Yes and no.
While this system is progressive similar to ours, it is greatly simplified by excluding deductions, exemptions etc. Everyone making the same amount would pay the exact same tax which could be calculated within seconds. Unless you are hiding income, there would be little opportunity for tax fraud or excessively awesome tax planning necessitating AMT.
That’s pretty much a text-book example of what I was talking about. You’re acting like a McDonalds worker is somehow privileged because he’s too poor to pay a lot of income tax.
It’s foolish to say that McDonalds working isn’t paying any taxes. Of course he is. What do you think happens when he goes to the store? He tells them, “Don’t charge me sales tax. I’m poor.”?
The rich aren’t paying their fair share. The means by which the wealthy earn money are taxed at lower rates than the means by which poor people earn money. A point that’s been repeatedly in this thread and which you keep ignoring.
That is the way it works now. Everybody who makes the same amount pays the same amount of federal income tax. But how much you make is the tricky part. It may take an army of accountants to figure out exactly how much money you made during a year.
If you want to simplify deductions, exemptions, etc., you could do that and leave the rate structure alone. That’s where all the complications are. Anybody who says they want to change the rates to make things simpler is blowing smoke.
Has the OP been back to this thread? I like to get his opinion on exactly what counts as “imcome”.
To be fair, anyone suggesting a reduction of deductions/credits while remaining revenue neutral will need to reduce rates as well. That is there was recent proposal to raise tax revenue by lowering rates but closing deductions.
One thing that modern computing can do is to improve the standard deductions/exemptions figure. Someone living in a “rich” suburb of St. Paul MN, or in San Francisco or Manhattan, is going to be paying substantially more in “fixed” costs – property taxes, rent/mortgage, heating expenses, etc., than someone living in Cleveland TN or Brunswick GA. By taking number of dependents and zip code, a taxpayer-specific standard deduction (including exemptions) could be generated with ease. If income tax were figured on a flat rate of all income above your personalikzed standard deduction, this would not be so bad. Everyone needs cost-of-dwelling, utilities, phone, food, necessary household and personal-care expenses, medicines, etc. These are the household equivalent of a business’s overhead expenses, and come off gross income. Taxing net income after overhead as we do of businesses would make sense.
Flat rate taxation would be a helluva lot better than what we have now. The Fair Tax would be the best solution.
However, Congress will fight both of them tooth and nail because if either plan came about, Congress couldn’t play games with the tax code to reward its cronies.
You like plans to cut taxes for the rich, and raise them for most other people. Color me surprised!
Within seconds? Really? If you own a rental can you deduct the cost of the building? Do you deduct it all the first year? How about the cost of painting, and plumber visits, and property taxes? If I make a large repair like replacing the roof can I deduct that? All in the first year or spread out? Can I deduct the cost of heat and electricity? How about if I live in one of the units, do I still get to deduct all the above or do I have to prorate it? Do I prorate based on sq ft or on the percentage of the cost of my unit to the whole building?
Taxes are hard because it’s difficult to figure out what is and is not income. Dealing with brackets and standard deductions is a snap.
If the flat tax were enacted, the cronies would have won and there would be no more need for them to play games.
I exaggerate of course. The fact that the wealthy want a flat tax on top of all their other tax breaks shows that they’ll never figure they have enough. If the flat tax were enacted, the wealthy would start a campaign for a Thatcher-style head tax.
Exactly what the Flat Tax would be “a tax game to reward their cronies”, but in this case it’d be GOP cronies.
Why? Could you explain it? Because that statement highly suggests you or I don’t understand the issue.
A flat tax would reward the richest people in America.
Color yourself foolish. I said neither of those things.
Which part are you denying, the part where you advocated for a flat tax or that a flat tax necesarily would decrease the taxes on the rich and hence necesarily raise them on others?
I’m confused then. If you go to a flat tax you pretty much have to do at least one of these. The current income tax rate varies from ten to thirty-five percent. A flat tax would have one rate for everyone. So if you raise taxes to a flat rate of thirty-five percent, you’re raising taxes for most people. If you lower them to a flat rate of ten percent, you’re cutting taxes for the wealthy. And if you go with a middle rate, like say twenty-seven percent, then you’ll be both raising taxes for most people and lowering taxes for the wealthy.
You also loose the ability to encourage and discourage behavior through taxes.
The mortgage interest deduction is a big one. In encourages people to buy homes. When they are younger and make less money, a bigger percentage of their mortgage payment goes to interest and can be written off. As they get older, they presumably make more and see less benefit. But they are able to buy a house sooner. The government sees home ownership as desirable - it creates more stable communities and communities with higher home ownership have less crime. It also encourages taxpayers to build wealth. (Granted those are the traditional benefits of home ownership to the government, the real estate bust has created a different reality, at least in the short term).
Charitable contributions are another big one.
But the real power is in the short term tax credits - “for this year only! Put in energy efficient windows and get a tax break!” These incentives can kick start industries, get people to spend money, give people in disaster areas breaks, and throw more money into the economy during a downturn. Giving them up costs the government a useful tool in tuning the economy.
I guess I’m not explaining it well enough for you to understand.
I’m NOT saying that the kid is ‘priveleged’… I’m saying that taxing dividend income as normal income, which is what I’ve been saying all along, won’t help or hurt the kid… AND HE PROBABLY PAYS NOTHING IN INCOME TAX ALREADY (do I need to repeat that?)
I am NOT saying that he doesn’t pay any taxes at all. I’m simply responding to the OP. I swear, why do lefties always need to introduce strawmen, Marley being the poster child for that technique - argue the question at hand, or start a new thread about sales taxes. This one has ‘income’ in the title, for chrissakes.
You tell me where I’ve ignored the fact that the rich have a lower tax rate on dividend income. I’ve only mentioned it, oh I don’t know, every time I’ve posted in this thread.
Try another argument, please.
There’s lots of problems with the tax system. But guess whose problems are most likely to get addressed?
Notice that this thread isn’t asking “should we raise the divided tax rate?” or “should we eliminate tax deductions for second homes?” No, the issue that gets raised is lowering the top marginal rate on income tax. Somehow I suspect that if that problem were “fixed” the spirit of tax reform would disappear very suddenly.
If we go to a flat tax rate with no deductions or exemptions, then the rich folks wind up paying taxes that they now duck through loopholes and avoid. And we could put in a lower limit, such as no tax paid on the first XX thousand dollars earned.
The Fair Tax handles both ends by design.
ETA: Of course, discussing either change is nothing more than mental masturbation if the change is not tied to Constitutional Amendments that 1) repeal the 16th Amendment and 2) mandate a balanced budget from Congress.
I see no point in a flat tax. Since the recession of 1974 gross income in the United States has become increasingly unequal. A flat tax would increase that. Also, it would probably raise taxes for most Americans. I do not see how it would lead to more economic growth.
So where would you fix the rate? At ten percent? Thirty-five percent? Somewhere in between? And what would be the untaxed minimum?
Why abolish income tax? What would you substitute in its place? Individual income tax is the largest revenue source of federal income - about 42%. The next two biggest sources are various employment taxes like social security taxes (about 40%) and corporate income tax (9%). What are we going to substitue for that - a fifty dollar a gallon excise tax on gas?