# Why wouldn't a flat income tax work? **URL:** \ **Category:** Great Debates\ **Created:** [May 26, 2011, 7:39pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343 "2011-05-26T19:39:05Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Mr\_Smashy](https://avatars.discourse-cdn.com/v4/letter/m/2bfe46/32.png) [@Mr\_Smashy](https://boards.straightdope.com/u/Mr_Smashy)\ **Post date:** [May 26, 2011, 9:18pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/21 "2011-05-26T21:18:04Z")
> [@Deeg](#): > > What would the flat tax % need to be if there was a deductible of, say $40k? I’m not in favor of a flat tax but I’m interested in knowing what the numbers would be. Here’s one primitive calculator. Doesn’t include an option for standard deductions, but at least it’s something. [http://www.freedomworks.org/scrapthecode/calculator.php](http://www.freedomworks.org/scrapthecode/calculator.php) ---
**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\ **Post date:** [May 26, 2011, 9:28pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/22 "2011-05-26T21:28:17Z")
> [@Mr\_Smashy](#): > > Also, I assume you’re going to not include payroll taxes in this discussion? > > There’s clearly something to be said about widening the tax base, making those who cry most often for more government actually have to pay for it. If the bottom half of the income groups are only paying something like 4 or 5% of the Federal government, it creates huge incentives for the majority to clamor for more services, which it’s pretty clear we can’t afford as a nation. Of course you’re excluding payroll taxes here, which are strongly REGRESSIVE, since you pay SS and medicare taxes on the first dime of income with no deduction, and your contributions max out at a fairly low rate. If you really want a “flat tax”, you could just end the maximum for social security and medicare taxes, instead of exempting the rich. I’m sure, Smashy, you’ve seen Warren Buffet’s article where he computed the total amount of all taxes that his secretary paid, and the total amount of all taxes that he paid, and found that his secretary paid a higher percentage of her income in taxes than he did. Still want to complain about how the poor don’t pay taxes? ---
**Author:** ![Deeg](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/deeg/32/2955_2.png) [@Deeg](https://boards.straightdope.com/u/Deeg)\ **Post date:** [May 26, 2011, 9:28pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/23 "2011-05-26T21:28:40Z")
> [@Mr\_Smashy](#): > > Here’s one primitive calculator. Doesn’t include an option for standard deductions, but at least it’s something. > > [http://www.freedomworks.org/scrapthecode/calculator.php](http://www.freedomworks.org/scrapthecode/calculator.php) That doesn’t answer my question (it assumes a 17% rate) but I can see that I was being somewhat ambiguous. What would the tax % have to be for it to be revenue neutral with a $40k deductible? I think that site illustrates Robot Arm’s point: figuring out how much you pay is hard not because of the tax rate but because you need to determine what’s taxable. ---
**Author:** ![Throatwarbler\_Mangrove](https://avatars.discourse-cdn.com/v4/letter/t/8c91f0/32.png) [@Throatwarbler\_Mangrove](https://boards.straightdope.com/u/Throatwarbler_Mangrove)\ **Post date:** [May 26, 2011, 9:40pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/24 "2011-05-26T21:40:03Z")
If you agree in principle that the rich should contribute more taxes than poor, what is your issue? Graduated tax brackets aren’t difficult, we have computers nowadays that can do it all in an instant. What problem does a flat tax rates solve? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [May 26, 2011, 9:45pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/25 "2011-05-26T21:45:49Z")
I can’t wait to hear the howling when you try to raise the capital gains tax from 15% to 27%. That is what you had in mind, right? ---
**Author:** ![Whack-a-Mole](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/whack-a-mole/32/141_2.png) [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)\ **Post date:** [May 26, 2011, 9:47pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/26 "2011-05-26T21:47:51Z")
> [@Mr\_Smashy](#): > > There’s clearly something to be said about widening the tax base, making those who cry most often for more government actually have to pay for it. If the bottom half of the income groups are only paying something like 4 or 5% of the Federal government, it creates huge incentives for the majority to clamor for more services, which it’s pretty clear we can’t afford as a nation. I agree but you are aiming at the wrong people. Corporate welfare amounts to about $125 billion/year. > [@](#): > > The Federal Government alone shells out $125 billion a year in corporate welfare, this in the midst of one of the more robust economic periods in the nation’s history. > > \ > > That makes the Federal Government America’s biggest sugar daddy, dispensing a range of giveaways from tax abatements to price supports for sugar itself. Companies get government money to advertise their products; to help build new plants, offices and stores; and to train their workers. They sell their goods to foreign buyers that make the acquisitions with tax dollars supplied by the U.S. government; engage in foreign transactions that are insured by the government; and are excused from paying a portion of their income tax if they sell products overseas. They pocket lucrative government contracts to carry out ordinary business operations, and government grants to conduct research that will improve their profit margins. They are extended partial tax immunity if they locate in certain geographical areas, and they may write off as business expenses some of the perks enjoyed by their top executives. > > SOURCE: [http://www.time.com/time/magazine/article/0,9171,989508,00.html](http://www.time.com/time/magazine/article/0,9171,989508,00.html) Hell, we recently gave Wall Street how many hundreds of billions in bailouts with tax payer money? They paid it back you might say? Yeah, they paid it back with…wait for it…tax payer money (they took the bailout money, borrowed money from the government at exceptionally low interest rates backed by junk securities, bought government debt which paid out at a substantially higher rate than they borrowed the money for essentially paying the government back with its own money and pocketing the difference). Never ceases to amaze me how some people are freaked over a non-existent Welfare Queen driving her Cadillac on your hard earned dime while the people they presumably support are the ones robbing them. But hey, don’t let facts get in the way of your preconceived notions. ---
**Author:** ![Mr\_Smashy](https://avatars.discourse-cdn.com/v4/letter/m/2bfe46/32.png) [@Mr\_Smashy](https://boards.straightdope.com/u/Mr_Smashy)\ **Post date:** [May 26, 2011, 9:51pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/27 "2011-05-26T21:51:12Z")
> [@Lemur866](#): > > Of course you’re excluding payroll taxes here, which are strongly REGRESSIVE, since you pay SS and medicare taxes on the first dime of income with no deduction, and your contributions max out at a fairly low rate. If you really want a “flat tax”, you could just end the maximum for social security and medicare taxes, instead of exempting the rich. > > I’m sure, Smashy, you’ve seen Warren Buffet’s article where he computed the total amount of all taxes that his secretary paid, and the total amount of all taxes that he paid, and found that his secretary paid a higher percentage of her income in taxes than he did. Still want to complain about how the poor don’t pay taxes? Of course I’ve seen the article. Obviously, he pays a lower rate because he’s structured most of his income in the form of Berkshire Hathaway dividends. I’m on record here saying that dividend income ought to be taxed at marginal rates (as are some pretty smart right wingers, like [Samuelson](http://www.washingtonpost.com/opinions/the-real-tax-avoidance-scandal-centers-on-dividends-and-capital-gains/2011/04/01/AFRz6TXC_story.html). Maybe you didn’t know that, but no worries, my mission to educate never ends. Just an aside, when you say > [@](#): > > since you pay SS and medicare taxes on the first dime of income with no deduction, and your contributions max out at a fairly low rate. You are wrong. No worries though, let me help you get smarter. Medicare taxes have [no ceiling](http://blog.accountingcoach.com/social-security-tax-2011/) > [@](#): > > In addition to the Social Security tax, _ **the employee must have withholdings for the Medicare tax of 1.45% of every dollar of salary or wages** _. The employer must also pay a Medicare tax of 1.45% on every dollar of every employee’s salary or wages. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [May 26, 2011, 9:52pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/28 "2011-05-26T21:52:09Z")
> [@Mean\_Mr.Mustard](#): > > Say the feds do the math and a flat income tax of 27% for all Americans who have an income is needed to balance the budget (I know the number would be higher, it’s the concept I am curious about). > > The full time college student who works part time and earns $8000 owes $2160. > > The single parent who works full time and earns $31,000 owes $8370 in income tax. > > The physician who earns $245,000 owes $66,150. > > And the NBA player who earns $2.6 million owes $702.000. > > Is there an argument that this is unfair in any way? I don;t get the whole idea of how a “flat” tax is in any whay more fair or easy than a graduated/progressive tax system. One could have a graduated/progressive tax system with no deductions that would also be filable on a postcard. Anyway every "flat tax’ system I have seen (that are revenue nuetral, those which depend upon a massive reductions in budgets don’t count) are very biased towards the rich, as **Ravenman** sez. In general, the middle class would get screwed. Often this is done by not taxing anything but “earned income”, but it can also be acheived by lowering the rates on the rich and thus increasing the rates on the middle class. I do not see why taxing the rich less and the middle class more is “fair”. ---
**Author:** ![Mr\_Smashy](https://avatars.discourse-cdn.com/v4/letter/m/2bfe46/32.png) [@Mr\_Smashy](https://boards.straightdope.com/u/Mr_Smashy)\ **Post date:** [May 26, 2011, 9:58pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/29 "2011-05-26T21:58:11Z")
**Whack** , while I’m glad you’re posting links that bolster your argument (unlike so many who just spout off the latest Kos claptrap, uncritically), maybe you could find an article more recent than 13 years old? 😃 To be clear, I’m not in favor of what you call corporate welfare, or anything really that distorts the market. Sugar, ethanol subsidies, and the like just end up costing taxpayers in the end, either through higher taxes or higher prices. As for the Welfare Queen comment you seem to think I made, you’ll have to provide a cite… perhaps not one from 1998 LOL. ---
**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\ **Post date:** [May 26, 2011, 9:58pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/30 "2011-05-26T21:58:55Z")
So why can’t the kid working at a McDonalds structure his income as McDonalds dividends? Because there’s one set of tax rules for the rich, and another for everyone else, of course. So your dream utopia of a flax tax is already here! Oh wait, the wealthy already in actual fact, pay a LOWER percentage of their total income as total taxes. So in order to actually create a flat tax we’d need to raise taxes on the rich! See, your problem, and the problem of your kind, is that you focus on tax rates. Forget tax rates. Let’s focus on actual total tax payments of all kinds, and divide that by actual total income of all kinds. ---
**Author:** ![Jackknifed\_Juggernaut](https://avatars.discourse-cdn.com/v4/letter/j/9de053/32.png) [@Jackknifed\_Juggernaut](https://boards.straightdope.com/u/Jackknifed_Juggernaut)\ **Post date:** [May 26, 2011, 10:01pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/31 "2011-05-26T22:01:02Z")
Plus, imagine the massive unemployment it would cause when all the brilliant tax accountants and tax lawyers, whose sole purpose is to calculate taxes and interpret our extremely complicated tax laws, lose their jobs! 😃 ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [May 26, 2011, 10:05pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/32 "2011-05-26T22:05:44Z")
> [@Jackknifed\_Juggernaut](#): > > Plus, imagine the massive unemployment it would cause when all the brilliant tax accountants and tax lawyers, whose sole purpose is to calculate taxes and interpret our extremely complicated tax laws, lose their jobs! 😃 Have you \*read \*some of those “flat tax” systems? :eek: ---
**Author:** ![Whack-a-Mole](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/whack-a-mole/32/141_2.png) [@Whack-a-Mole](https://boards.straightdope.com/u/Whack-a-Mole)\ **Post date:** [May 26, 2011, 10:26pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/33 "2011-05-26T22:26:29Z")
> [@Mr\_Smashy](#): > > **Whack** , while I’m glad you’re posting links that bolster your argument (unlike so many who just spout off the latest Kos claptrap, uncritically), maybe you could find an article more recent than 13 years old? 😃 > > To be clear, I’m not in favor of what you call corporate welfare, or anything really that distorts the market. Sugar, ethanol subsidies, and the like just end up costing taxpayers in the end, either through higher taxes or higher prices. > > As for the Welfare Queen comment you seem to think I made, you’ll have to provide a cite… perhaps not one from 1998 LOL. Hard to find current numbers. I found this from the CATO Institute: > [@](#): > > Overall, the Bush administration has proposed a very modest reduction in “corporate welfare” subsidies in its fiscal year 2003 budget. The budget includes $86 billion in corporate welfare for FY2003, down 7 percent from $93 billion in FY2002, according to Cato Institute estimates. > > SOURCE: [http://www.cato.org/pubs/tbb/tbb-0205-7.pdf](http://www.cato.org/pubs/tbb/tbb-0205-7.pdf) (PDF) Dated I know but we recently just saw Congress refusing to end oil subsidies despite oil companies recording record or near record profits. I am also unsure on just what they are counting as a corporate subsidy and what we would probably count as a subsidy (many are indirect…e.g. the government decides to build a new road which also happens to service your new warehouse). And of course it is the CATO Institute which is business friendly so I think we can safely say this is a minimum (I have found many cites that claim higher amounts but most seem to have an agenda so not comfortable quoting them…I’ll have to look for more later). Certainly looking at the landscape today I see many instances of entitlement programs being slashed and then the government (often state governments) turning around and handing new tax breaks to various businesses. I do not see a ground swell in the people at the bottom getting “more” at the expense of the rich. As for the Welfare Queen it seems implied by your comment about those at the bottom being interested in getting more. I suppose that is true insofar as everyone wants “more” but the implication is a bunch of lazy peoplel not paying their fair share and bilking hard working Americans out of their hard earned money. There probably are some of those people but in the past the US has had unemployment rates as low as 4% in 2000 which is darn near full employment (there is no such thing as 0% unemployment). This indicates people want to work and will work when they can rather than kick back and collect welfare. Whether a poor person pays their “full” share for the education of a child is debatable. Perhaps you think they should (I do not know). We have notable posters here who have made good and are doing well who were raised in poverty. Their parent(s) did not pay their “fair share” but their kids have done well. I call it a good investment. Others might see it as people taking from them. YMMV ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [May 26, 2011, 10:33pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/34 "2011-05-26T22:33:34Z")
> [@Lemur866](#): > > So why can’t the kid working at a McDonalds structure his income as McDonalds dividends? Because there’s one set of tax rules for the rich, and another for everyone else, of course. > > So your dream utopia of a flax tax is already here! Oh wait, the wealthy already in actual fact, pay a LOWER percentage of their total income as total taxes. So in order to actually create a flat tax we’d need to raise taxes on the rich! > > See, your problem, and the problem of your kind, is that you focus on tax rates. Forget tax rates. Let’s focus on actual total tax payments of all kinds, and divide that by actual total income of all kinds. Yes, I notice that all these calls for “fairness” want to equalize ordinary income rates. There’s never any call to equalize rates between different forms of income. The income tax rate ranges from 10% up to 33%. Anyone with an annual income of over $34,000 is paying at least a 25% rate. Long term capital gains rates max out at 15%. The long term rates on income earned through real estate, collectibles, or small business stock also are lower than ordinary income rates. Corporate tax rates are lower than ordinary income tax rates. Qualified stock dividend rates are lower than ordinary income rates. But somehow in all of the calls for “fairness” nobody suggests that we treat all these things as ordinary income and tax them at the same rates. ---
**Author:** ![Mr\_Smashy](https://avatars.discourse-cdn.com/v4/letter/m/2bfe46/32.png) [@Mr\_Smashy](https://boards.straightdope.com/u/Mr_Smashy)\ **Post date:** [May 26, 2011, 11:19pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/35 "2011-05-26T23:19:47Z")
> [@Whack-a-Mole](#): > > Dated I know but we recently just saw Congress refusing to end oil subsidies despite oil companies recording record or near record profits. > > I am also unsure on just what they are counting as a corporate subsidy and what we would probably count as a subsidy (many are indirect…e.g. the government decides to build a new road which also happens to service your new warehouse). And of course it is the CATO Institute which is business friendly so I think we can safely say this is a minimum (I have found many cites that claim higher amounts but most seem to have an agenda so not comfortable quoting them…I’ll have to look for more later). > > Certainly looking at the landscape today I see many instances of entitlement programs being slashed and then the government (often state governments) turning around and handing new tax breaks to various businesses. I do not see a ground swell in the people at the bottom getting “more” at the expense of the rich. > > As for the Welfare Queen it seems implied by your comment about those at the bottom being interested in getting more. I suppose that is true insofar as everyone wants “more” but the implication is a bunch of lazy peoplel not paying their fair share and bilking hard working Americans out of their hard earned money. A reasonable reply. Let me respond. I’m not sure I’d call the tax cuts that oil companies enjoy (credit for drilling places, LIFO account methodologies, etc) corporate welfare per se, but I agree, they have no place in a time of fiscal trainwrecks (made worse by both parties, to be sure, in different ways). To call them corporate welfare or government handouts, you’d first have to assume that all money first belongs to the government - not that idealistic socialism is unknown on this board, but there you go. My comment about the lower half (_half_, mind you… not necessarily welfare queens) paying more of their ‘fair share’ (whoops, liberal wording there, sorry) comes from this realization: anything not paid for, anything given, isn’t valued as much and eventually gets taken for granted. Anyone with kids knows this. With the system we have now (and God forbid if it gets more ‘progressive’), you end up incentivizing the lower half to demand ever more government services. I’m not talking about WIC or AFDC, I’m talking about higher education, about free healthcare, about services that the middle class use and come to expect… all paid for by a someone else. It’s an unhealthy arrangement. The state tax breaks for business are usually (always?) because they are competing against other states to get business to relo there. Virginia just did this with Hilton and Northrop Grumman, crushing DC and Maryland (yes!). It creates a race to the bottom of sorts, but I’d prefer that kind of State Business Development to lobbyists in back rooms pledging PAC dollars to get a sweetheart rule in some obscure bill. ---
**Author:** ![Mr\_Smashy](https://avatars.discourse-cdn.com/v4/letter/m/2bfe46/32.png) [@Mr\_Smashy](https://boards.straightdope.com/u/Mr_Smashy)\ **Post date:** [May 26, 2011, 11:22pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/36 "2011-05-26T23:22:53Z")
> [@Lemur866](#): > > So why can’t the kid working at a McDonalds structure his income as McDonalds dividends? Because there’s one set of tax rules for the rich, and another for everyone else, of course. I’m not sure what planet you live on, **Lemur** , but there’s one set of _everything_ for the rich and another set for everyone else. Rich people don’t travel like us, live in homes like us, vacation like us, etc. If you don’t like it, feel free to become rich. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [May 26, 2011, 11:29pm UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/37 "2011-05-26T23:29:04Z")
> [@Mr\_Smashy](#): > > I’m not sure what planet you live on, **Lemur** , but there’s one set of _everything_ for the rich and another set for everyone else. Rich people don’t travel like us, live in homes like us, vacation like us, etc. > > If you don’t like it, feel free to become rich. Or tell Congress to change the tax laws. I wonder which one poor voters might find more attainable. There are a lot of them, you know. ---
**Author:** ![SenorBeef](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/senorbeef/32/2220_2.png) [@SenorBeef](https://boards.straightdope.com/u/SenorBeef)\ **Post date:** [May 27, 2011, 12:03am UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/38 "2011-05-27T00:03:29Z")
> [@Mr\_Smashy](#): > > If you don’t like it, feel free to become rich. Wow, is this the new “if you don’t like something about America, then find another country to live in!”? ---
**Author:** ![Bosstone](https://avatars.discourse-cdn.com/v4/letter/b/22d042/32.png) [@Bosstone](https://boards.straightdope.com/u/Bosstone)\ **Post date:** [May 27, 2011, 12:11am UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/39 "2011-05-27T00:11:14Z")
> [@SenorBeef](#): > > Wow, is this the new “if you don’t like something about America, then find another country to live in!”? Don’t be silly. It’s not new. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [May 27, 2011, 12:16am UTC](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343/40 "2011-05-27T00:16:51Z")
> [@Lemur866](#): > > So why can’t the kid working at a McDonalds structure his income as McDonalds dividends? Because there’s one set of tax rules for the rich, and another for everyone else, of course. The rich are not like you and me. For one thing, they have a lot more money. [Previous page](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343.md?page=1) [Next page](https://boards.straightdope.com/t/why-wouldnt-a-flat-income-tax-work/583343.md?page=3)