Let's Discuss the Pros/Cons of a Flat Tax

Discussion in 'General Discussion' started by random3434, Apr 16, 2010.

  1. random3434
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    random3434 Senior Member

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  2. boedicca
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    boedicca Uppity Water Nymph Supporting Member

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    Pros:

    Simplicity - less opportunity for politicians to buy and sell favors, and engage in social engineering.

    Fairness - everyone has a stake in the system; people are not able to vote for redistribution of others' income to themselves.

    Productivity - less resources devoted to compliance and reporting can be deployed to productive, job creating activities.
     
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    Last edited: Apr 16, 2010
  3. Oddball
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    Oddball BANNED Supporting Member

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    The biggest con of all:

    America's incomprehensibly convoluted IRC started out as a flat tax.

    Direct taxes on productivity and incomes will always draw people seeking their own special carve-outs and exemptions from the tax.

    Best to massively shrink the size, scope and cost of the federal gubmint and return funding it with lawful imposts, duties and excises.
     
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  4. Baruch Menachem
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    Baruch Menachem '

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    I like the idea where rates are low and universally applied. I don't like all the auctioning going on in congress where everyone is pushing their taxes on to the neighbor.. Everyone contributes a little, rather than some getting away with 0 and those who are not connected have to shoulder the whole load.

    And you can be darn sure that those with the higher incomes are the ones who are first in line at the auction. We have lots of folks with really big incomes who are able to shift their obligation at will.

    I think lower rates for all would be stimulative as well.

    And even more stimulative would be all the money going into the economy rather than into tax evasion.

    And even more stimulative would be money that right now is sent into politically correct rat holes that get good tax treatment, but are bad for growth.

    Of course, there is going to be a huge problem defining income. Is capital gains income? I think not. Lots of people on this board disagree. There are other problems with definition too.

    But I think one low universal rate that no one evades would be morally and financially the best option.
     
  5. eagleseven
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    eagleseven Quod Erat Demonstrandum

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    Pros

    1. Simplicity. When you simply multiply your income by a percentage, there is no need for thousands of forms, expensive software, and tax accountants.

    2. Lack of loopholes. The simpler the system, the harder it is to evade it.

    3. Prevents moral hazard. Since everyone is hit by the income tax proportionally, everyone has skin in each new government program created.

    4. It increases the motivation of entrepreneurs to start small businesses. The more you penalize people who "make it," the fewer people will even bother to try.

    Cons

    1. It retards income redistribution. Our current system is designed to take from the rich, and give to the poor. A flat tax would stop this, making everyone pay the same percentage of their income.

    2. It is not as fair. Any economist will tell you, the less money you have, the more you personally value each dollar. A person making only $20k a year will be dramatically affected by a $5k tax, while a person making $200k a year won't miss the $50k as much.

    3. It may not generate as much revenue as the current system, without significantly increasing taxes on a majority of Americans. This will likely sour several voting blocks to the proposal (principally, those who benefit from the current system).


    ---

    I support the proposal, primarily for pro #2.

    Moral hazard occurs when one benefitting from risk, is not exposed to that risk. It is akin to taking a stranger's money to Vegas, but personally keeping all the winnings.

    Moral hazard is, fundamentally, what is currently wrong with the leadership of Financial Sector, and is also the reason why our political leaders continue to forsake our economic future with debt. CEOs are immune to the consequences of their actions, politicians will be retiring on their islands even if America collapses, and people benefiting from government regulation/handouts/loopholes don't give a damn about the health of the overall economy.

    The Flat Tax, while imperfect, would go a long way in eliminating the moral hazard that is dooming our country.
     
    Last edited: Apr 16, 2010
  6. Modbert
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    Modbert Daydream Believer Supporting Member

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    Indeed.

    Not even bothering to account for those who already can't afford the tax as is at the moment. How many people would be pushed into poverty because of such a tax? Families that literally live paycheck to paycheck for example. I assume it would be a great number.

    This in turn would create more of a turn to government programs, where if the people who want the flat tax get their way, won't be there.

    So what will those people now be who need help?

    SOL & JWF.
     
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  7. Foxfyre
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    Foxfyre Eternal optimist Gold Supporting Member Supporting Member

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    I can't say it any better than Boedicca does here.

    The progressive income tax currently in place punishes productivity and success and with all the exemptions and tax credits and deductions etc. etc. etc. has produced a massive and incomprehensible tax code. It is extremely easy to maniuplate to favor certain groups or constituencies and, because it is so easy to use to buy votes, it is corrupting.

    The "Fair Tax" has most of the same problems and potential for inequities as the existing system.

    A VAT would be so invisibile and easy to manipulate that nobody should be considering that.

    The flat tax is the most visible, easiest to understand by everybody, most difficult to manipulate to favor one group over another, and 100% reasonable and fair to everybody.
     
  8. Ravi
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    Ravi Diamond Member

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    I like it. Say, 15% of all income earned...either through employment or investments. No loopholes, no write-offs.

    The rich will never go for it, imo, because 15% is probably more than they now pay for the most part.
     
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  9. eagleseven
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    eagleseven Quod Erat Demonstrandum

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    A Flat Tax does not preclude the existence of safety net programs. While one might think it redundant for a family to both pay tax and receive welfare, see my point about moral hazard above.
     
  10. eagleseven
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    eagleseven Quod Erat Demonstrandum

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    Teabagger!

    :eek:
     

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