idea how much revenue the government currently takes in on that first $50K from everyone? Since at last glance, $50K was above the median household income, so it’s probly a fair amount. What would the flat rate on income above that have to be, to generate the same revenue? And is that $50K exemption per individual, or per household? If per household, doesn’t that bring back the ‘marriage penalty’, only bigger than it was to begin with? And if per individual, can spouses pool their exemptions or not? (E.g. does a couple earning $70K and $30K get taxed on $20K, and a couple earning $50K and $50K pay nothing? Either way, it’s unfair - either a $70K earner is dodging tax, or two $100K households are being treated very differently.) And if they can pool, how about if kids earn income - what exemptions do they get, and can theirs be pooled with the adults’? It’s amazing how much stuff looks simple from a distance, but has a lot of complexities close up. ---
**Author:** ![jshore](https://avatars.discourse-cdn.com/v4/letter/j/b5e925/32.png) [@jshore](https://boards.straightdope.com/u/jshore)\ **Post date:** [February 21, 2003, 4:08am UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/44 "2003-02-21T04:08:35Z")
> [@](#): > > \*Originally posted by Boo \* > People don’t realize that wealthy people often have over 50% of their income for a year go to taxes. **Boo** , I don’t disagree with your basic point that the tax system would become less progressive if we put in a flat tax and it would really sock the poor or middle class (depending on how large a deduction there was) relative to what they pay now. However, I am unclear how you arrive at this amount that the wealthy pay. According to the CBO, the **total** effective federal tax rate on the top 1% of earners is about 33%. (This includes the effective payroll taxes, excise taxes, and even “effective corporate taxes” that they pay indirectly…It’s ~23% for just income taxes.) I know the states are taking more but even here in New York State, ones is talking a top **marginal** rate of 6.85%. Maybe adding in property taxes and sales taxes you could approach 50% but I think it may be a bit of a stretch. ---
**Author:** ![Debaser](https://avatars.discourse-cdn.com/v4/letter/d/3da27b/32.png) [@Debaser](https://boards.straightdope.com/u/Debaser)\ **Post date:** [February 21, 2003, 4:19pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/45 "2003-02-21T16:19:31Z")
> [@](#): > > \*Originally posted by RTFirefly \* > \*\*BTW, **Debaser** , any idea how much revenue the government currently takes in on that first $50K from everyone? Since at last glance, $50K was above the median household income, so it’s probly a fair amount. What would the flat rate on income above that have to be, to generate the same revenue? > \*\* Look, I even said twice now that the number of the deduction that people get you can make up. Pick whatever you like. It’s not terribly relevant to this debate. We could argue for days about the rate of the standard deduction, and for the overall flat tax rate. There just isn’t any point in it. Having said that, I picked the $50K figure because it _is_ just about the median household income. I also know that the %50 of households that make below the median of 50K already pay only 4% of the total income taxes. Also, about %4 of tax revenues are going back to the lowest earners in the form of tax credits and earned income credit. So, as a group the people below this $50K houshold income aren’t generating any income tax revenue now. That’s why I picked that number. ---
**Author:** ![Boo](https://avatars.discourse-cdn.com/v4/letter/b/7feea3/32.png) [@Boo](https://boards.straightdope.com/u/Boo)\ **Post date:** [February 21, 2003, 4:22pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/46 "2003-02-21T16:22:01Z")
I’m talking total income tax…federal, state, and municipality to get to over 50%…if you are devising tax strategies for someone, you look at all of their taxes, not just federal. I used to prepare returns for a big five firms several years ago…trust me, wealthy people (not many poor people pay big five firms to prepare their returns) have a much higher effective tax rate than middle a low income people…much higher. Like someone pointed out…on the surface some of these alternate tax ideas make sense, but when you start analyzing them, you’ll see what we have today is a much more fair alternative. ---
**Author:** ![Debaser](https://avatars.discourse-cdn.com/v4/letter/d/3da27b/32.png) [@Debaser](https://boards.straightdope.com/u/Debaser)\ **Post date:** [February 21, 2003, 4:22pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/47 "2003-02-21T16:22:22Z")
> [@](#): > > \*Originally posted by RTFirefly \* > And is that $50K exemption per individual, or per household? If per household, doesn’t that bring back the ‘marriage penalty’, only bigger than it was to begin with? And if per individual, can spouses pool their exemptions or not? (E.g. does a couple earning $70K and $30K get taxed on $20K, and a couple earning $50K and $50K pay nothing? Either way, it’s unfair - either a $70K earner is dodging tax, or two $100K households are being treated very differently.) And if they can pool, how about if kids earn income - what exemptions do they get, and can theirs be pooled with the adults’? Oh, and I don’t see how making it $50K per household increases the marriage penalty. Obviously you would geta $25K deduction if you are single, and $50K deduction if you are married. If you have 2 wives then the three of you can take a 75K deduction. Whatever. You are really grasping at trying to find complications with my ideas that just aren’t there. ---
**Author:** ![Boo](https://avatars.discourse-cdn.com/v4/letter/b/7feea3/32.png) [@Boo](https://boards.straightdope.com/u/Boo)\ **Post date:** [February 21, 2003, 4:24pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/48 "2003-02-21T16:24:52Z")
One thing I’d definately get rid of is the “death” tax…but again, if you plan correctly you won’t have to deal with it anyways. ---
**Author:** ![Apos](https://avatars.discourse-cdn.com/v4/letter/a/838e76/32.png) [@Apos](https://boards.straightdope.com/u/Apos)\ **Post date:** [February 21, 2003, 4:37pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/49 "2003-02-21T16:37:23Z")
—but when you start analyzing them, you’ll see what we have today is a much more fair alternative.— There’s that word again! ---
**Author:** ![rogue4007](https://avatars.discourse-cdn.com/v4/letter/r/b77776/32.png) [@rogue4007](https://boards.straightdope.com/u/rogue4007)\ **Post date:** [February 21, 2003, 4:52pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/50 "2003-02-21T16:52:11Z")
Autz…thanks for the reply to my post. I do consider all the things you mentioned, but that was my point, maybe i dont put things over too well. Yes all those things are provided by the gov for us to use, but my point is that it is our money that creates these services. We are sometimes made to feel that it is a privilage we are granted, its not. We pay for them, the gov dosnt provide them in any kind of charitable way. The point about social engineering, is in terms of peoples fiscal behaviour. Not in terms of law or order, or general behaviour. Many govs use tax to limit the money in circulation, this is moraly wrong. The money is earnt by the people for their use, its not for the gov to take what they dont need. Rogue ---
**Author:** ![Debaser](https://avatars.discourse-cdn.com/v4/letter/d/3da27b/32.png) [@Debaser](https://boards.straightdope.com/u/Debaser)\ **Post date:** [February 21, 2003, 4:56pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/51 "2003-02-21T16:56:51Z")
> [@](#): > > **Debaser** > You need to read my posts. I said that the lowest earners will not pay any tax. > > **RTFirefly** > Then I guess you need to read mine. You dealt with that at the end of your post; I responded at the end of mine. I saw that you responded to it. This only makes it worse that you ignored it in your response. > [@](#): > > **Debaser** > How would figuring out what the flat tax is be challenging? You pick a number that would generate the same amount of gov’t revenue that the current tax system is now, and go with it. > > **RTFirefly** > I think Boo and DrDeth have at least touched on this. But one problem when people hold property and generate income in complex ways, is deciding just what is ‘income’ for the purpose of tax - any tax. What does getting rid of the overwhelming number of deductions have to do with determining what income is? Lets make it simple and talk about someone who makes money working at a job, getting a paycheck. This person should be able to figure out what the tax they pay is with one calculation. Tax rate x Annual income = tax paid Thats it. Sure, there’s no avoiding having it more complicated if the person has a job on the side where they are self employed, or owns a business but that doesn’t mean simplifying the tax code is a bad idea. > [@](#): > > **RTFirefly** > For instance, do you tax capital gains the same as regular income, even though they’re very different? > > **Debaser** > This thread is talking about income tax. Read the OP. Making a flat tax would improve the complexity problems and unfairness of the income tax. Other taxes are a seperate issue. > > **RTFirefly** > Next time you look at a Form 1040, may I refer you to Schedule D, I think it is. My bad. I somehow missed that you were talking about capital gains. My solution here is pretty simple, as usual. Don’t tax them at all. I pay taxes on my income in the first place. If I want to use it to buy a house, which then appreciates, that is still my money. Of course, if I own a construction company, then I pay taxes on the money from my house sales because that is my companies income. > [@](#): > > **Debaser** > It doesn’t matter. > > I just used that illustration to show that the system has unintended consequences. I don’t care if it undermines marriage or not. > > **RTFirefly** > Well, if you’re using the example to show that the system has unintended consequences, but you don’t know or even care whether there are any unintended consequences in your example, then exactly why am I wasting my time debating you? I was using the example to show that there was unintended consequences. It does prove that. **The unintended consequence is that they pay more.** The consequence of this is that they have less money in thier pocket. That’s the consequence, get it? Sheesh. Is it your opinion that we can punish married people with more taxes as much as we like, as long as no studies show that it harms the institution of marriage? My position is that the fact that they pay more is wrong, period. Do you need this further explained? It should be obvious to any reasonable person. > [@](#): > > **RTFirefly** > Actually, it makes some married couples pay less than if they were single, and makes other married couples pay more than if they were single. And this makes it ok? > [@](#): > > **RTFirefly** > It will be simple and efficient, certainly. It is your opinion that it will be fair, but that’s all it is. > > **Debaser** > Well, if you agree that it would be simple and efficient and fair, then why not do it? > > **RTFirefly** > I mentioned that there were times when you didn’t read my post very well. I pointed out that it was only your opinion that it was fair. Well, are you arguing that it’s not? My case is a clear one. Everyone pays the same rate = Fair. No special treatment for individual circumstances. People pay the same rate if they have children or not, if they have a house or not, if they have donated money to church or not. It would clearly be more fair. > [@](#): > > **RTFirefly** > I was presenting an alternative system of taxation that was as obviously, blatantly, and unquestionably ‘fair’ as yours - but very different in its structure and effects. No you weren’t. The system you talked about wasn’t unquestionably fair. It was obviously, blatantly, and unquestionably unfair to anyone who read it. > [@](#): > > **RTFirefly** > I’m trying to get you to consider (1) that ‘fair’ is in the eye of the beholder, and (2) that different ‘fair’ systems can play out very differently. (And if ‘fair’ can mean two or more very different things at the same time, then doesn’t that explode the notion of ‘fairness’ as a well-defined concept?) Let me explain it this way. A more minor change to still move us in the right direction would be to stop every deduction currently in the tax code. Then lower everyones taxes, across all brackets evenly, the amount that would bring the total revenue generated back to it’s current level. So, instead of getting those deductions for having kids, a mortgage, and charity work, you instead just get a lower tax rate, just like your neighbors would. Do you disagree that this would be more _fair_? > [@](#): > > **RTFirefly** > They basically act the same - they are both amounts by which you reduce your income before calculating the tax on it. > > You’ve produced no evidence that deductions, but not exemptions, are responsible for the messy tax code. It’s obvious that there are far many more deductions in the tax code than there are exemptions. Are you disputing this? I don’t have a cite, but I’m sure it’s true. I am proposing eliminating **all** of the deductions, and **all but one** of the exemptions. Do you dispute that this would make the tax code less messy? It’s reasonable to disagree that this is a good idea or not. But, it just doesn’t make any sense to argue that this wouldn’t simplify things. > [@](#): > > **Debaser** > Having one, simple, flat rate exemption would be a fair and efficient and easy way to give the poorest earners a break. > > **RTFirefly** > BUAHAHAHAHAHAHAHA!!! > > OK, I take that back. With a $50K exemption, that will be true. But DrDeth made a valid point - the rates on the rich will go down noticeably under a flat tax system, so someone has to get hammered to make up for it. If it isn’t the poor, I guess it’s the middle class or upper middle class. But if we’re not arguing about the spending side (and by agreement, we’re not), any change in the tax system, by definition, produces winners and losers. Which gets us back to what is ‘fair’. > > Are you sure that rich people are paying too much? Are you sure the upper middle class is not paying enough? I’m not sure about either one. Maybe my sense of what’s ‘fair’ differs from yours. Once again, there’s no absolutes here; that’s why there’s this thing called ‘politics’ where we work stuff like this out. We resort to that because people don’t always see eye to eye, even about first principles. And politics is greatly preferable to civil war. The laughter is silly. I don’t see the need to get so snarky. If you agree that the $50K deduction will give the poor a break at least we can agree on one thing. I would like to keep our agreement that the spending side should not be discussed here. That would just quickly spiral into another debate. Civil war?? At this point, I could even alter my proposal to drop the flat tax. Keep it gradual, and would that make you happy? I just can’t imagine that anyone could think that the government tinkering with the rules of how taxes are paid on a yearly basis can result in anything but negative effects for the tax payers. Any good they try to accomplish will have unthought of negative effects. The more complicated it is, the worse it is. Keeping it simple would be more efficient and fair. ---
**Author:** ![Apos](https://avatars.discourse-cdn.com/v4/letter/a/838e76/32.png) [@Apos](https://boards.straightdope.com/u/Apos)\ **Post date:** [February 21, 2003, 5:01pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/52 "2003-02-21T17:01:31Z")
—Many govs use tax to limit the money in circulation, this is moraly wrong.— Well, it could be imprudent from a Keynsian sense. But why is it morally wrong simply to alter the money supply? Creating or destroying money is not the same thing as creating or destroying wealth. If you burn a 100$ bill, you’ve essentially given up your claim to a 100$ share of goods and services… but everyone else is richer for your loss, because the remaining pie is slightly bigger. Taxes aren’t generally how governments do this, however. —We are sometimes made to feel that it is a privilage we are granted, its not. We pay for them, the gov dosnt provide them in any kind of charitable way.— Not to mention that the government decides what services to provide: whether anyone really needs them or not, whether they are prudent or not (why should I pay for farm subsidies which HURT me by distorting the market, and are generally bad ideas period?). We ca go on and on about democracy, but the fact is, even if this was a perfect democracy, my tax rate and the government’s spending choices are essentially forced upon me by my neighbors. ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [February 21, 2003, 7:02pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/53 "2003-02-21T19:02:06Z")
> [@](#): > > \*Originally posted by Debaser \* > I picked the $50K figure because it _is_ just about the median household income. I also know that the %50 of households that make below the median of 50K already pay only 4% of the total income taxes. Also, about %4 of tax revenues are going back to the lowest earners in the form of tax credits and earned income credit. > > So, as a group the people below this $50K houshold income aren’t generating any income tax revenue now. That’s why I picked that number. :rolleyes: I’m getting tired of explaining the basics. But one more time into the breach. If you exempt the first $X earned by any person, household, or whatever, from taxation, that doesn’t just cancel the revenues from the people earning less than $X. Depending on X, of course, you’ll lose a lot more revenue from people earning more than $X than you will from the people earning less. This doesn’t undermine the idea of a flat tax of its ownself, but flat-taxers almost invariably seem to have the idea that the resulting tax rate will be a lot lower than is possible. Just wanted to make sure you weren’t expecting a 17% tax rate on everything not exempted. ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [February 21, 2003, 7:14pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/54 "2003-02-21T19:14:25Z")
> [@](#): > > \*Originally posted by Debaser \* > I don’t see how making it $50K per household increases the marriage penalty. You don’t? Well, let’s go to school. (I guess I’m not as tired as I thought.) If it’s $50K per household, then two single people get $100K exempted. But if they get married, it goes down to $50K. That’s a pretty whopping marriage penalty, don’t you think? > [@](#): > > Obviously you would geta $25K deduction if you are single, and $50K deduction if you are married. Hey class - who else was this ‘obvious’ to? No really - your personal ‘right’ is _right_, your personal ‘wrong’ is _wrong_, your personal ‘fair’ is the gold standard for fairness. Now you’re saying that if it’s obvious to you, it should be obvious to the world. Believe it or not, the rest of us are persons whose existence is independent of yours; you didn’t dream us up. Our values aren’t necessarily your values, and our assumptions aren’t your assumptions. > [@](#): > > If you have 2 wives then the three of you can take a 75K deduction. Whatever. So OK, it’s _not_ a household deduction of $X, it’s an individual deduction of $X that can be shared with whatever persons want to come together to form a household for tax purposes. (Or is it? I’m unsure what’s ‘obvious’ here.) That should create an interesting market in unused exemption. > [@](#): > > You are really grasping at trying to find complications with my ideas that just aren’t there. If they aren’t there, how come I keep finding them? ---
**Author:** ![blowero](https://avatars.discourse-cdn.com/v4/letter/b/41988e/32.png) [@blowero](https://boards.straightdope.com/u/blowero)\ **Post date:** [February 21, 2003, 7:27pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/55 "2003-02-21T19:27:05Z")
I’ve always thought it would be nice to just have a flat tax, no deductions, no exemptions, no nothing - just a straight percentage of your income, including capital gains. It could easily be made revenue-neutral by tweaking the percentage. I suspect that the wealthy would end up paying as much or more than they currently do, since there would be no loopholes. But if not, there’s no reason it couldn’t be made progressive as well. ---
**Author:** ![Debaser](https://avatars.discourse-cdn.com/v4/letter/d/3da27b/32.png) [@Debaser](https://boards.straightdope.com/u/Debaser)\ **Post date:** [February 21, 2003, 8:35pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/56 "2003-02-21T20:35:48Z")
> [@](#): > > \*Originally posted by RTFirefly \* > > Hey class - who else was this ‘obvious’ to? Currently this is the way that standard deductions work. It’s the only way that standard deductions would make any sense to work. It’s logical to assume that this would be what I meant. However, you could have just asked, instead of this ranting that you seem so fond of. > [@](#): > > If they aren’t there, how come I keep finding them? You haven’t found any yet. You have made some silly plans that I never made and then argued against them. These strawmen are distracting, but don’t really do anything to my arguments. ---
**Author:** ![Debaser](https://avatars.discourse-cdn.com/v4/letter/d/3da27b/32.png) [@Debaser](https://boards.straightdope.com/u/Debaser)\ **Post date:** [February 21, 2003, 8:48pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/57 "2003-02-21T20:48:38Z")
Why do you roll your eyes at this: > [@](#): > > _by Debaser_ > I picked the $50K figure because it is just about the median household income. I also know that the %50 of households that make below the median of 50K already pay only 4% of the total income taxes. Also, about %4 of tax revenues are going back to the lowest earners in the form of tax credits and earned income credit. > > So, as a group the people below this $50K houshold income aren’t generating any income tax revenue now. That’s why I picked that number. Whats wrong with it? > [@](#): > > _by RTFirefly_ > If you exempt the first $X earned by any person, household, or whatever, from taxation, that doesn’t just cancel the revenues from the people earning less than $X. Depending on X, of course, you’ll lose a lot more revenue from people earning more than $X than you will from the people earning less. This paragraph makes sense does not. Let me break it down: “If you exempt the first $X earned by any person, household, or whatever, from taxation, that doesn’t just cancel the revenues from the people earning less than $X.” Ah, yes it does. (Keeping in mind we are only talking about income tax, not payroll tax). If you exempt the first $50K and my household only makes $49K then we don’t pay income tax. Do you have some other theory of how this works? “Depending on X, of course, you’ll **lose** a lot more revenue from people earning more than $X than you will from the people earning less.” For this to be correct it would have to read: Depending on X, of course, you’ll **gain** a lot more revenue from people earning more than $X than you will from the people earning less. > [@](#): > > _by RTFirefly_ > This doesn’t undermine the idea of a flat tax of its ownself, but flat-taxers almost invariably seem to have the idea that the resulting tax rate will be a lot lower than is possible. Just wanted to make sure you weren’t expecting a 17% tax rate on everything not exempted. For the third time (at least): I don’t want to talk about the rate. That is another debate. For purposes here I am just trying to say that it will be revenue neutral for the federal gov’t. ---
**Author:** ![Debaser](https://avatars.discourse-cdn.com/v4/letter/d/3da27b/32.png) [@Debaser](https://boards.straightdope.com/u/Debaser)\ **Post date:** [February 21, 2003, 8:52pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/58 "2003-02-21T20:52:35Z")
> [@](#): > > \*Originally posted by blowero \* > \*\*I’ve always thought it would be nice to just have a flat tax, no deductions, no exemptions, no nothing - just a straight percentage of your income, including capital gains. It could easily be made revenue-neutral by tweaking the percentage. I suspect that the wealthy would end up paying as much or more than they currently do, since there would be no loopholes. But if not, there’s no reason it couldn’t be made progressive as well. \*\* Well said, **blowero**. Depending on how well, or poorly (pun intended) the rich fare under this new plan, I would be willing to make it progressive as well. I am not sure that would be needed, though. Once you got rid of all deductions it would be interesting to see how the bottom line of peoples taxes and take home looked. I do disagree with you on the cap gains though. Dump it entirely, I say. At the very least keep it like it is now where you don’t have to pay on a house if you’ve lived in it for 2 of the past 5 years. ---
**Author:** ![blowero](https://avatars.discourse-cdn.com/v4/letter/b/41988e/32.png) [@blowero](https://boards.straightdope.com/u/blowero)\ **Post date:** [February 21, 2003, 9:08pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/59 "2003-02-21T21:08:34Z")
> [@](#): > > \*Originally posted by Debaser \* > I do disagree with you on the cap gains though. Dump it entirely, I say. At the very least keep it like it is now where you don’t have to pay on a house if you’ve lived in it for 2 of the past 5 years. But wouldn’t dumping capital gains tax tend to heavily favor the wealthy? And if you tried to exempt only certain people from it, then you’ve opened the whole exemption/deduction/loophole can of worms again. If you sell a house and make a profit, why shouldn’t you have to pay tax on the profit? ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [February 21, 2003, 9:31pm UTC](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925/60 "2003-02-21T21:31:35Z")
> [@](#): > > \*Originally posted by Debaser \* > What does getting rid of the overwhelming number of deductions have to do with determining what income is? Lets make it simple and talk about someone who makes money working at a job, getting a paycheck. This person should be able to figure out what the tax they pay is with one calculation. > > Tax rate x Annual income = tax paid > > My solution here is pretty simple, as usual. Don’t tax them at all. I pay taxes on my income in the first place. If I want to use it to buy a house, which then appreciates, that is still my money. > Well, are you arguing that it’s not? My case is a clear one. Everyone pays the same rate = Fair. No special treatment for individual circumstances. People pay the same rate if they have children or not, if they have a house or not, if they have donated money to church or not. It would clearly be more fair. > > Let me explain it this way. > > A more minor change to still move us in the right direction would be to stop every deduction currently in the tax code. Then lower everyones taxes, across all brackets evenly, the amount that would bring the total revenue generated back to it’s current level. > > So, instead of getting those deductions for having kids, a mortgage, and charity work, you instead just get a lower tax rate, just like your neighbors would. > > Do you disagree that this would be more _fair_? > If you agree that the $50K deduction will give the poor a break at least we can agree on one thing. > > \*\* OMG:eek: So, we are not going to tax “unearned income”- which is a magor part of the tax. Then, we won’t have any deductions. Then, a huge, whopping personal exemption. Ok, then- who will a “revenue neutral” income tax hit? Remember- it won’t hit the poor to lower middle class. The middl-middle class will also pay less. The top upper class will pay nothing. So- the upper middle class to middle-upper class will be hit REAL hard. Those with wages from 100K to 500K. Hmmm, I am just talikng a WAG here, but based upon a few treasury figures, it looks like we’ll have to charge them something like a 100% tax. Yep, that’s it- all wages over 50K will have a REAL simple tax form= 1. How much did you make? 2. Subtract $50000 3. Send the rest in. (Oh,and remember, you still pay Social security, medicare, unemployment, state income tax, & sales tax on that $50K). (Ok, that was a WAG. But it’d have to be something close to that- maybe 80%.) Dudes in the about 100K range will pay more in taxes than they earn (they’ll owe 50K in FIT, then a bunch more in Social security, Medicare, Unemployment, and State & local). So, then, all those upper executives with high salaries will simply get their earning by way of a 50K wage- then dividends, stocks, and forgiven debt. They won’t have a wage over 50K. Then- who will pay the income tax? Well, it looks like those engineers, professionals, and middle managers will have to pony up more. Yes, we’ll have to make it a 150% income tax on wages over $50. One of the great ideas about the Federal Income tax was “Income is income”- and for a large extent- it is all taxed. Thus, dudes can’t screw around with the tax system by having one sort of income reclassified to another, thus reducing their tax burden. (mark my words- this will start happening big time if the plan to exemt dividends fro taxes goes thru). Sure Debaser- you bought you house with your wages- which were taxed (or maybe you inherited- but your parents still paid tax on their wages). But then it increased in value. You would only pay taxes on the increase. Of course, under the new rules, basicly no one pays taxes on the gain of sale of a personal residence (YMMV- consult an expert). Capital gains aren’t on house sales- they are on stock sales- that’s were most of the incomes tax on capital gains comes from. Blowero- the wealthy would pay less. You’d pay more. Every “flat tax” scheme I have seen seriously pushed (those that had the numbers punched, and were mostly revenue neutral) had the upper middle class hit very hard. Depending on the “exempt amount” those below it either were also hit hard, or got off easy. The top 5% got a huge tax cut. The tax burden, as a % of income, assumes a bell shaped curve, with the bell shoved a bit towards the high end. SOMEBODY will have to pay the taxes. If one bracket pays less- another HAS to pay more. That’s just the way it is. “Fairness” doesn’t come into that basic fact. Capacitor- yeah, that might be about right. I figure I’d pay about $1000 more. 😕 Apos- yes, there is a conundrum here. Basicly, those in the upper or middle middle class would be hit hard by removing the Mort Int deduction. They’d have to sell- lowering property values. Those in the upper brackets would step in, buy the house, then rent them out- (they’d still get a deduction for the Mort int as a business deduction). Fewer home owners, more renters. If we phased this in, maybe. But families have signed on for a 30 year mortgage in the assumption they’d be able to deduct the Interest. Now- we have talked a lot about “fair”- and I am not sure exactly what’s “fair” or not- but that certainly would not be “fair”. Boo- you’re basicly correct. But the figures I saw had the top 20% of the US paying about 19% of their GROSS income in total tax burden- about the same as the bottom 20%. Weird, huh? So, dudes:cool: - in order to talk a “flat tax” with any sort of reasonableness, you simply have to: 1. Have the numbers calculated. 2. Have it revenue neutral. You can’t just fling a few figures around, and say “hey, this sounds fair to me”. :dubious: :smack: There are quite a few serious Flat tax plans that have been promulgated, mainly by various candidates. Look them up. Pick one you like, post a link to it with a summary- and THEN we’ll seriously debate it. If you don’t, then you’re simply talking some specious figures that could well end up having one income group pay more than they make in taxes. None of this “no deductions, just 10%) crap- they’ll have the actual figures & numbers to make the plan work. Then- we can say"hey, that would work for me”, or argue “fairness”. OK? 🆒 [Previous page](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925.md?page=2) [Next page](https://boards.straightdope.com/t/how-would-you-reform-the-us-national-income-tax-system/155925.md?page=4)