A tax proposal

[MagisterCultuum]

A Flat Tax does not have to mean a Flat Income Tax. A Flat Wealth Tax would be fairer and actually more progressive than just about any progressive income tax.

 

[Antilogic]

A Flat Tax does not have to mean a Flat Income Tax. A Flat Wealth Tax would be fairer and actually more progressive than just about any progressive income tax.

An interesting idea, but the question I asked still stands. What are we talking about when we use the word 'fair'?

 

[Cutlass]

Depends on the exact "flat tax" presented. Most I hear about is a complete simplification of the tax code to where humanity is capable of understanding it. It's a good thing if true and has little if any to do with the fairness thing.

It's easy to make a simple tax code with several rates instead of one. Just ditch all the other complications.

 

[JollyRoger]

Just to clear things up, Pennsylvania's income tax is 3.07% and has a sales tax rate of 6%. Some localities add onto the sales tax rate as well. Food, clothing and medications are not subject to sales tax.

Plus, Pennsylvania excludes certain types of income from the "flat" tax and allows deductions, so that taxable income can be less than gross income. It is flatter than a traditional progressive tax system, but not close to being purely flat.

http://taxes.about.com/od/statetaxes/a/Pennsylvania-State-Income-Taxes.htm

 

[Tani Coyote]

Fairness, in the dictionaries of flat tax advocates, means a system where the wealthy aren't punished for being successful. They view progressive taxes as punishing them.

Fariness, in my book, is neither punishing the wealthy, nor leaving the poor out to rot. Which is why I support the NIT.

So your idea is a BLS of 833 a month. I think paying monthly is better than annually. Too many people seem to be budget challenged.

Correct.

The problem is your tax rate is too low. Since a Flat tax must be 25% to collect the same money (which is already less than the government spends) any progressive system must have a higher rate at the top end to work.

Why can't we cut the government?

Social Security and Medicare could likely still be funded through the same taxation(unless of course, we abolished Medicare in favor of universal healthcare).

The welfare bureaucracy is slashed enormously, as many people get their welfare automatically, rather than needing middlemen to dispense it.

Secondly I don't agree with paying people to be baby factories. Although giving some extra might be in order I believe it should be a net loss to have another kid on welfare.

But what do you do if more kids are born anyway?

People aren't responsible with kids, pure and simple, regardless of what financial incentives you put out there. Most you could really do is subsidise contraception and cross your fingers.

The biggest problem I have is the way the working poor lose. If the BLS is not quite enough all the better to encourage finding work. But I don't want is the working poor to lose.

Most people win under my system. As for those who don't - they should learn to cohabitate if paying a few hundred more a year is bad for them. All they need is a spouse, and bam, 10K right there. Or even just a roommate.

The solution to Boston being to expenses is simple, but one certain states will not like, let Boston or Massachusetts subsidize the BLS for their residents.

Theoretically, each states' own tax and spend system would adjust imbalances in the national NIT; more expensive states would have more elaborate welfare, as is usually the case, and thus mitigate the cost of living.

Hey SerriaFox, you still haven't answered one of my questions.

I was wondering why this flat tax thing is a good idea, ignoring for a second the "fairness" argument.

There really isn't an economic argument for a flat tax to my knowledge; it's based on the principle everyone should pay the same rate(more or less) so no one is punished for being successful.

 

[warpus]

Fairness, in the dictionaries of flat tax advocates, means a system where the wealthy aren't punished for being successful. They view progressive taxes as punishing them.

Citation required (for the last sentence)

There really isn't an economic argument for a flat tax to my knowledge; it's based on the principle everyone should pay the same rate(more or less) so no one is punished for being successful.

So basically it's an economic plan not based on economic theory of any kind but rather a feel-good gut feeling...

And that's why I don't support such nonsense. It's like not involving an architect when the blueprints for a new building are drawn up - a recipe for disaster.

 

[pi-r8]

I just don't understand why anyone thinks a flat tax is a good idea.

With out current system, the rich pay a higher rate. In a flat tax, their rate would go down, so they pay less. If you want to raise the same amount of tax revenue, that means rates on everyone else need to go up. If you're posting on this board, that basically means your tax rate would go up.

You can make an exemption for the poor at the bottom if you want (which this proposal does), but then that just means that the middle class will get soaked even more. Why do people have this burning desire to raise taxes on the middle class and cut taxes for the rich?

 

[Tani Coyote]

Citation required (for the last sentence)

Any flat tax advocate I've spoken to advocates flat taxes since they view progressive taxes as punishing the wealthy.

So, I'm not going to provide citation since I never claimed that progressive taxes punish the wealthy, merely that's what all the flat tax advocates say.

So basically it's an economic plan not based on economic theory of any kind but rather feel-good feelings.

More or less, from what I've seen.

Of course, some prominent economists have supported the idea, so I'm sure there might be some theoretical merit to it.

Then again, given how economists disagree on a lot ot things, it's not like it's a unified profession.

And that's why I don't support such nonsense. It's like not involving an architect when the blueprints for a new building are drawn up - a recipe for disaster.

And it's why I support hard facts and data over such things where possible. I've heard people say a tax rate is "too high." "Too high" for me would be to the point it hurts the economy; going by how most other countries have much higher tax rates, I don't think we're near that point.

 

[warpus]

Any flat tax advocate I've spoken to advocates flat taxes since they view progressive taxes as punishing the wealthy.

So, I'm not going to provide citation since I never claimed that progressive taxes punish the wealthy, merely that's what all the flat tax advocates say.

I was asking for a citation from a rich person, specifically saying that progressing taxes hurt him or her.

Your statement was vague and I was under the impression that that's what you meant - that rich people think that progressive taxes hurt them. I have not heard a single rich person say that, quite the opposite.. That's why I was asking for a citation.

More or less, from what I've seen.

Of course, some prominent economists have supported the idea, so I'm sure there might be some theoretical merit to it.

Then again, given how economists disagree on a lot ot things, it's not like it's a unified profession.

Which economists?

Let's see some hard data, too. There are countries, states, and provinces who use a flat tax. Why has there been no analysis of how well it is working out for them?

And it's why I support hard facts and data over such things where possible.

So.. where is this data? All I've seen is conjecture, no analysis of existing data. (It's possible I missed it)

 

[Tani Coyote]

I was asking for a citation from a rich person, specifically saying that progressing taxes hurt him or her.

That would be nice! I've seen plenty of wealthy people argue for higher taxes on themselves... weird thing, isn't it?

Flat taxation seems to be the most popular with "self-made" middle class people, and a few corporate heads.

With many of them justifying it by saying progressive taxation "punishes success."

Which economists?

Milton Friedman, as I recall. Though he technically supported an NIT, which is less "throw the poor out to rot" flat taxation and more "give the poor some modicum of comfort" flat taxation.

Let's see some hard data, too. There are countries, states, and provinces who use a flat tax. Why has there been no analysis of how well it is working out for them?

Russia has a pure flat tax. Plenty of things to be studied there, eh?

To my knowledge, no country has an NIT - which is what I support. The burden of proof for a pure flat tax is on someone else.

 

[Integral]

The Baltic states have a flat tax + exemption amount.

 

[Cutlass]

The Baltic states have a flat tax + exemption amount.

And what's the effect on their economy?

 

[Integral]

Estonia instituted a flat tax in 1994. It grew at an impressive clip in the early 2000s, averaging about 8% from 2000-2006 inclusive. Its unemployment rate held steady around 9% from the late 90s to early 2000s, dipped down to below 5% by 2007, and shot up to 13% in the wake of the Great Recession. The country has been hit hard by the global financial crisis; apparently it has a vibrant financial sector. Well, had.

All three Baltic states are small open economies and derive more of their growth from trade/financial openness than from internal policy. It'd be difficult to generalize their experience to the US, I think. I bring them up as countries which have flat taxes and haven't turned into complete basket cases for it.

I know little about their social safety net.

Note that in addition to a 22% flat income tax, Estonia also has a monstrous 18% VAT.

 

[Cutlass]

So you don't really learn anything about the flat tax from those examples. Which is what I was wondering about.

 

[Integral]

So you don't really learn anything about the flat tax from those examples. Which is what I was wondering about.

Sadly the situations are too different. It's nearly impossible to generalize from small open economies to large open economies like the US.

 

[warpus]

Interesting. Well, we tried using science guys.

Back to ideology.

 

[say1988]

Depends on the exact "flat tax" presented. Most I hear about is a complete simplification of the tax code to where humanity is capable of understanding it. It's a good thing if true and has little if any to do with the fairness thing.

How hard can it be to understand (2011 US tax ratesfor a single):

Up to $8,500 rate 10%
$8,501 to $34,500 rate 15%
$34,501 to $83,600 rate 25%
$83,601 to 174,400 rate 28%
$174, 401 to 379,150 rate 33%
$378,151 and up rate 35%

Of course you whould have to either have a 0% range, some sort of personal exemption, or a payment to individuals (preferably one of the latter two because it can scale with the number of dependents more easily)

The complication comes from all the deductions and other things associated with it. Progressivity is pretty basic.

Most people win under my system. As for those who don't - they should learn to cohabitate if paying a few hundred more a year is bad for them. All they need is a spouse, and bam, 10K right there. Or even just a roommate.

Unless that small group loses a LOT then that just isn't possible. Federal income tax receipts for 2009 (personal and business as reported by the IRS) were $1.4 trillion meaning you are dramatically increasing taxes. If you are also rolling payroll taxes into income tax then it is approximately $2.25 trillion, approximately your projected revenues so for any decrease there is an offsetting increase.

 

[Mise]

Total personal income in the US was $13.0 trillion in Sep 2011, so the tax rate would have to be 17%. That includes ALL income, including rental income, dividends, interest payments, government welfare, etc.

If you just include total employee compensation (salaries, benefits, etc), then total income is $8.3 trillion, and the tax rate would need to be 27%.

source: http://bea.gov/newsreleases/national/pi/2011/txt/pi0911.txt


FYI, it's a mathematical certainty that most people will pay more in a flat tax regime than in a progressive tax regime.

 

[G-Max]

My tax plan for America:

- Federal expenses should be paid for with tariffs on imported crap. If this is not sufficient to cover Federal expenses, then you're spending too much.

- State expenses should be paid for with a retail sales tax.

- Local expenses should be paid for with property taxes, land value taxes, or something similar.

- Income taxes are stupid and should be abolished.

 

[dIZZyBlIZZy]

@say1988 - what about small business? Dividends? What about x retirement account vs y retirement account? The code is a plethora of pages. There are tax layers and such that make a lot of money on the fact that most people do not understand the tax code. It's only simple for you because you applied it to just single income with a 9-5 job.