The Optional Flat Tax

[w8tlftr]

Today, several states have implemented this single rate structure, and from Utah to Massachusetts, citizens are seeing the benefits.

In Colorado, a single income tax rate generated so much surplus revenue that one lawmaker actually proposed reducing the rate ten years after its implementation, and today the rate is below its original level. In Indiana, the economy boomed after a single rate went into effect in 2003. Since that time, corporate income tax receipts have increased by almost 250 percent. Admiring such success, Governor Mark Sanford of South Carolina currently is pushing for an optional flat tax on Palmetto State income.

http://article.nationalreview.com/?q=MjU5NjgzZjMyNGQ1OWQ1Mjc4OTk1MGM3NWYxZDE2MGM=&w=MA==

[Decker]

The progressive features of most state income taxes are not that progressive.

3 states have a top marginal rate of 9%

13 states have a top marginal rate of 7-8%

22 states have a top marginal rate of 5-6%

6 states have a top marginal rate of 3-4%

7 states have no income tax.

"Even among states with graduated tax rates, most systems are fairly flat. In several states, the top tax bracket begins at a very low level of taxable income ($3,000 in Alabama and Maryland). Other states have only a small difference between the lowest and highest tax rates (just 2 percentage points in Connecticut and Mississippi).

In most states, however, credits and deductions lead to some progressivity in the income tax system.  In Colorado and Michigan, two states with a flat tax, the top 10 percent of taxpayers still paid about half of all personal income taxes in 2003."  http://www.taxpolicycenter.org/UploadedPDF/1001064_State_Individual.pdf

These flat-taxers always come out of the woodwork during election time.  From a federal perspective, the flat tax is a tax cut on the richer people that are better able to pay taxes and it's a tax hike on the poor.

It's a shifting of the tax burden to the backs of the poor and middle class generally.

I also noted this disingenuous nugget from the article:

"When President Reagan cut taxes in 1981, several good things happened. The economy grew, revenues increased, and jobs were created."

Tax rates double every decade due to growth.  Reagan's tax cuts created a debt we are still repaying.  Reagan raised taxes 7 out of his 8 years in office including the largest tax increase in history.

His tax cuts did not magically help the country grow out of the recession, that was due to Paul Volcker.

[shootfighter1]

Not necessarily true.  A flat tax could take away creative deductions from the wealthy and business owners.  The wealthy would always pay more. 

The flat tax is the only true and honest tax system.  You spend (or make) more, you pay more.  Everyone pays the same %.  A flat consumption tax would ensure that everyone pays, including travelers and people who traditionally avoid income tax (whether legally or illegally).  Abolish the IRS & establish the flat consumption tax.

[Decker]

...

The flat tax is the only true and honest tax system.  You spend (or make) more, you pay more.  Everyone pays the same %.  A flat consumption tax would ensure that everyone pays, including travelers and people who traditionally avoid income tax (whether legally or illegally).  Abolish the IRS & establish the flat consumption tax.

I disagree.  The best tax system addresses which group of people have the best ability to pay.  Progressive rates are best for that b/c:

Everybody pays the same rate, &

The more you earn, the higher your tax bracket, the more tax you pay for the dollars in that bracket.

Abolishing the IRS is a pipedream.  It will never happen.  I think the people advocating that position are in it for the shock value without really thinking through the issues of accounting or enforcement.

[shootfighter1]

But a progressive tax system is truely a biased and unfair system.  The progressive tax system doesn't make sense.  It is discriminatory by nature and makes people who make increasing amounts of money pay not only more in total $ for the same services but then we double hit them with a higher %.

If we abolished the IRS and had a consumption based fair tax system, it would be fair for all.  And in most varieties of consumption fair tax plans, the empoverished either get rebates or are not taxed at all on food and utilities.

We probably will have to agree to disagree on this one.

[w8tlftr]

The more you earn, the higher your tax bracket, the more tax you pay for the dollars in that bracket.

This is the problem most Americans have. It's a penalty for success. Let's say the flat tax was 20 percent. 20 percent of $100,000 is still greater than 20 percent of $50,000 so the those that have the best ability to pay are still paying more in taxes and it's fairer than what we currently have.

Abolishing the IRS is a pipedream.  It will never happen.  I think the people advocating that position are in it for the shock value without really thinking through the issues of accounting or enforcement.

Decker you never fail if you never try. The tax system should be straight forward and simple. No deductions, no loop holes, nothing. You make x you pay y. Keep it simple and fair.

[calmus]

I disagree.  The best tax system addresses which group of people have the best ability to pay.  Progressive rates are best for that b/c:

Everybody pays the same rate, &

The more you earn, the higher your tax bracket, the more tax you pay for the dollars in that bracket.

Abolishing the IRS is a pipedream.  It will never happen.  I think the people advocating that position are in it for the shock value without really thinking through the issues of accounting or enforcement.

Good to see some sense talked here.

[Bindare_Dundat]

Abolishing the IRS is a pipedream.  It will never happen. 

"We'll never fly."

"We will never break the speed of sound."

"We'll never reach the moon."

[War-Horse]

I would love to see a consumption tax.  It could save the economy.    But it wont happen because it makes to much sense.

[w8tlftr]

I would love to see a consumption tax.  It could save the economy.    But it wont happen because it makes to much sense.

Stop saying shit I agree with! 

The Fair Tax Act would be the BEST solution but I think the flat tax would be a good compromise.

[Decker]

This is the problem most Americans have. It's a penalty for success. Let's say the flat tax was 20 percent. 20 percent of $100,000 is still greater than 20 percent of $50,000 so the those that have the best ability to pay are still paying more in taxes and it's fairer than what we currently have.

Any flat tax or consumption tax pushed in the last 20 years has used about 23% as a baseline so that gov. revenues won't fall.
If someone in the tax bracket of 10% ($7825 single) or 15% ($7826-31,850) has to pay 23%, that's doubling the taxes on the 10% bracket and adding 8% to the 15% bracket.

For someone earning such a small amount of income, is it really a good idea to double their taxes?

Is that doubling of their taxes at that income rate the same thing as someone taxed on 23% of 100,000?  No, it's not.

How does that work with someone in the 35% bracket earning over $350,000?  They see their tax rate fall.  That's a tax cut for the wealthy...for those most able to pay the tax without going under.

Decker you never fail if you never try. The tax system should be straight forward and simple. No deductions, no loop holes, nothing. You make x you pay y. Keep it simple and fair.

I agree to an extent.  The system should be cleaned up.  But you are forgetting accountability in your quest for simplicity and scrapping the IRS.

Under your flat tax, if there is no IRS, who is going to make sure the taxes are paid, that those taxes are paid in the correct amount, and if not paid in the correct amount, who is going to make sure those unpaid or under-paid taxes get collected?

Removing all deductions is not a good idea either.  Deductions provide incentives for people--helping charities, funding cancer research through donations etc.

Flat/consumption tax is really a lot like supplyside side economics--it looks great at first blush, but when you really consider it, it turns out to be not so good.

[w8tlftr]

Any flat tax or consumption tax pushed in the last 20 years has used about 23% as a baseline so that gov. revenues won't fall.
If someone in the tax bracket of 10% ($7825 single) or 15% ($7826-31,850) has to pay 23%, that's doubling the taxes on the 10% bracket and adding 8% to the 15% bracket.

For someone earning such a small amount of income, is it really a good idea to double their taxes?

Is that doubling of their taxes at that income rate the same thing as someone taxed on 23% of 100,000?  No, it's not.

How does that work with someone in the 35% bracket earning over $350,000?  They see their tax rate fall.  That's a tax cut for the wealthy...for those most able to pay the tax without going under.I agree to an extent.  The system should be cleaned up.  But you are forgetting accountability in your quest for simplicity and scrapping the IRS.

Under your flat tax, if there is no IRS, who is going to make sure the taxes are paid, that those taxes are paid in the correct amount, and if not paid in the correct amount, who is going to make sure those unpaid or under-paid taxes get collected?

Removing all deductions is not a good idea either.  Deductions provide incentives for people--helping charities, funding cancer research through donations etc.

Flat/consumption tax is really a lot like supplyside side economics--it looks great at first blush, but when you really consider it, it turns out to be not so good.

I see where you're coming from but respectfully disagree. IMO, people can't help but spend the extra money in their pockets - especially the rich. Maybe I'm missing something here but if people have more money to spend, and do so by investing and spending, how does that not put more money in the coffers of the government?

IMO, we need to change our culture from that of government dependence to one of personal accountability. I wholeheartedly agree with you that society has a moral responsibility to help the poor. What I take issue with is our government spends so much of our money (because it's so easily accessible to them) they don't have the resources to put it to good use where it's really needed.

So, entertain me for a minute, Decker. Let's say there was a flat tax. In your opinion what would be a fair rate and which incomes would be excluded from the tax?

[War-Horse]

Decker.  Even tho the % of tax burden may seem to increase, I think it would be offset by most people consuming less.  Start living simplier lives.   

My grandmothers home was a nice cottage built brand new in 1947, it has 2 bedrooms  (10x10 ft.)  A livingroom (15x12ft).    Maybe 700sq ft total, in pacific beach san diego.  Raised 2 kids and lived there 50yrs.
I go in there and it seems like i cant turn around.  She sees our homes now a days and says" WTH is all this space needed for???  "For you to fill it with crap, I guess"......


How far we have come..........in the wrong direction, probably.

[Decker]

I see where you're coming from but respectfully disagree. IMO, people can't help but spend the extra money in their pockets - especially the rich. Maybe I'm missing something here but if people have more money to spend, and do so by investing and spending, how does that not put more money in the coffers of the government?

While it is true that the country has, on average, a negative savings rate, that doesn't translate into seeing surplus discretionary income invested in American products.  Wealthy people seek to shelter from taxes as much surplus cash as possible.  Taxes can be deferred for years.  Taxes can be eliminated with creative accounting.  It's nice to know that I paid more in taxes in 2004 than Prudential did.  Foreign investments likewise don't help.  Middle and lower class earners will spend excess money in our economy but that doesn't make sense b/c in your flat tax world, the lower and middle classes have less money b/c their income tax rate either doubles or increases significantly.  Only the well-off see a surplus of cash b/c of the tax cut.  And as I pointed out, they are pretty good at avoiding taxation.

IMO, we need to change our culture from that of government dependence to one of personal accountability. I wholeheartedly agree with you that society has a moral responsibility to help the poor. What I take issue with is our government spends so much of our money (because it's so easily accessible to them) they don't have the resources to put it to good use where it's really needed.

I am for personal accountability as well.  However, since we are the government in this country, it is the apathetic voter who is responsible for the mess.  If your elected rep is spendaholic, vote his ass out.  Why don't they?  B/c politicians bring home the bacon in the form of federal spending.  Look at all those jobs created from Governmental contracts. 

Voters love that shit.  A flat tax is not going to change this dynamic.

So, entertain me for a minute, Decker. Let's say there was a flat tax. In your opinion what would be a fair rate and which incomes would be excluded from the tax?

Governmental expenditures require a flat rate btn 23-30%.  That's why I would never support a flat tax...it hurts the little guy.  But since you insist, I would likely exempt from taxation household income of $60,000 or less.  Why?  I don't know.  It looks like a good middle class number.

What do you think a good rate of taxation is?

[w8tlftr]

While it is true that the country has, on average, a negative savings rate, that doesn't translate into seeing surplus discretionary income invested in American products.  Wealthy people seek to shelter from taxes as much surplus cash as possible.  Taxes can be deferred for years.  Taxes can be eliminated with creative accounting.  It's nice to know that I paid more in taxes in 2004 than Prudential did.  Foreign investments likewise don't help.  Middle and lower class earners will spend excess money in our economy but that doesn't make sense b/c in your flat tax world, the lower and middle classes have less money b/c their income tax rate either doubles or increases significantly.  Only the well-off see a surplus of cash b/c of the tax cut.  And as I pointed out, they are pretty good at avoiding taxation.
I am for personal accountability as well.  However, since we are the government in this country, it is the apathetic voter who is responsible for the mess.  If your elected rep is spendaholic, vote his ass out.  Why don't they?  B/c politicians bring home the bacon in the form of federal spending.  Look at all those jobs created from Governmental contracts.

It's my understanding that the optional flat tax (or the flat tax proposed by guys like Forbes or Buchannan) took away any and all deductions. Maybe I misunderstood? All you would be taxed on is your income. Period. Their thinking was if no taxes where collected on interests or dividends that it would encourage investment - especially by the poor and middle class.

As far as voting out the big spending politicians goes... I try to but I seem to be in the minority.

Voters love that shit.  A flat tax is not going to change this dynamic.
Governmental expenditures require a flat rate btn 23-30%.  That's why I would never support a flat tax...it hurts the little guy.  But since you insist, I would likely exempt from taxation household income of $60,000 or less.  Why?  I don't know.  It looks like a good middle class number.

What do you think a good rate of taxation is?

You know what? I really have no damn clue. I know that the state and local government are gonna want their cut so a number that floats around in my head ranges between 10 to 15 percent. IMO, the more I can keep to save and invest the more financially independent I can be and the more the government can use money it would use on me for someone who is truly needy.

[Decker]

Decker.  Even tho the % of tax burden may seem to increase, I think it would be offset by most people consuming less.  Start living simplier lives.

  If a person earning $15,000 a year sees his tax rate go up significantly, I would think he would have to make his life simpler--give up the auto, the house, food.  I want the poor and lower middle class--those contributing to society--to not be one financial crisis away from the poorhouse. 

My grandmothers home was a nice cottage built brand new in 1947, it has 2 bedrooms  (10x10 ft.)  A livingroom (15x12ft).    Maybe 700sq ft total, in pacific beach san diego.  Raised 2 kids and lived there 50yrs.
I go in there and it seems like i cant turn around.  She sees our homes now a days and says" WTH is all this space needed for???  "For you to fill it with crap, I guess"......


How far we have come..........in the wrong direction, probably.

My grandparents were the same way.  Hell, I'm the same way.  I live a rather austere life.  I don't even have cable tv...talk about roughin' it.  I hate clutter and I don't care for McMansions.  Keep your accounts on your thumbnail.

[w8tlftr]

  If a person earning $15,000 a year sees his tax rate go up significantly, I would think he would have to make his life simpler--give up the auto, the house, food.  I want the poor and lower middle class--those contributing to society--to not be one financial crisis away from the poorhouse. 
My grandparents were the same way.  Hell, I'm the same way.  I live a rather austere life.  I don't even have cable tv...talk about roughin' it.  I hate clutter and I don't care for McMansions.  Keep your accounts on your thumbnail.

Whut?! No cable?

I couldn't do that. Take away my damn cell phone and other "niceties" but I need my Grace Park fix on BSG.

[Decker]

It's my understanding that the optional flat tax (or the flat tax proposed by guys like Forbes or Buchannan) took away any and all deductions. Maybe I misunderstood? All you would be taxed on is your income. Period. Their thinking was if no taxes where collected on interests or dividends that it would encourage investment - especially by the poor and middle class.

Those proposals did do that.  So did Dick Armey's and Bill Archer's.  More money in the hands of investors could mean more money invested in the market.  But the elimination of the tax itself would still be net loss to the governmental revenue.  Tax cuts are always a net loss to the government...to us.

As far as voting out the big spending politicians goes... I try to but I seem to be in the minority.

You are.  Would you vote out of office a senator that has brought your district a couple of hundred defense contractor jobs...maybe including your own?  That's hard to do.  That's why the military industrial complex was brilliant in its approach to governmental contracts--spread just enough of the wealth around to make the gravy train irresistable and unwreckable.

You know what? I really have no damn clue. I know that the state and local government are gonna want their cut so a number that floats around in my head ranges between 10 to 15 percent. IMO, the more I can keep to save and invest the more financially independent I can be and the more the government can use money it would use on me for someone who is truly needy.

I want more money for myself as well.  We do have gov. expenses and 9 trillion in debt.  Someone's got to pay for that.

[Decker]

Whut?! No cable?

I couldn't do that. Take away my damn cell phone and other "niceties" but I need my Grace Park fix on BSG.

I don't have a cell phone either.  The only vacations my wife and I take are to her parent's cabin....shit, I'm starting to depress myself. 

I wish I had cable tv just for the AMC channel...it's always running the Godfather trilogy.

[w8tlftr]

Those proposals did do that.  So did Dick Armey's and Bill Archer's.  More money in the hands of investors could mean more money invested in the market.  But the elimination of the tax itself would still be net loss to the governmental revenue.  Tax cuts are always a net loss to the government...to us.

It's my understanding that tax cuts are a loss when government spending stays the same or increases (as it did under the Bush administration).

I fully expect our government to function as we should - within our financial means.

You are.  Would you vote out of office a senator that has brought your district a couple of hundred defense contractor jobs...maybe including your own?  That's hard to do.  That's why the military industrial complex was brilliant in its approach to governmental contracts--spread just enough of the wealth around to make the gravy train irresistable and unwreckable.

It depends on what sort of jobs in the defense sector. There's a lot of waste and redundancy in the DoD. It certainly wouldn't hurt to cut a lot of programs and hold government officials and contractors accountable.

Besides, if the flat tax did work and it resulted in a booming economy and job growth wouldn't we just see a big shift in where the money is? As an database administrator I'm fortunate enough to work anywhere.

I want more money for myself as well.  We do have gov. expenses and 9 trillion in debt.  Someone's got to pay for that.

No argument there but if times are tight and Americans have to do with less than so should the government.

[Decker]

It's my understanding that tax cuts are a loss when government spending stays the same or increases (as it did under the Bush administration).

I fully expect our government to function as we should - within our financial means.

It depends on what sort of jobs in the defense sector. There's a lot of waste and redundancy in the DoD. It certainly wouldn't hurt to cut a lot of programs and hold government officials and contractors accountable.

Besides, if the flat tax did work and it resulted in a booming economy and job growth wouldn't we just see a big shift in where the money is? As an database administrator I'm fortunate enough to work anywhere.

No argument there but if times are tight and Americans have to do with less than so should the government.

Tax cuts are always a net loss for gov. revenue.  Even with massive spending cuts, our gov. is 9trillion dollars in hock.  For everys fiscally sane senator like Ron Paul or Russ Feingold there's a fuck like that asshole from Alaska that cried and threatened to resign immediately if the funding for his bridge to nowhere was cut.

[shootfighter1]

With a consumption tax, more people are paying into the system. 
With a flat tax system there are no deductions and no complicated IRS waste.  People at & under the poverty line in most flat tax proposals do not pay taxes or pay a lesser %.  I've seen the flat tax being proposed & studied as effective at approx. 20%.  It could even be a bit lower if we can change the way oue government wastes $.