Then they need to be voted the fuck out, no? I am too stubborn to “give up” on the political system as it stands however, I, like you, am very cynical when talking about politicians doing for the people instead of themselves.
Did you count the standard deduction for you and your family in your math?
ETA - sorry, you said you looked at the exemption - my fault.
So you are in the 80th percentile and pay less than 19% of taxes AFTER a personal exemption? You have just identified why we need a flat tax system to clean things up.
In your example, let’s say the person making $30K feeds a family of four. Rent is $12 K, food is $10K, health insurance is $3K (very cheap) which leaves $2K for utilities, clothing, transportation, and entertainment. That flat $3K tax is very significant.
Let’s say the person with $3 million pays 10 X in food and housing, etc, which is $220 K. Double that for luxuries. Still plenty of money left over, and a $300K tax bite is not going to hurt very much. Double it to $600K and it still won’t hurt all that much.
There are basic costs for each of us, which don’t go up with income level nearly as quickly as income does. Progressive taxation can be seen as a flat tax, more or less, on what is left over. That’s a lot different from a flat tax on total income.
Check pages 8 & 9 from their FAQ for their answers:
They also eliminate capital gains from the sale of your home.
Yes - game changing.
As usual, you’d still have exemptions for most people due to economic differences.
“In comparison to the Hall-Rabushka proposal, the personal income tax in 1994 provided exemptions of $9,800 for a family of four, an earned income tax credit (EITC), and the choice of a $6,350 standard deduction or itemized deductions for mortgage interest, state and local income and property taxes, charity, and large health expenditures. Estimates indicate that in 1996, a family of four taking the standard deduction and the EITC, with all income from wages, would pay no federal income taxes on the first $23,700 of income, 15 percent on the next $31,000 or so, 28 percent on the next $53,000, and higher rates on additional income, reaching 39.6 percent on taxable income above $250,000.”
from: http://www.taxpolicycenter.org/publications/url.cfm?ID=1000530
According to this, someone in my position probably pays about 17% of their income in various Federal taxes. Some pay more, others pay less.
Furthermore, your FAQ does not address the fact that the VALUE of housing will be fundamentally reorganized. Currently, both high housing prices and interest rates are effectively subsidized because of the mortgage interest deduction. If that deduction were not in place; yes, interest rates would change, but also home prices, because fewer people could afford to spend $300,000 to $400,000 on a home in many urban areas in the country. Those prices would drop. Everyone who bought their houses at $300-$400k would now be holding on to property that would drop at LEAST 20% in value, making everyone – EVERYONE – upside down on their mortgages to the tune of tens of thousands of dollars.
This is not a good thing.
It does mention the change in value, though minimally.
Your rate of 17% would go up to 19% on income AFTER your deduction - so it might be close to a wash.
The fact that people pay smaller percentages of their income on necessities as they increase income holds true even after we get out of exemption ranges. Another problem is that the basic cost of living varies so much depending on where you live. My modest home in the Bay Area costs as much as a mansion in other places. Deducting mortgage interest helps.
A flat tax is a political non-starter because all the complexity in our tax code comes from specific political decisions, the reasons for which have not suddenly vanished.
But the biggest problem is this - if we assume a flat requirement for tax income, and we cut taxes on the rich, where does the shortfall come from? Clearly the middle and lower classes. It can thus be seen as another cynical ploy to give more to those with the most already. Joe Middle Class might experience a second of pleasure at spending much less time filling out his tax form, but he’ll lose that sense when he sees how his bill has gone up.
It sounds like what you want isn’t so much a “fair” policy, it’s one where the rich subsidize the poor and middle class. Of course someone who makes 30 million is going to be able to afford things not born of necessity (and the poor won’t)
I would argue that they shouldn’t able to. It should be enough that they aren’t taxed into oblivion.
No, my effective tax rate is lower than 17% because I have an expensive house and pay a lot in interest. As I said, my tax bill would go up by something like 60%, maybe 55%. And my house value would go down considerably. It would not be a wash, it would be a disaster for me.
Just back of the envelope math, my interest rate would have to go down to about 2% for me to be able to afford the mortgage considering under a flax tax I’d be paying many more thousands of dollars in Federal taxes. I don’t foresee interest rates dropping that low ever, so I’d probably have to either sell my house at a huge loss (considering the change in property values) or just walk away from it.
Yeah, it will make health care look EASY.
There are a number of issues - one, we try and design a tax system that is “fair” but everyone has different ideas about what fair is. I think the current one is pretty darn fair (and I’m in a high tax bracket.)
Two, we actually use tax code to influence desired behavior. And, it works. When we need to get companies to spend capital, we accelerate depreciation. We encourage people to own houses by giving them a mortgage deduction. Without tax code to do this, we’d be limited in the levers in the toolbox. (Another big one we use is interest rates and other aspects of monetary policy, but they aren’t as specific and targeted as we can get the tax code.) Want to give people who went through Hurricane Katrina a break, stick a break in the tax code for a year - easier than figuring out whom to write checks to.
By the way, if you look at my cite about how much people at various income levels actually pay in Federal taxes, think about the claims of the authors for a moment.
They say that a 19% rate will provide the government with a similar amount of revenue to the current system, and under this new system the poorest people will not pay more in taxes. I’ll take the authors at their word on both points.
It is plainly evident that the rich will pay less in taxes – as my earlier cite shows, the top 10% of earners (those that make $300k plus) currently pay at a 27% rate, so they’re getting a large tax cut. So if the poor aren’t paying any taxes under a flat tax, and the rich are paying less in taxes, who is going to pay more in taxes to keep government revenues stable? That’s right, everyone in the middle class.
This.
It’s much easier to pay 25% of your income in tax if you make $500,000 a year than if you make $50,000 a year.
But then I can’t get a second Rolls Royce 
No, what I want is a tax system where everyone, rich and poor, more or less feels the same level of pain when taxed. Those who feel that pain or more even before taxes, barely making ends meet, shouldn’t pay. Equal percentages do not make for equal pain, even after exemptions.
I’d benefit from a flat tax, but I see no reason why I who can save and is not worried about paying for my next meal should benefit at the expense of someone who does worry about this. I doubt my level of consumption would increase if I got $5,000 more back from a tax reduction, so it wouldn’t help the economy much giving it to me.
It will never be enough. Until you take 5.9 million from a guy who made 6 and then turn around and give the guy who made 25k, 75k, there will never be equal buying power. In fact, even that won’t work as I’m sure they have different buying capacity already. What you want sounds an awful lot like Socialism and might be the reason why people like you have the extreme right screaming.
No matter how hard you try, you will never equate 100k to = 1 million (use whatever arbitrary numbers you wish here)
Aaaaaaaaaand we get to the crux of it.
Nothing. But a flat tax assumes that the income spread is already ‘fair.’ What if someone only made more money because he screwed over his clients & his vendors? What if someone cut his employees wages, increased their hours, & kept prices & outlays steady, just so he could pocket more?
What if a whole sector, with high barriers to entry of new competitors (let’s say health care, or public utilities) decides to collude in raising their prices, sucking financial power from the rest of the economy–& they get away with it because we’re over a barrel & have to buy their service?
In those cases, the rich would be rich because they didn’t pay their fair share. Why should the government ratify their proportion of wealth as fair?
Ah, you say, not all wealthy people are evil swindlers. Maybe not. Not everyone who benefits from an economy of cheap labor & elite privilege is consciously building that paradigm. But the government ends up having to insure the pensioners, feed the jobless, provide medicine to the poor, & generally shore up the undercompensated that suffer because they are paid less. Who pays when the bills come due? The rich can take that hit. The poor can’t, they’re having to beg already. Why exactly should any of it fall on the middle income range, who didn’t do the damage, instead of entirely on the overcompensated? At least some of whom, consciously or unconsciously, did the damage to people’s incomes, to people’s health, financial security & opportunity in the private part of the market?
Naive. It’s not about need, is it? It’s about opportunity, & the opportunity will always exist. But OK, provide basic considerations (health, education, housing) to all & we can talk about “eliminating need for class warfare.”
Why would we want government to shrink? No, really, why? What benefit accrues to us from "small"government?
It’s not about equal buying power. It’s about distributed ownership based on the benefit that you derive from being a part of a society. At the low end, sure, there are people who derive (at least temporarily) their entire existences from the largesse of the government. But part of society is a realization that people will always be on the hard luck side, and we need to take care of them so that they do not riot (and also because it is the moral thing to do, in my opinion). At the top rung, when you own more than several thousand average people, you derive a good deal more than the benefit of the folks who live entirely on welfare and are untaxed federally. As a percentage, you pay more, but on average, you still do better in terms of the society as a whole. We seek a balance in there somewhere where tax is not confiscatory but it is highly progressive. That’s what we will argue about until we live in the Star Trek universe.
That’s a head tax. :rolleyes:
This is in fact my position. (Which I owe substantially to Paul Krugman, whose books I recommend.) The economic boom of the 1950’s was actually nourished, not undercut, by high marginal tax rates. Reaganomics gets it exactly wrong.