Prosperity Lost

[xsited1]

A one rate tax is not fair at all, unless you think it is fair that some pay taxes from money needed for necessities while other pay from monies only used for luxuries.

I agree that taxing things like food is immoral, but what about everything else? If you have a consumption tax of, say, 15%, everyone pays it. If you buy something for $100, you pay $15 in taxes. If you're rich and buy something for $1,000,000, you pay $150,000 in taxes. Sounds fair to me.

Let's take two examples. And let's make a realistic comparison -- you'll need about a 30% tax rate to just get the same revenues as the current tax system.

Family A makes $20,000. They can't afford to save a dime, in fact they don't have enough to pay for basic things like health care and education.

They spend all their money. In effect they spend about 15,400, and pay about 4,600 (which is 30% of 15,400) in taxes, money they desparately need to pay for necessities they are doing without. That gives them an effective tax rate of about 23% (4600/20,000).

Family B makes $20,000. They save and invest $10 million and spend $10 million. Of that $10million they spend, about 2.3 million is taxes, the balance or 7.7 million is for products and services. Obviously Family B is not sacrifices health care or junior's education to pay the tax!

The effective tax rate for Family B is 2.3m/20m or 11.5%

Now, I personally don't think that a system in which a family making $20k and paying a higher tax rate with money they desparately need for necessities than a family making $20 million in any way is fair, and I really don't see how any one else could either.

Unless your goal is to make the rich richer at the expense of keeping the poor poorer, which IMO is exactly the goal of lots of folks who promote such tax plans.

How can Family B save $10 million if they only make $20,000? That would take 500 years if they saved every penny. And the tax numbers are just made up, so let's make up some numbers based on a consumption tax.

Family A tax: $20,000 * 0.15 = $3,000
Family B tax: $10M * 0.15 = $1,500,000

Same percentage, different tax amounts.

Oh, I see. You want to tax the rich at a greater rate because they make more money and you call that 'fair'. And obviously you want to redistribute the wealth so that the rich send their money to the poor. Well, your idea of 'fair' is different from mine. Not that there's anything wrong with it!

 

[American Horse]

Unless your goal is to make the rich richer at the expense of keeping the poor poorer, which IMO is exactly the goal of lots of folks who promote such tax plans.

I have a suggestion for you Irie. Try looking at from the other side without imputing any motives to them like you just did. That will help for a starter. Of course doing that still allows you to see them as illogical idiots, tools, or about the same as that. But what if their assumption was correct that everone would enjoy more income because artificial restraints from government on income would be removed - then there might be double the economic activity, double the economic benifits and opportunities. Your figure of 30% could easily be cut in half to 15%. I think that is their conclusion. Wouldn't everyone be better off, more incentivized then?

I think part of the plan of the advocates that you deride is that the amount of government spending would actually be drastically reduced, because there would no longer be a way of diffusing that spending throughout the economy as it is now. There would be some constraints put in play on the government.

As for food, there could be a so called "Tax Credit" for per capita expenses for food (bare survival costs), a formula which would level that out of the equation. Right now, as I see it, to get it started on the right leg, the proponents of these ideas want to ensure there are virtually no tax loopholes so that everything is taxed; the idea is to preserve the purity of the system, and not let it be compromised from the start by burdening it as it is now with so many deductions and loopholes; that's the new starting point, otherwise it can't work.

The benifit and beauty of having a Tax Credit for certain expenses like food - maybe transportation or costs like gasoline; and you could name others - is that this ensures that people will actually become a part of the tax system. They need to be a part of the system to apply for their tax credits.

Of course I'd prefer to see no taxes on food, and anonymity of citizenship (including medical records). Gasoline is a different matter, because it is the perfect example of a targetted tax. Tax on gasoline ought to remain only a tax for the costs of maintaining the highway transortation system, paid at the pump. That way if you don't use it you don't have to pay for maintaining it; only the users pay.

 

[Iriemon]

I agree that taxing things like food is immoral, but what about everything else? If you have a consumption tax of, say, 15%, everyone pays it. If you buy something for $100, you pay $15 in taxes. If you're rich and buy something for $1,000,000, you pay $150,000 in taxes. Sounds fair to me.

Let's take two examples. And let's make a realistic comparison -- you'll need about a 30% tax rate to just get the same revenues as the current tax system.

Family A makes $20,000. They can't afford to save a dime, in fact they don't have enough to pay for basic things like health care and education.

They spend all their money. In effect they spend about 15,400, and pay about 4,600 (which is 30% of 15,400) in taxes, money they desparately need to pay for necessities they are doing without. That gives them an effective tax rate of about 23% (4600/20,000).

Family B makes $20,000 [edit: should be $20 million]. They save and invest $10 million and spend $10 million. Of that $10million they spend, about 2.3 million is taxes, the balance or 7.7 million is for products and services. Obviously Family B is not sacrifices health care or junior's education to pay the tax!

The effective tax rate for Family B is 2.3m/20m or 11.5%

Now, I personally don't think that a system in which a family making $20k and paying a higher tax rate with money they desparately need for necessities than a family making $20 million in any way is fair, and I really don't see how any one else could either.

Unless your goal is to make the rich richer at the expense of keeping the poor poorer, which IMO is exactly the goal of lots of folks who promote such tax plans.

How can Family B save $10 million if they only make $20,000? That would take 500 years if they saved every penny. And the tax numbers are just made up, so let's make up some numbers based on a consumption tax.

Typo, I'm sorry. Family B makes $20 million. Does it make more sense now?

Family A tax: $20,000 * 0.15 = $3,000
Family B tax: $10M * 0.15 = $1,500,000

15% is not a realistic replacement tax figure. A 15% tax on gross income of $12 million gives you $1.8T in revenues, well below the $2.5T the Govt took in last year. And since you are taxing only expenditures, the revenues will be lower than even that because not all income is spent, some is invested.

Same percentage, different tax amounts.

Oh, I see. You want to tax the rich at a greater rate because they make more money and you call that 'fair'. And obviously you want to redistribute the wealth so that the rich send their money to the poor. Well, your idea of 'fair' is different from mine. Not that there's anything wrong with it!

Of course.

IMO it is not fair to expect a family of 4 making $20,000 to pay an equal tax rate with monies they need for necessities, than a family of 4 making $20 million to pay a lower rate with money they have for luxuries.

A higher tax rate on the family making $20k means they do without basic necessities, like health care, education, transportion, etc. The higher rate on a family making $20 million means they might have to get a smaller yacht, but they are not doing without basics.

How is taxing them at the same rate possibly "fair"?

 

[Iriemon]

Unless your goal is to make the rich richer at the expense of keeping the poor poorer, which IMO is exactly the goal of lots of folks who promote such tax plans.

I have a suggestion for you Irie. Try looking at from the other side without imputing any motives to them like you just did. That will help for a starter.

You don't think that some who promote stuff like flat tax rates do so because it makes the rich richer? Steve Forbes the billionaire had a very financially logical reason for why he wants a flat tax. It would enrich him significantly. Unless he is taking advantage of all the loopholes that Republicans have put in the tax code (eg the special low 15% tax rate for investments) to already pay a lower tax.

But you do raise a good point, no sense injecting emotion. I was offering an explanation as to why someone might favor a tax system that effectively taxes the very rich at significantly lower rates than the poor.

Of course doing that still allows you to see them as illogical idiots, tools, or about the same as that. But what if their assumption was correct that everone would enjoy more income because artificial restraints from government on income would be removed - then there might be double the economic activity, double the economic benifits and opportunities. Your figure of 30% could easily be cut in half to 15%. I think that is their conclusion. Wouldn't everyone be better off, more incentivized then?

I have not seen evidence that the tax rates in this country, which have been up to 91% marginal top rates, have significantly effected the economy one way or the other.

I think part of the plan of the advocates that you deride is that the amount of government spending would actually be drastically reduced, because there would no longer be a way of diffusing that spending throughout the economy as it is now. There would be some constraints put in play on the government.

I'm for spending cuts. Get out of Iraq, cut the military budget to 2000 relative levels, make SS and medicare means tested. That would save close to $1/2 trillion a year right there.

As for food, there could be a so called "Tax Credit" for per capita expenses for food (bare survival costs), a formula which would level that out of the equation. Right now, as I see it, to get it started on the right leg, the proponents of these ideas want to ensure there are virtually no tax loopholes so that everything is taxed; the idea is to preserve the purity of the system, and not let it be compromised from the start by gaming it.

The benifit and beauty of having a Tax Credit for certain expenses like food - maybe transportation or costs like gasoline; and you could name others - is that this ensures that people will actually become a part of the tax system. They need to be a part of the system to apply for their tax credits.

With tax credits as such, they are implicitly recognizing that the flat tax system is inherently unfair, and trying to correct some of the unfairness with such credits.

It does make it somewhat less unfair. But it still retains the element that the richest who save more are taxed less. And why should Warren Buffect get his caviar tax free?

Of course I'd prefer to see no taxes on food, and anonymity of citizenship (including medical records). Gasoline is a different matter, because it is the perfect example of a targetted tax. Tax on gasoline ought to remain only a tax for the costs of maintaining the highway transortation system, paid at the pump. That way if you don't use it you don't have to pay for maintaining it; only the users pay.

I'm all for a hefty tax on gas. Not to raise revenues (though that doesn't hurt) but because it is the most economically sound way to encourage efficiency and alternative energy usage and get us off the damned oil addication.

 

[auditor0007]

i have a question.....i own a company ....my company pays zero corporate taxes.....why.....because we issue the profits to the shareholders and they pay taxes on it....

who else here owns a corporation.....do you really pay corprate taxes on your profits then take what is left over and give it to the shareholders and then have them pay taxes on what is left.....

small businesses don't get hit with corporate tax rates...

are you an S-corp? I don't believe corporate taxes apply, there is a level in which they do....I will try to get that number.... or try googling it.

S-Corps must pay out all profits. Regular Corps do not. However, I believe regular Corps have a certain amount that is tax exempt, as it can be rolled over into the next year's numbers.

 

[MaggieMae]

Prosperity Lost

A MINORITY VIEW
BY WALTER E. WILLIAMS
RELEASE: WEDNESDAY, MARCH 18, 2009 AND THEREAFTER

Prosperity Lost​

Ask the average person which is the correct answer to the following question: Which president gave the biggest tax cuts for the rich -- Reagan or Bush? I would bet the rent money that you would not get the correct response, which is: Presidents have no taxing authority. Article I, Section 8 of the U.S. Constitution says: "The Congress shall have power to lay and collect taxes, duties, imposts and excises." I know that many politicians and news media people read my column. How do we characterize them if they continue to speak of presidents cutting or raising taxes?

Another tax question: If there's an imposition of a property tax on your land, who pays the tax? I guarantee you that land does not pay taxes; only people pay taxes. That means a tax on your land is a tax on you. You say, "Williams, that's pretty elementary, isn't it?" But what do you say to a politician or news media people who propose increasing corporate taxes as means to get rich corporations to pay their rightful share of government? They should be told that they speak nonsense because corporations, like land, do not pay taxes; only people pay taxes.

If a tax is levied on a corporation, and if it is to survive, it must raise the price of its product, or lower dividends or lay off workers. In each case, it is people, not some legal fiction called a corporation, who bear the burden of any tax levied on the corporation. An important subject area in economics called tax incidence says that the entity upon whom a tax is levied does not necessarily bear the burden of the tax. Some of the tax burden can be shifted to another party. That's precisely what corporations do and as such they are merely government tax collectors.

Here's another tax question: Which worker receives the higher pay: a worker on a road construction project moving dirt with a shovel or a worker moving dirt atop a giant earthmover? If you said the guy on the earthmover, go to the head of the class. But why? It's not because he's unionized or that employers just love earthmover operators. It's because having more capital (tools) makes him more productive and therefore earn higher wages.

It's not rocket science to conclude that whatever lowers the cost of capital formation enables workers to have more capital to work with and enjoy higher wages. Policies that raise the cost of capital formation such as capital gains taxes, low depreciation allowances and high corporate income taxes, and thereby reducing capital formation, serves neither the interests of workers, investors nor consumers.

Taxes also reduce transactions. I need my computer repaired. You and I agree that the job is worth $200. Suppose there's the imposition of a 30 percent income tax on you. That means you would net only $140 and might refuse the job. You might suggest that if I were willing to pay you $285 you would do the job because at that price your after-tax earnings will be $200 -- what doing the job is worth to you. There's a problem. The repair job was worth $200 to me, not $285. So it's my turn to say the heck with it, or would we and society be better off if you and I agreed to the repair job but did not tell anybody? I'd say yes, but we'd be criminals.

You might wonder how congressmen can get away with taxes and other measures that reduce our prosperity potential. Part of the answer is the anti-business climate promoted in academia and the news media. The more important reason is that prosperity foregone is invisible. In other words, we can never tell how much richer we would have been without today's level of congressional interference in our lives and therefore don't fight it as much as we should.

Walter E. Williams is a professor of economics at George Mason University. To find out more about Walter E. Williams and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at Creators Syndicate - Celebrating 20 Years as a World-Class Syndicate Of Talent.

COPYRIGHT 2009 CREATORS SYNDICATE, INC.

Let's see, On this board I hear liberals complaining about the "Bush Tax Cuts", and that corporations don't "pay their fair share" of taxes.
Quite telling.

That is because far too many liberals, while reaping the benefits of a free market system, fail to actually understand how those benefits are created. They then wrap their intellectually flaccid minds around the pre-packaged political slant on what the free market is, and isn't, and march along to that tune like happy monkeys to the organ grinder's message, crying out the mind numbing phrases equating success with evil and working class with nobility, when each are not always the exclusive right of the other.

America is being nailed to the cross of liberalism, mocked and ridiculed, gutted and bled, and the nation is left shaking its weary head and crying out, "Forgive them - they know not what they do."

I get really, reallly pissed off when I see comments blaming ONLY LIBERALS for anything. It's an implication that you people 'hope' will be read by the more stupid and they will believe it.

 

[MaggieMae]

the person buying the product or service is the one paying the corporate taxes, which is how it should be.

the taxes are only paid on pure profit made, not on their revenues generated....so even though as per your example a corporation may be taxed at a 30% rate, their effective tax rate averages only 6%, once they take all of their deductions....which is one of the LOWEST corporate tax rates in the world.

corporate taxes for most our history in collecting taxes, paid for 1/2 of our tax burden as a country and corporate taxes now only pay for 10-20% of our total tax burden while income taxes now pay for a greater portion of our tax burden because of the major lowering of corporate tax rates.

I'm not certain how this relates to your article, but these are important facts that should be known and a quick google of corporate tax history could serve to enlighten one on the topic.

Care

Care, you've mixed the scenarios; the 30% tax rate (you) mentioned was for an individual's income (repairing a computer) going for taxes, and not a corporation's, so the ratios apply as stated. Secondly, the fact that such a small part of revenue is gained from taxing corporations, suggests that it shoud be abandoned. Thirdly, although the corporate tax rate is applied to net corporate income, and not to gross sales/income, it still has to be made up for in the margin, where it is much more than the 6% you mentioned. Finally, there is a reason that Ireland with the lowest corporate tax rate in Europe has the fastest growing economy in Europe (and N.A.) -

Ireland income tax rates today are 20% on the first $50,000 of income and 41% above that. There are value-added taxes of 21% levied on all goods and transactions, with the exception of health and medical services, children’s clothing and food. The tax on corporate profits is 12.5%.

 

[auditor0007]

Here's the bottom line; we need to collect taxes, and we need to collect enough to cover goverenment spending. We cannot continue to borrow from our children and grandchildren. The solution is twofold; cut costs and tax everyone fairly, a flat tax across the board. Everyone pays the same less a standard deduction. Income tax, Corporate tax, Capital Gains, and Inheritance taxes, all one rate, simple and fair to everyone.

A one rate tax is not fair at all, unless you think it is fair that some pay taxes from money needed for necessities while other pay from monies only used for luxuries.

Under the flat tax that I support, low income earners wouldn't pay any tax because their standard deduction would reduce their taxable income to zero, the same as it is now. Low income earners would still pay their share of SS and Medicare, as they will eventually benefit directly from those programs. In fact, they could even keep the earned income credit for low income earners. It also means that everyone still pays something. The final tax rate would be much lower than it is now, so it would be very fair. And there would be no deductions other than the standard deduction, which would be the same for everyone. In the end, most of the wealthy would actually end up paying more than they do now.

 

[Meister]

Prosperity Lost



Let's see, On this board I hear liberals complaining about the "Bush Tax Cuts", and that corporations don't "pay their fair share" of taxes.
Quite telling.

That is because far too many liberals, while reaping the benefits of a free market system, fail to actually understand how those benefits are created. They then wrap their intellectually flaccid minds around the pre-packaged political slant on what the free market is, and isn't, and march along to that tune like happy monkeys to the organ grinder's message, crying out the mind numbing phrases equating success with evil and working class with nobility, when each are not always the exclusive right of the other.

America is being nailed to the cross of liberalism, mocked and ridiculed, gutted and bled, and the nation is left shaking its weary head and crying out, "Forgive them - they know not what they do."

I get really, reallly pissed off when I see comments blaming ONLY LIBERALS for anything. It's an implication that you people 'hope' will be read by the more stupid and they will believe it.

I get really, reallly pissed off when I see comments blaming ONLY CONSERVATIVES for anything. It's an implication that you people 'hope' will be read by the stupid and they will believe it. Do you see the irony here, Maggie?

 

[MaggieMae]

Let's see, On this board I hear liberals complaining about the "Bush Tax Cuts", and that corporations don't "pay their fair share" of taxes.
Quite telling.

Yes, calling these tax policies by the Administration which they occured is misleading, I quite agree.

Corporations, however, are entities which in some weird kind of legal way are treated similarly to individuals. (hey don't blame me, blame the supreme court!)

So I don't think it's necessarily wrong to say that a corporation is pay taxes.

Because that entity IS paying taxes

Yes, which is why it makes the analogy to "land" in the initial article rather silly. Corporations themselves, although the buildings are inanimate, contain people; land contains dirt. Corporations can be destroyed in any number of ways, never to return. Land can be destroyed, but it just gets shifted elsewhere.

 

[Iriemon]

Here's the bottom line; we need to collect taxes, and we need to collect enough to cover goverenment spending. We cannot continue to borrow from our children and grandchildren. The solution is twofold; cut costs and tax everyone fairly, a flat tax across the board. Everyone pays the same less a standard deduction. Income tax, Corporate tax, Capital Gains, and Inheritance taxes, all one rate, simple and fair to everyone.

A one rate tax is not fair at all, unless you think it is fair that some pay taxes from money needed for necessities while other pay from monies only used for luxuries.

Under the flat tax that I support, low income earners wouldn't pay any tax because their standard deduction would reduce their taxable income to zero, the same as it is now. Low income earners would still pay their share of SS and Medicare, as they will eventually benefit directly from those programs. In fact, they could even keep the earned income credit for low income earners. It also means that everyone still pays something. The final tax rate would be much lower than it is now, so it would be very fair. And there would be no deductions other than the standard deduction, which would be the same for everyone. In the end, most of the wealthy would actually end up paying more than they do now.

Yes, proponents of flat taxes know their system in inherently unfair and could never be sold in its "pure" form, so they change it from being a true flat tax to having some progressive tax elements like a standard deduction.

That does make it fairer, but the end result is that the very richest who can afford to invest pay relatively less than those who can't.

The tax rate would be lower on the wealthiest, not so the middle classes which only get a marginal benefit from the deduction.

Again, there is a reason why guys like Steve Forbes think it would be great.

IMO a progressive tax is the fairer system.

 

[Amanda]

That is because far too many liberals, while reaping the benefits of a free market system, fail to actually understand how those benefits are created. They then wrap their intellectually flaccid minds around the pre-packaged political slant on what the free market is, and isn't, and march along to that tune like happy monkeys to the organ grinder's message, crying out the mind numbing phrases equating success with evil and working class with nobility, when each are not always the exclusive right of the other.

America is being nailed to the cross of liberalism, mocked and ridiculed, gutted and bled, and the nation is left shaking its weary head and crying out, "Forgive them - they know not what they do."

I get really, reallly pissed off when I see comments blaming ONLY LIBERALS for anything. It's an implication that you people 'hope' will be read by the more stupid and they will believe it.

I get really, reallly pissed off when I see comments blaming ONLY CONSERVATIVES for anything. It's an implication that you people 'hope' will be read by the stupid and they will believe it. Do you see the irony here, Maggie?

Partisan politics suck. I'm conservative but I think I "get" where libs are coming from and I think it should be possible for reasonable people to find common ground. It makes me sad when I see people just trashing the other because they don't agree. I commend you for pointing out the irony. Maybe it will touch someone's heart and make a diff.

 

[Meister]

A one rate tax is not fair at all, unless you think it is fair that some pay taxes from money needed for necessities while other pay from monies only used for luxuries.

Under the flat tax that I support, low income earners wouldn't pay any tax because their standard deduction would reduce their taxable income to zero, the same as it is now. Low income earners would still pay their share of SS and Medicare, as they will eventually benefit directly from those programs. In fact, they could even keep the earned income credit for low income earners. It also means that everyone still pays something. The final tax rate would be much lower than it is now, so it would be very fair. And there would be no deductions other than the standard deduction, which would be the same for everyone. In the end, most of the wealthy would actually end up paying more than they do now.

Yes, proponents of flat taxes know their system in inherently unfair and could never be sold in its "pure" form, so they change it from being a true flat tax to having some progressive tax elements like a standard deduction.

That does make it fairer, but the end result is that the very richest who can afford to invest pay relatively less than those who can't.

The tax rate would be lower on the wealthiest, not so the middle classes which only get a marginal benefit from the deduction.

Again, there is a reason why guys like Steve Forbes think it would be great.

IMO a progressive tax is the fairer system.

Yeah, I guess we should punish success, and the American Dream.

 

[auditor0007]

Here's the bottom line; we need to collect taxes, and we need to collect enough to cover goverenment spending. We cannot continue to borrow from our children and grandchildren. The solution is twofold; cut costs and tax everyone fairly, a flat tax across the board. Everyone pays the same less a standard deduction. Income tax, Corporate tax, Capital Gains, and Inheritance taxes, all one rate, simple and fair to everyone.

A one rate tax is not fair at all, unless you think it is fair that some pay taxes from money needed for necessities while other pay from monies only used for luxuries.

I agree that taxing things like food is immoral, but what about everything else? If you have a consumption tax of, say, 15%, everyone pays it. If you buy something for $100, you pay $15 in taxes. If you're rich and buy something for $1,000,000, you pay $150,000 in taxes. Sounds fair to me.

There are a few really big problems with a consumption tax. Under the so-called "Fair Tax", the goverenment sends money back to low income earners to offset the taxes they would end up paying. The problem is detemining how much to send each person. People's income levels do change. How does the goverenment track that to stay current?

Secondly, administration of this type of tax would likely end up costing us more than our current system. If you think tax fraud is a problem now, can you imagine how bad it would be when companies are collecting taxes based on sales? This would be especially true for small businesses that can easily hide much of their revenue. On top of that, you would likely begin to see a black market where goods and services are traded rather than sold in order to avoid paying the tax.

And finally, in an economy that relies so heavily on consumption, why would we try to reduce consumption with taxes? If everything we purchase is taxed, people will purchase less. There is no way you can make an argument that people will purchase more by raising prices to the levels necessary to meet fiscal needs. The effective rate would need to be around 30%. And when consumption is reduced and revenues fall? Then what? Raise the rate to 40%? Great idea.

 

[MaggieMae]

Corporation are legal entities, and in many ways are treated like people.

So before you start whining that only people pay taxes not corporations, do bear in mind that those stockholders enjoy ownership but are not subject to being held responsible for that corporation's mistakes either.

That's exactly why corporations exist, but that also means that corporations SHOULD pay taxes, too.

Consider the advantages of corporations for their stockholders.

If the corporation gets sued, the stock owners don't.

If the corporation goes bankrupt stockholders are not responsible for its debts.

If the corporation's officers commit crimes, the stockholders are not held accountable.

So when somebody is going to whine about coporations and FORGET why corporations were created to begin with, then all I can say is they are either be pretty fucking stupid or purposefully ignoring the ENTIRE STORY about what corporations REALLY are.

How true. I can remember one of my first jobs as a paralegal was setting up dummy "Delaware" corporations for the sole purpose of tax avoidance.

 

[MaggieMae]

Here's the bottom line; we need to collect taxes, and we need to collect enough to cover goverenment spending. We cannot continue to borrow from our children and grandchildren. The solution is twofold; cut costs and tax everyone fairly, a flat tax across the board. Everyone pays the same less a standard deduction. Income tax, Corporate tax, Capital Gains, and Inheritance taxes, all one rate, simple and fair to everyone.

A one rate tax is not fair at all, unless you think it is fair that some pay taxes from money needed for necessities while other pay from monies only used for luxuries.

I agree that taxing things like food is immoral, but what about everything else? If you have a consumption tax of, say, 15%, everyone pays it. If you buy something for $100, you pay $15 in taxes. If you're rich and buy something for $1,000,000, you pay $150,000 in taxes. Sounds fair to me.

Add up all those 15% taxes on every item but food, and the guy earning $50,000 has little cash flow left, whereas the one making $100,000 still has plenty left after paying the tax on the same items. And both, by the way, still have to pay mandatory payroll taxes. That's what's unfair about the flat tax.

 

[Iriemon]

Under the flat tax that I support, low income earners wouldn't pay any tax because their standard deduction would reduce their taxable income to zero, the same as it is now. Low income earners would still pay their share of SS and Medicare, as they will eventually benefit directly from those programs. In fact, they could even keep the earned income credit for low income earners. It also means that everyone still pays something. The final tax rate would be much lower than it is now, so it would be very fair. And there would be no deductions other than the standard deduction, which would be the same for everyone. In the end, most of the wealthy would actually end up paying more than they do now.

Yes, proponents of flat taxes know their system in inherently unfair and could never be sold in its "pure" form, so they change it from being a true flat tax to having some progressive tax elements like a standard deduction.

That does make it fairer, but the end result is that the very richest who can afford to invest pay relatively less than those who can't.

The tax rate would be lower on the wealthiest, not so the middle classes which only get a marginal benefit from the deduction.

Again, there is a reason why guys like Steve Forbes think it would be great.

IMO a progressive tax is the fairer system.

Yeah, I guess we should punish success, and the American Dream.

Someone has to pay the taxes.

Keeping taxes low on those towards the bottom of the latter incentivizes them and gives them a better chance to pursue the American dream, no? Providing every kid with a chance to get the quality of education he or she is willing to work to achieve gives them the best chance at the American dream, doesn't it? Providing basic health care so that poorer families are not wiped out by a medical situation gives them a better shot at the American dream, doesn't it?

The family making $20 million has already achieved the American dream. Why should the tax code help them out more?

 

[MaggieMae]

I agree that taxing things like food is immoral, but what about everything else? If you have a consumption tax of, say, 15%, everyone pays it. If you buy something for $100, you pay $15 in taxes. If you're rich and buy something for $1,000,000, you pay $150,000 in taxes. Sounds fair to me.

Let's take two examples. And let's make a realistic comparison -- you'll need about a 30% tax rate to just get the same revenues as the current tax system.

Family A makes $20,000. They can't afford to save a dime, in fact they don't have enough to pay for basic things like health care and education.

They spend all their money. In effect they spend about 15,400, and pay about 4,600 (which is 30% of 15,400) in taxes, money they desparately need to pay for necessities they are doing without. That gives them an effective tax rate of about 23% (4600/20,000).

Family B makes $20,000. They save and invest $10 million and spend $10 million. Of that $10million they spend, about 2.3 million is taxes, the balance or 7.7 million is for products and services. Obviously Family B is not sacrifices health care or junior's education to pay the tax!

The effective tax rate for Family B is 2.3m/20m or 11.5%

Now, I personally don't think that a system in which a family making $20k and paying a higher tax rate with money they desparately need for necessities than a family making $20 million in any way is fair, and I really don't see how any one else could either.

Unless your goal is to make the rich richer at the expense of keeping the poor poorer, which IMO is exactly the goal of lots of folks who promote such tax plans.

How can Family B save $10 million if they only make $20,000? That would take 500 years if they saved every penny. And the tax numbers are just made up, so let's make up some numbers based on a consumption tax.

Family A tax: $20,000 * 0.15 = $3,000
Family B tax: $10M * 0.15 = $1,500,000

Same percentage, different tax amounts.

Oh, I see. You want to tax the rich at a greater rate because they make more money and you call that 'fair'. And obviously you want to redistribute the wealth so that the rich send their money to the poor. Well, your idea of 'fair' is different from mine. Not that there's anything wrong with it!

Bracketing has been going on since 1917.

 

[Iriemon]

A one rate tax is not fair at all, unless you think it is fair that some pay taxes from money needed for necessities while other pay from monies only used for luxuries.

I agree that taxing things like food is immoral, but what about everything else? If you have a consumption tax of, say, 15%, everyone pays it. If you buy something for $100, you pay $15 in taxes. If you're rich and buy something for $1,000,000, you pay $150,000 in taxes. Sounds fair to me.

Add up all those 15% taxes on every item but food, and the guy earning $50,000 has little cash flow left, whereas the one making $100,000 still has plenty left after paying the tax on the same items. And both, by the way, still have to pay mandatory payroll taxes. That's what's unfair about the flat tax.

And with a $12 trillion gross national income, how is a 15% sales tax possibly going to generate the current $2.6 trillion in revenues the Govt currently takes in, much less the $3.6 trillion it is spending?

 

[auditor0007]

A one rate tax is not fair at all, unless you think it is fair that some pay taxes from money needed for necessities while other pay from monies only used for luxuries.

Under the flat tax that I support, low income earners wouldn't pay any tax because their standard deduction would reduce their taxable income to zero, the same as it is now. Low income earners would still pay their share of SS and Medicare, as they will eventually benefit directly from those programs. In fact, they could even keep the earned income credit for low income earners. It also means that everyone still pays something. The final tax rate would be much lower than it is now, so it would be very fair. And there would be no deductions other than the standard deduction, which would be the same for everyone. In the end, most of the wealthy would actually end up paying more than they do now.

Yes, proponents of flat taxes know their system in inherently unfair and could never be sold in its "pure" form, so they change it from being a true flat tax to having some progressive tax elements like a standard deduction.

That does make it fairer, but the end result is that the very richest who can afford to invest pay relatively less than those who can't.

The tax rate would be lower on the wealthiest, not so the middle classes which only get a marginal benefit from the deduction.

Again, there is a reason why guys like Steve Forbes think it would be great.

IMO a progressive tax is the fairer system.

Actually, you are 100% wrong on this. On a consumption tax, you are correct, but not on an across the board flat tax. Everyone gets the standard deduction. After that, everyone pays the same rate. The lower your income, the lower your overall percentage. The higher your income, the greater the overall percentage.