Well, what do ya think?

CP

I voted yes CP . I think we both know it's as fair as it's going to get. Persoanlly though I would rather abolish all Federal taxes and have the states pay the federal government for me. That way the Feds will have to actually show just cause for taking my money. Like Reagan did... return a ton of state programs back to the states.

Though on the surface, I'm in favor of a flat tax, and I voted yes, I've not yet completely made up my mind.

There is a good link I found that outlines both sides of the Armey-Shelby tax plan:
Article

I am in favor of a flat tax system with no deductions at all, no loopholes, no exemptions. The only addition would be if you make under $24,000 a year, then you will not be taxed at all.

Then abolish the IRS and save billions per year in administrative costs.

I would be in favor of a flat tax as long as it included all forms of income including inheritance. But yes, all loop holes out (and that means some tough changes for many people and businesses) corporate taxes that match the income on their income statement at the same flat tax rate and a ceiling before the taxing commences.

And start a tariff war with bermuda until all of those paper conglomerates come back to the USA.

The current income tax system is nothing more than a way to pay for social engineering. Its designed to both promote and to pay for whatever the gov't decides is good for us. That's two strikes against it as far as I'm concerned.

Flat tax and learn to live within that amount.

If I'm expected to live that way, so should my gov't.

Passion, I couldn't agree with you more. It's vital that we set limits or otherwise we might as well keep the system the way it is so that the rich keep getting ripped off and I don't . Seriously though, I would also be in favor of setting spendin caps that could possibly go up and down depending on inflation and interest rates only if salaries and other incomes can't stay comparable to the dollar... you know, only in wierd cases but if necessary.

And I can't believe that anyone would suggest that people making under $24,000/year don't get taxed. The whole idea behind a flat tax is that every body pays a comparable amount. If we start setting limits than we'll have a whole new group of special interests and people just above that portion lobbying to raise the rate. It'll then turn into a rich man's tax, but at a "fair flat rate". If some people are going to carry the burden and others aren't we should just privatize 90% of public works.

Actually, JL, most of those proposing a flat tax, start the taxation at around $30,000. Here's why:

Let's say that the tax rate is 20% (just for a nice round number). Some propose a little less, some a little more.

Now, let's say you make $20,000 a year. At a 20% flat tax rate, you pay $4,000 in taxes, for a net income of $16,000. A pretty steep cut, but maybe still livable. Until you realize that's only the Feds. State and local are going to take another 10 to 15 percent on average. At 10% local taxes, your income is down to $14,000. At 15%, it's down to $13,000. Can you live on that these days? Rent or mortgage? Car payment? Insurance? Groceries? Utilities? Doubtful.

Now let's look at, say, $50,000. Feds get $10,000, locals get $5,000 to $7500. That still leaves you with $32,500 to $35,000. Not extravagent, but at least liveable.

With a flat tax in place for every income bracket, we'd be placing almost everyone making less than about $30,000 below the poverty level, and they would nearly all require some kind of assistance. Are you sure that's really what you want?

The only thing I don't agree with, as far as most of the proposals go, is the exemption of capital income. Stock dividends, interest, capital gains, and the like. It's all income, earned or not, and needs to be taxed, for one over-riding reason, if nothing else. When you make more, you have a greater ability to invest in stocks, and interest bearing accounts that you wouldn't necessarily have access to making, say only $20,000 a year. The fact that you have stocks or bonds making money for you, instead of personal labor, should not exempt it from income taxes once you start drawing on it.

I have not voted as of yet. The main purpose is the question of taxable income. While in theory a flat tax sounds good, it does not take many of the factors into account that I think should be taken. The largest one being dependants. One could argue that having children are a personal choice and you should still pay the same, but this argument is colder that Pluto on a bad day. Children take an enormous amount of money and effort to raise. It is not like the family is carelessly spending money on a nice car or large home. They are simply trying to meet the bills.

50,000 dollars on a simple flat tax of 20 percent with two children would not be enough. Fed taxes as stated would be 10,000 plus another percentage for state taxes. If you figure 40,000 dollars of net income after taxation, which ignores the state taxes, about 15,000 goes toward a mortgage payment. (This varying from state to state as the cost of living in each area varies.) You are now down 25,000. Figure in a vehicle payment and average consumer debt. Then add up your basic utilities at another couple thousand. Oh then figure in health insurance and auto insurance. It really starts to get ugly if you really try to put a budget together with just the basics in life.

I realize that this post lacks the detail I normally like to include, but a flat tax on those that are wealthy is fine with them. They actually would gain the most from such. Loopholes are here and there, but many of them encourage large charitable donations to avoid being lobbed into a more stiff tax bracket. I think the issue of taxation is a bit over simplified. If it were so great I think we would have already made the move.

Niteguy,

I can't say that I would favor a 20% flat tax either. I was thinking along the lines at 3-5% and never over 10%. That would be outrageous. If people said that wasn't enough to run the Federal government then it would be time to start rolling back programs to the state at which point several idiotic ones would be cut. When you let people decide for themselves just exactly what to fund and it's in their discretion, things change and the first thing is people's opinion about public spending.

I would probably agree with you, JL, if we were starting from scratch. I'm sure most other proponents of a flat tax would, as well. Unfortunately, this is the real world, and we have programs in place that cannot be cut without a massive uprising in this country.

Now, perhaps we could eventually bring it down, by eliminating some programs gradually. But really, nobody on either side of the isle in Washington seems inclined to do that. I don't see it changing anytime soon.

And even if you do eliminate programs by shifting them to the states, it won't change the overall amount of taxes paid by your average citizen. It just changes who they make the check out to.

I do not support the same percentage being taxed on all income. I do support the same percentage being applied to income after a certain amount of income. I would tax all income at 25% after the first $50,000. There would be one tax group: individuals. There would be no deductions other than the $50,000.

There would be no corporation tax as the individuals who own the corporation would pay their taxes on the money they earned in the corporation.

All citizens would be subject to the same tax structure. No special categories would exists for elected officials.

With such a tax those members of our society who, in our economic system, have exceeded the basic means of life would be shouldering the responsibility for maintaining our government. Though not fair in some respects, it seems to be much cleaner and reasonable than our current code. For example, taxing people and then give money back to them via a government program is less efficient than not taxing them in the first place. The wealthy are already bearing the greater responsibility of sustaining the cost of government. This tax would reduce determination overhead. Further, it will a tremendous value in eliminating political motivated manipulation of the tax code.

Despite having six children, I do not support a child care deduction. No one else should be subsidizing me to raise them. If I can not afford them, I should not be having children. It is indeed a large monetary commitment. That in itself is no reason for it to be subsidized. I can not see how encouraging people to have children via a subsidy is a good thing. Over population is the number one problem in the world.


(all numbers are subject to tweaking and are presented as is for discussion purposes)

ok, but corporations in and of themselves make income (profits) over and above what is necessary to run the business. The owners do not take all of this out in salary or bonuses, so why should the corporate profits be exempt?

I am proposing that the profits of a corporation be assigned to individuals and the appropriate tax paid by the individual. I am not in favor of the current legal definition of a corporation. This change is part of the correction. Corporations should not have an identity into themselves. They should be treated as the collective ownership of individuals, because that is what they are. People should be under the same tax code and not put themselves under a different one via corporations. If there is a profit, it should be taxed. It should not matter if these profits are not taken out via salary or bonuses.

I believe the flat tax could be part of a unified tax code where loopholes and inequity is decreased. Corporation reform would be another part of it.

I would support a flat tax as long as all income - including capital gains, inheritance, whatever - is treated equally. If it comes in, it's income. I would prefer a plan with a fixed per-person exemption, but I'm not sure exactly how large it should be and I could possibly accept a plan without it. Other than that, though, there should be no exemptions. None. Your tax return really should fit a postcard. If someone has unreimbursed medical expenses, for example, they should seek aid somewhere. Perhaps that "somewhere" should include government and perhaps it shouldn't, but it's definitely not a tax matter. That's entirely the wrong way to handle it.

I see no reason why this should affect corporate taxes at all. Corporations are treated as people, and given many of the same legal protections as people, separately from the officers or employees of the corporation. Maybe that's wrong, maybe there are others who would (like me) want to change that, but right now it's the case and as long as corporations are given that protection they should pay for it.

Lastly, it's important that any new tax plan not reduce revenue too drastically right away. While I could favor a plan that phases down to a much lower overall size of government five years or more from now, any plan that explicitly tries to make such a reduction in one step is a non-starter with me. Incremental change is the only responsible option.

I don't know if I am out of order here, but I don't like the idea of any kind of a flat tax. I am in favor of a sales tax or usage tax, that taxes each individual on what you buy.

You're certainly not out of order. I sort of agree with you, personally...in the abstract. At that level I definitely think that it's better to tax consumption than income. The problem is, I just don't believe it's practical. It's certainly not very compatible with the idea of having the first part of your income not taxed at all, as with a personal exemption under a flat income tax. Even in the general case, though, I think there are some problems. Products such as stereos are computers consist of dozens of components, which consist of smaller components, and so on down to raw materials, plus labor and overhead costs at each step. People raise the "double taxation" ruckus enough; imagine what they'd be like with quadruple tax or worse...and this time they'd actually have a valid point. It would have to be a value-added tax instead of a sales tax, or there would have to be rebates/exemptions for the sales tax that was already paid on components etc., and there'd be a whole morass of rules for determining what value was added at each stage and it would be just as subjective and subject to social engineering as what we have now, plus it would be even more costly to administer.

Maybe you see ways out of all that, but to me it just looks like a mess. While a consumption tax is great in concept, it doesn't seem like it can really work. While an income tax doesn't have the same ideologically-pure glow as a consumption tax, the two approximate one another in their effects and the income tax is much more practical.

Platpus:

I definitely agree with your assessment of the usage tax vs. the income tax.

I guess the reason I am against any kind of flax tax is the abuse and the tax laws that are there to benefit people who translate those laws to the public.

As far as I am concerned, the best solution is to throw away all the countless pages of tax laws and interpretations. There is such a large industry that just caters to interpreting the tax laws and filing your taxes. I believe the cpas and tax lawyers are in cahoots with the politicans, since a large segment of Congress are lawyers.

And you also have all the lobbyists for keeping the mortgage interest deductible,among other things. There are so many people lobbying to kept these special interests that a flat tax would never pass.

So in my limited brain, I think a usage tax maybe would be less troublesome than a flat tax. I realize a usage tax would be complicated too.

In an LLC that is what happens. The profits (or losses) directly funnel to the "members" or sole owner. Most corporations are actually double-taxed. Tax on the overall profits after expenses. Then tax on the pay to the salaries drawn out. The Enron's of the world can cheat their way around not paying taxes but that's how most of them work especially small ones that are straight Corps.

I voted no because I'm in favor of a federal sales tax on non-essential items. I don't consider myself an expert in the matter and I really appreciated the debate above regarding it, but I must say I'm convinced on the basis of experience. I've lived in Florida, Georgia, Texas, Alabama, Tennessee, and now in West Virginia. Of all those states, if I could choose where I work, I would choose FL, TX, or TN because they don't have income taxes.

True that they also collect property tax and I wouldn't like the Feds collecting property taxes Nevertheless, my reasoning, although simplistic, is that if you are in hard times you can stop consuming "luxuries", and consume only essentials. That way the really poor -- those that don't spend their money on junk, but in feeding the kids -- would really get a tax break. The filthy rich would pay their share. In the current system the filthy rich can pay their lawyers and accountants to find them loop holes and end up paying a lot less in what I call "real taxes" -- the money you need to survive but have to give to the IRS.

IMHO that is..

I voted "Yes" but I would also advocate a hefty personal exemption and dependent exemption. I think something in the neighborhood of $25,000 personal exemption and $2,000 per child credit. The flat tax would then be in the range of 15-18% initially (to keep the same revenue level) and we can step it down from there.

The tax form would still fit on a post card, the math is still utterly simple.

It would be slightly more progressive than a straight flat tax. I do think the expenses of having children should be taken into account with regards to the tax burden.


I agree there. As much as I would like to drastically reduce the size and scope of government, it must be done incrementally or there will be chaos.

Platypus, your explanation of the sales tax is also right on the money.

I am in favor of a flat tax. I think it should be around 10% or so eventually, though if we were to go to it today, it would need to be higher, and we would need to phase out programs that are not really needed. I believe that this could highly restrict the power of government (funny hearing a commie proposing limited government power, eh?) I also think that there should be a limit as to what level of income is taxed, whatever it takes to survive, perhaps around 50,000 dollars or so. I also think that it should apply to ALL income including dividends and such. corporations also need to lose their status as individuals, and profits included as a group of people's income.

UB,

Damned straight. I love your ideas. Just drop that whole "no tax under $50,000 per year and I wouldn't be ashamed to call you my friend .

The capitalist world beckons you.

JL, you never did respond to the numbers I gave you. At what point do we not tax people then, (or allow for exemptions) if everyone under a flat tax that makes less than $25,000 is going to end up on the welfare rolls with what they take home?

In any tax program, there is going to be a portion of the populace that simply cannot afford both federal taxes, and "luxuries" like having food to eat, clothes on their backs, and a roof over their heads. You can't make the problem go away, simply by denying it. On the other hand, if you actually have some kind of idea on how to solve this problem, I'd really like to see it.

The major reason, and I do mean MAJOR, that we'll never see anything resembling real tax reform is that those in power use the tax sysytem to help insure they remain in power.

Who among them is willing to give up that power? And I don't mean the one or two who offer a plan knowing full well it will never get off the drawing board. Something of this magnitude will require a revolution. A revolution far more awesome than any tea party ever was.

Would that be advocating the forcible overthrow of the US government?

Hmmmmm, don't know 'bout the gumment, but it's tax system for sure.

I voted maybe.

If the flat tax was 10%, I'd say yes. If it was 30%, I'd say no.

However, I like the idea of a sales/usage tax better. (Another thread perhaps?)

One thing I don't like is about a flat tax is that there would still be an IRS and it's still possible to evade paying taxes.

However, a flat tax would be much better than the mess we have now. And if Russia and Iraq can have flat taxes, then why can't the US?

There might be many answers to that. Russia and Iraq have flat taxes and their economies are in sorry shape, which does not necessarily indicate any causal relationship at all but certainly doesn't indicate that flat taxes are beneficial. Your argument would be more compelling if you had named a country that has both a flat tax and a robust economy, but off the top of my head I can't think of any that meet both criteria.

Hong kong has a 15 percent flat tax. Cato link

I agree with otseng, if it's a realistic amount like 10 to 15 percent. I votes Yes.

The allure of the flat tax is more about simplifying the tax system than it is about equitable tax burdens.

The IRS's budget was $10.4 billion for FY2003. It employs 102,000 people. Why is the department so large and cumbersome? Because the tax code is so large and cumbersome.

The IRS estimates that over $280 billion in tax revenues is lost to tax evaders. The tax code is over 9,400 pages long. There are over 4,000 pages of IRS tax forms. It isn't surprising that there are loopholes to be exploited.

Meanwhile, the IRS is making more and more mistakes and is cracking down on the wrong "revenue sources":
Abolish the Tax Code, Not the IRS


The bottom line is that the IRS itself makes millions of mistakes per year, due to the complexity of the tax code.

A flat tax alleviates most of the problems associated with tax evasion of individuals and reduces the possibility of companies exploiting tax loopholes. It would also reduce corporations dependance on tax attorneys and accountants.


The tax code needs to be simplified. A flat tax is the easiest and simplest solution available.

Several people have mentioned that a problem with a flat tax is that there will still be tax evasion or use of loopholes. I do not understand how this will be true. What loopholes?

I don't understand this either. The IRS already receives all the pertinent information. Evasion occurs when you use the tax code credits and deductions inappropriately.

It is simply too cumbersome to audit every single return. A flat tax eliminates this possibility.

Of course, corporations could still use "creative accounting" to reduce their announced profits. This, however, would directly affect the stock price and would probably be counter-productive.

People could still hide income in trusts, offshore accounts, etc. A flat tax in and of itself really does little to address the most common ways in which the ultra-rich evade taxes. It might at least address the "paper losses" which are used to balance real gains and avoid tax on declared income, but undeclared income is really the bigger problem.

I agree. I don't see where tax loopholes could come into play. But don't put anything past CPAs,Lawyer,etc. Where there is a will, there is a way.

There is an old saying "necessity is the mother of invention". So I am sure they would find a way.

A flat tax wouldn't automatically improve a country's economy. But, in the the case of Russia, their tax revenue went up 28% after they implemented a flat tax. So, Russia is an example where a flat tax is more efficient than progressive tax.

http://www.heritage.org/Press/Commentary/ed032102.cfm