Taxes........who should pay them? (maybe a flat tax thread)

Great Debates
1

In a recent thread I claimed that America was fast approaching the point where 50% of Americans would pay ZERO federal income taxes.

Of course I couldn’t find the link at the time :slight_smile:

Since America is pretty close to a direct democracy, what stops Americans from jacking up the tax rate and increasing handouts once the majority of us do not pay taxes?

I have never been a big proponent of the National Sales Tax, or even the Flat Tax, but I am bothered by the trend leading to only a small percentage of Americans actually paying any taxes.

Once we cross that threshold, what keeps us as a capitalistic society and stops us from becoming a socialist, or even communist one?

Tax Info

2

I think we’re rapidly approaching a level of technology that will render existing economic models obselete. With increasing automation and computerization, almost all manufacturing could be done today with very little labor.

With most good jobs now requiring advanced degrees and a considerable amount of intelligence, what will the mass of people without those qualifications do?

If we were to dump 10-15 trillion dollars into automation (figuring 2-3x of GDP is the outside edge of prudent capital outlay), could we have a society whereby all our productive needs could be fulfilled by true volunteers, people who enjoy working for its own sake?

When the need to work is imposed by nature, it is not immoral. When the need to work is imposed by Man, it is then truly slavery. If it is within our power to free mankind from the necessity of work, should we not do so?

If Cecil Adams did not exist, we would be obliged to create Him.

3

Yeah yeah, and then if somebody invents the Replicator, the economy will be exactly like the one in Star Trek: The Next Generation.

4

Let’s get those damn dead people to start pulling their weight around here! Tax them more! (Actually, I do favor a very steep tax on anything beyond $1 million, but I don’t think it will work in the real world. If it did, we could strenghten capitalism while reducing taxes on the living, but it’s propbably pie in the sky.)

Bucky

Oh, well. We can always make more killbots.

5

Freedom,

You brought up a flat tax rate…are you talking a flat sales tax rate? If so, the top one percent will continue to pay out more in taxes than those in the bottom of the income spectrum.

For example, my father is in that top one percentile. He is more likely to purchase items that are higher in dollar amount than me in the 40-70,000 income range, yet I get the same benefits as he does when it comes to military, fire, police, etc…

It seems to me that no matter what you do, a tax based on percentage or income will not resolve the issue at hand.

6

Singledad…

I’m going to have to go with Tracer on this one. I’ll believe it when I see it.

Bucky

How would this strengthen capitalism? This is pure redistribution of wealth. This is the absolute opposite of capitalism.

This would reward those up and until they were succesful. Then screw-em. Why bother to push the envelope?

Techchick

I don’t know what I am talking about.

(there, I said it, I know that makes some people happy :slight_smile: )

Under the sales tax, as I understand it, you pay for what you consume. If you consume more, you pay more. But it is all at an equal rate (on your consumption).

I guess I am a bigger supporter of a flat tax, but am not really sure.

My big thing is that I see it as WRONG and possibly a fatal mistake to a democracy to allow over half the population to vote, and not pay for anything.

7

To me, a sales tax seems like a dumb idea, because it meddles with the laissez-faire model by encouraging people not to spend. Income tax is the only sensible kind of tax, because it is the only one that doesn’t encourage or discourage any kind of behavior.

The question I have is “is flat tax or progressive system better?”

Flat tax seems fairer, and simpler.

Freedom, you posit a scary idea. Can non-taxpayers who outnumber taxpayers kill the democracy?

Was it Lenin who said something like “Democracy will fail when people realize they can vote themselves money from the treasury”?

I don’t think it’s very likely, however, as long as there is a significant middle class. The nontaxpaying majority don’t cooperate as a group enough to make the idea viable.

Just my 2 cents!

Sincerely,
Hardwood Paneling

8

The fact is, over half the population of this country does not vote. Over half the population of this country are irrelevant to the government and future economic prosperity. It’s been this way since the FF began this grand experiment.

Freedom, sales taxes contribute greatly to State revenue and should not be so quickly dismissed. The bottom 50% may pay only 4.3% of income tax returns, but I imagine (i.e., I could find no cite) they contribute close to 50% of sales tax revenue. And, of course, sales tax hurts the the poor far worse than the wealthy. It sure seems like equality, but try telling that to the $7/hour guy who’s paying a hundred dollars a month in gasoline tax, food tax, tobacco tax, clothing tax, etc.

  1. We’re not even close to being a democracy
  2. Everyone pays a chunk of their income on taxes.

I think what’s alarming is the AMOUNT of money in the hands of that top 1%. Incredible. Even if we instituted a flat 10% income tax, that elite 1% would still contribute to the majority of the nations’ tax revenue. They have all the money, after all.

I think you’re on the wrong crusade here. Why does 1% of the US population have 90% of the wealth? That’s a lot more interesting and problematic than the meager tax breaks given to low income families.

SingleDad, I am astounded by your boundless optimism. It is much more likely that those without skills will suffer even worse fates than the poor, uneducated factory workers of the industrial revolution.

The “volunteer” is a figment of your imagination.

Yet to be reconciled with the reality of the dark for a moment, I go on wandering from dream to dream.

9

Sure it does - higher income taxes discourage folks from working harder to generate more income.

(I’m not a supply-sider, but I’m going to use a suply-sider argument here because it’s convenient to do so.) As a simplistic example of the above, let’s assume that we have an income tax rate of 100% - IE, every penny you earn goes to the government for taxes. How hard are you going to work under those circumstances? Not very hard at all - in fact, probably not at all, period.

10

In asolute dollars, yes - but in terms of percentage of their wealth, no. Economists refer to flat sales taxes as regressive because sales taxes hit poorer folks harder than richer folks. That’s because richer folks save a higher percentage of their income/wealth than poorer folks do, and sales taxes tax consumption rather than savings.

11

Note that on a “Flat” income tax, the flat rate would be likely around 15-20%. The middle class would pay a LOT more tax. Those people w/ homes, who get a break on mort int would pay even more. The stats seem to show an almost instant crash in the home market, many being forced out, many not being able to buy. Think about it- if the rich pay less, and the tax is revenue neutral, we have to pay more? Many of the “flat taxes” proposed by millionaire pols would have them paying 0, some deal, huh?

Replacing the Income tax w/ a National Sales tax or a VAT is no deal either. The rate would have to be around 17%. Adding this to a state tax of 5-8% would mean a sales tax of upto 25%!!! There would be widespread evasion, leading to an even higher tax rate. Us in the middle class would be screwed again.

Note that all industrial nations use an income tax. Also, of the industrial nations, the good ol’ USofA , ranks almost dead last in overall tax rate, w/ only Turkey less.

What we need is less “corporate welfare” tax cuts, less meddling by congress, less sweetheart deals, and a simpler system. We could simplify the IRC down into one fat book, rather than 2 1/2. We could make the wagearner w/o a house return a postcard. A graduated RATE is fair, why make the rate flat?

12

I’d favor a flat income tax rate, and here’s why: My employer estimates how much money to withhold from my check, but she has no idea how much my husband makes; ditto for his employer. We have no idea what our taxes will be until we look at the table. Usually we have to pay in (altho I prefer that to getting a refund, which would mean Uncle Sam was getting an interest-free loan from us.) If it was a flat X%, then X% of mine plus X% of his would be X% of our total income. A lot simpler.

Remember, during the Reagan administration, when they closed some loophole and suddenly the businesspeople were screaming that they couldn’t have their 3-martini lunches anymore? Cry me a river.

13

Freedom,

I understand what you are saying, but a “sales” tax means only a tax, it has no purpose other than a government spending it freely.

Now, a tax for gas should go directly to roads, not for schools or anything else, I will look for a link to a California state congressman’s cite on this.

A fee for schooling, goes directly for schooling.

But the moment you open up a tax with no purpose, then the government can use it no matter it’s intention.

I am not any kind of economist, that I realize, but if one percent of the people are paying more than their share, when is it that society says “this is unfair?” Most wont because they think that it is “okay” to force people with wealthy bank accounts into higher taxes. (sorry, that’s my Libertarian side coming out here.)

Yeah, my dad will buy a $3,000 TV whereas I only can afford a $600 TV. If they place a 10% sales tax on all items here’s the deal:

My dad pays [in taxes] $300.00 while I pay $60.00…the proportion is the same yet my father still pays more into the system than I do.

Again, he has a Jaguar vehicle, I own a used Honda…$56,000 car versus $15,000 (at purchase) is a great difference.

How this hits harder for those with less in terms of income, is above me.

It seems to me that the wealthy carry a huge burden for the rest of us. Yet, those of us with less income benefit pretty much the same (not taking other issues like lobbyists in state and federal governments.)

14

Sake: No, actually I think a dystopian scenario is much more likely. I think that we’ll see a George Turner (“The Destiny Makers”) future rather than a Mack Reynolds (“The Towers of Utopia”) future. But I think I’ll probably see one or the other in my old age.

A sales tax, properly structured, could be equally as progressive as an income tax. Leave the staples untaxed, and progress the tax based on the “luxury value” of the item; a Rolls Royce would carry a 100% tax, a Ford Escort a 10% tax. It would be complicated, true, but more complicated than our income tax system? Is such a thing possible? And the complication would be placed on business, who already retain accountants and lawyers to figure that stuff out.

I totally agree will techchick; a tax should be levied for a particular purpose. Let the people more directly decide what to spend their money on.

On interesting idea I’ve heard is the 9% rule: You get to allocate 10% of your income tax as you wish, but you have to pay a 1% penalty. You would get to allocate up to 90% of your base tax, but you would pay 9% more.

If Cecil Adams did not exist, we would be obliged to create Him.

15

Your dad spends, say, 1/3 of his income on things he needs/wants and puts the rest in the bank. (ok not probably not accurate, but go with it)

You spend all your income on things you need/want.

Hence, your entire income is taxed at a rate of 10%, and 1/3 of his entire income is taxed at a rate of 10%.

The point is that people with higher incomes will have to spend less of their income to survive than people with a lower income.

16

Nu Vo,

I understand what you are saying, but I think that making the wealthy pay out an extraordinary amount is not fair to the wealthy.

Most of those in the one percent area are providing jobs for the rest, thereby paying out more in taxes, overall (no figures to back this up) but as the daughter of a business owner and as a small-business owner, I know for a fact a business owner spends a lot of money to keep people employed.

I pay 2 times into Medicare and Social Security than does the average employee, simply by being self employed and owning my own business. A business owner matches dollar for dollar what an employee pays into this system.

I stray from the topic, but I still don’t see how it is really all that fair that given the alternatives posted that the wealthy man or woman should be forced to carry the rest of the country.

In fact, things like police protection seem to be more needed in a poorer part of town than in a wealthy part…I know from experience.

I strayed, I apologize.

17

since tax is a commonly referred to about 40% doesent that mean that the wealthy people would pay alot more just because they have more money? and the people who barley eke out a living if they were taxed more simply would quit and go to welfare

18

Rich people derive more benefit from and have more power over our society than middle-class or poor people. It seems only fair that they should assume more responsibility.

I have nothing against rich people. Good for them! But it’s not like we’re impoverishing them. they’re still rich even after they pay more taxes. But they aren’t intrinsically better than ordinary or poor people.

If Cecil Adams did not exist, we would be obliged to create Him.

19

Singledad,

Again I stray from the topic, but what I see is a modern day Robin Hood situation, take from the rich and give to the poor.

Without “wealthy” people, many, many jobs would not exist. I realize their earnings are a good grounds by which to pick from for taxes.

However, I do believe that it is up to other people, myself included, to pay a fair share for things like police, fire, roads, etc…

My $15,000 used Honda does as much wear and tear on the roads as does my fathers $56,000 Jag. Yet in sales taxes he is paying more for the “luxury” car that he owns. In fact, they (my parents) own an Audi and a Jeep Cherokee, so there they have added to the tax amount (not including annual fees for licensing the car) to a greater degree.

My parents probably drive the same amount per person that I do, so per person, the wear and tear on the roads is the same of what I drive. However, they are taxed more for having more, dollar wise.

I just don’t see how all this is “fair”. I know life isn’t fair, but in this situation (always try to pull from my own life) my parents are not driving more than I am, they simply have more assets than me, yet they help you and me with roads…

Do you see where I am going with this?

I know it’s a weird arguement, but if I can bring in a different analogy.

What if people were required to pay more at a grocery store based on their earnings?

My dad might pay 10.00 for a gallon of milk while I pay only 2.00. Is this fair?

I don’t think that’s an unreasonable question since we are comparing the fact that many think the wealthy “should” pay more.

No, a car is valued at it’s worth, not it’s drivability, but still, if wealthy people should pay more then why don’t we charge them more for things the average Joe would buy?

20

techchick:

By my reasoning, it is only out of convenience that we don’t ask the rich to pay more than the poor for staples. Other forms of implementing societal responsibility are more efficient.

Which leads, of course, to the fact that we seem hard up against the “non-coercion” value system vs. the “societal responsibility” value system. We can go round and round on these values, unless we define the terms of debate (as I tried to do in my earlier thread).

Neither of these value systems seems self-contradictory. The adoption of one or another depends on the psychology of “what sort of society do I want to live in?” as seen by each voter.

I want to live in a society where every human being has a value, even if economically unproductive or underproductive. I want to live in a society where those who are fortunate, both in their circumstances and their personal characteristics, assume a share of responsibility for everyone in proportion to that fortune.

You have the choice of participating or not participating in American society. The US places no restrictions on emigration. Your options once you leave are not relevant.

You have the option of attempting to convince me (and others) to change my values and add my vote to yours. To do so, you would have to appeal to my self interest or our shared values.

You have the right to point out my values lead to a contradiction. As a dedicated, passionate, and sometimes overzealous devotee to rationality, if you are correct, my nature would then force me to alter my values to eliminate the contradiction.

I’m not saying your arguing these, I’m just making philosophical points.

If you choose to live in a democratic society:

You don’t have the right to apply special rules to yourself because of your own specific values.

You don’t have the right to impose (as opposed to persuade) your own values because you believe them to be superior.

If Cecil Adams did not exist, we would be obliged to create Him.