Flat Tax: One Simple Rate

[Iriemon]

Actually a flat tax of even 10% on earned and unearned income with no loopholes and to include a reasonable corporate tax (corporations not only often don't pay taxes, but also suck up a huge amount of useless corporate welfare) starting over a reasonable poverty line would dramatically INCREASE revenues.

Actually a 10% rate wouldn't even come close. Gross personal income is about 10 trillion [ from NIPA: http://www.bea.doc.gov/bea/dn/nipaw...able=58&FirstYear=2003&LastYear=2005&Freq=Qtr ] so a 10% flat tax would raise about 1 trillion, far less than the 2.3 trillion the Govt spends.

Current corporate taxes raise about 180 billion in revenues, so you are talking about a dramatic increase, 10 fold, to make up the difference.

IMO this is bad policy. Corporate taxes should be eliminated. Taxes on corporations are passed on to consumers in the terms of higher prices and make the corporations less competitive internationally.

Those who benefit for corporate profit -- employees, shareholders, and management, should be taxed.

Most of the top 5% of Americans pay a tiny percent of their income in taxes, certainly much less than 10%, and a large number of corporations pay little or no taxes either. Bush has made that situation even worse with his tax cuts for the rich.

Most statistics indicate that the top 5% of Americans pay a disporportionate portion of the taxes. Can you provide a cite to facts supporting your contention they pay much less than 10% in taxes? That is not my understanding.

I would support a flat tax that included all earned and unearned incomes from individuals and supplied a reasonable rate on corporations. Most of us would, so why do you think one has never been passed? The elite who buy representatives and place them in government to ensure their interests will never allow such a logical change. You will never in your lifetime see a change in tax code that makes the rich pay anything close to 25%, 20% or even 10%. Never.

Income tax rates on the income of the wealthy are now at 33%. While that rate may effectively be lowered by deductions such as mortgage interest right offs and 401k investments, I don't believe these deductions have the effect of lowering the effect tax rate on the wealthy to the degree you suggest. Is there data to support your assertions?

 

[Iriemon]

What many fail to see about this tax plan is that a single mother with 2 children under 16 would not pay any taxes on her first $23,200. She would only pay a flat 17% tax on the remainder. That means if this woman were making $11 dollars an hour OR below...she would be completely tax exempt. She would pay nothing. A couple filing jointly with two children under 16 would not pay any taxes on the first $36,400. That is quite a deal really. Today families aren't getting that good of a deal.

A 17% flat tax is competely insufficient to generate revenues at current spending levels, and would result in $1+ trillion annual deficits. Unacceptable. The flat tax rate needs to be in the 27-30% rate with the exemptions provided.

No. Let's assume it doesn't bring in enough revenue.

I'd call it a fact, not an assumption.

The difference would be made up in downsizing Government. Bush has bloated Government to massive levels. We can cut Government spending. The No Child Left Behind business is stupid and way too expensive, besides, it can't deliver.

You don't need a flat tax to cut Government spending. Why can't we cut Government spending and reduce the rate structure we already have?

However...if the plan brings a boom....that means more tax revenue.

Only if the "boom" would be marginally greater than taxes lost due to the lower rate.

I don't understand how a flat tax, in and of itself, would increase economic performance.

This system would be easier to police thus increasing compliance. The Government may actually make out pretty well.

No more easier to police than the current system. Again, you are trying to confuse the concepts of simplifying the tax code with a flat tax. They are different concepts, despite would Forbes would tell you.

Also it is important to note that businesses and corporations would also pay a flat rate of 17% on income. No more loopholes allowing multi-million or multi-billion dollar companies to weasle out of paying their fair share in taxes. Some argue that this alone would make up for the difference.

If you look at national figures for corporate profit, the average tax rate paid is about 10%, so a 17% would bring in a little more revenue. Corp taxes were about 180 billion in 2004, another 7% would add about 120 billion more in revenues. You are still far, far short of the need (unless Govt spending is radically slashed).

IMO, corporate taxes should be eliminated. Individual beneficiaries should be taxed.

This plan is a great plan for a greater America.

An America in greater debt, where the poor are poorer and the rich are richer.

 

[Iriemon]

The rich are turning this country into a two-tiered third-world country bit by bit.

...

Now this is fairly dated material and I have more current material in my files that shows an even sharper drop for the middle class and an even more steep climb for the top 5%. I'll try to find it.

You can find income data at the Bureau of Economic Analysis and the Dept of Labor.

It is true that inflation adjusted wages for the middle and lower classes have stagnated over the last couple decades, and that the income of the wealthiest have increased. This is even more pronounced when looking at the after tax incomes, as the wealthy benefitted from the Bush tax cuts and the poor did not.

It is always good to be wealthy, but this is a particularly good period of time to be wealthy in America.

 

[ChristopherHall]

A 17% flat tax is competely insufficient to generate revenues at current spending levels,

Yep...that's why we need to but Government on a diet NOT raise taxes.

 

[cnredd]

Flat Tax Revolution
Bremer's tax will give Iraq a competitive advantage. ​

©2003 Copley News Service, 11/11/2003

[Moderator mode]

8. Copyrighted Material - All material posted from copyrighted material MUST contain a link to the original work.
Please do not post entire articles. Proper format is to paraphrase the contents of an article and/or post relevant excerpts and then link to the rest. Best bet is to always reference the original source.
Title 17, Chapter 1, Section 107 http://www4.law.cornell.edu/uscode/17/107.html

[/Moderator mode]

 

[Ether]

Yep...that's why we need to but Government on a diet NOT raise taxes.

I don't think you understand the crux of the matter. As Iriemon illustrated, if your proposal was implemented current expenditure levels would require a very high flat tax rate, which will crush the poor and even most middle class income earners. The only way to avoid that negative effect is to allow for exemptions and deductions. Of course, those particular losses in revenue will need to be offset by other taxpayers - most likely the income earners at the top brackets. But isn't that just taking us back to a progressive tax, where people who are at the top pay their taxes disproportionately relative to those near the bottom? Why not just keep what we have now?

If you really want to make the tax system "better" for the economy, cut spending levels and then cut taxes. No simplification or flattening is necessary. Like I said, all these tax reform ideas are missing the point entirely.

 

[Canuck]

I don't think you understand the crux of the matter. As Iriemon illustrated, if your proposal was implemented current expenditure levels would require a very high flat tax rate, which will crush the poor and even most middle class income earners. The only way to avoid that negative effect is to allow for exemptions and deductions. Of course, those particular losses in revenue will need to be offset by other taxpayers - most likely the income earners at the top brackets. But isn't that just taking us back to a progressive tax, where people who are at the top pay their taxes disproportionately relative to those near the bottom? Why not just keep what we have now?

If you really want to make the tax system "better" for the economy, cut spending levels and then cut taxes. No simplification or flattening is necessary. Like I said, all these tax reform ideas are missing the point entirely.

I don't think you understand the crux of the matter.
Income earners at the top bracket dont pay or pay very little income taxes their money is in off shore bank accounts
the middle class is disappearing at an alarming rate 3 million mid class jobs lost since 2001 20$ and up jobs ,and still
the cries go out for outsourcing ,paycuts ,and off shore jobs.

a good example is the ford motor company
they are currently making thier next big proposition
the FORD FUSION in Mexico

say it out loud who will pay your natl debt
it stands at 90,000$ per person able to pay now add personal debt and taxes
and is going up to the tune of 1/2 a trillion a year tacked to the debt
greenspan tells world leaders two days ago America cant cover its debt it is out of control
the tax it days are over the people are weary

best thing left to do is make a new curency
call it the
texmexcan
and buy up all your worthless greenback at a ratio of 10:1
as the $ will become like the rupple and peso so deflated that you wont be able to buy a bubble gum and a tooth pick with it
if you try to tax your way out of this mess

 

[Iriemon]

Yep...that's why we need to but Government on a diet NOT raise taxes.

Where can we feasible cut $550 billion out of the budget? According to Delay, there is no fat in the budget after 10 years of lean Republican fiscal leadership.

 

[Iriemon]

Income earners at the top bracket dont pay or pay very little income taxes their money is in off shore bank accounts

Can you give us some data to back up this assertion? This is not my understanding at all.

 

[George_Washington]

What would you guys think of having a flat tax rate and putting higher taxes on foreign and imported goods?

 

[Iriemon]

What would you guys think of having a flat tax rate and putting higher taxes on foreign and imported goods?

They are two different issues. I have previously expressed why I don't favor a flat tax.

I am against tariffs in principle, for several reasons. In makes goods more expensive in the US, and there is no real gain because as soon as we slap tariffs on our trading partners do the same. An argument can be made that in general a country is better off trading without tariffs even if its trading partner has tariffs. I believe that the consensus is that free trade benefits everybody, and empirically data supports that.

 

[TheBigC]

If you really want to make the tax system "better" for the economy, cut spending levels and then cut taxes. No simplification or flattening is necessary. Like I said, all these tax reform ideas are missing the point entirely.

I was asked once in another debate "when is it a *bad* time for a tax cut?" and my answer was "when you can confidently say that every dollar being taken from the taxpayers is being spent wisely and efficiently. Until you can say that, we should have our money back."

I agree with Ether: tax reform misses the point. We need spending reform. Not just cut this, cut that, but *how* is the money being spent? You bet we need a national defense, but do we need to spend $120 on a hammer? Do we need to give $200k grants to study ketchup viscosity? Is spending $60 a week on a homeless child sufficient? We need to demand transparency in the system so that people will be shamed into reasonable spending habits because no "revolution" is ever going to happen. *Spending reform* is what's necessary, and then and only then will it be clear if it's time for tax cuts or increases.

 

[Iriemon]

I was asked once in another debate "when is it a *bad* time for a tax cut?" and my answer was "when you can confidently say that every dollar being taken from the taxpayers is being spent wisely and efficiently. Until you can say that, we should have our money back."

I agree with Ether: tax reform misses the point. We need spending reform. Not just cut this, cut that, but *how* is the money being spent? You bet we need a national defense, but do we need to spend $120 on a hammer? Do we need to give $200k grants to study ketchup viscosity? Is spending $60 a week on a homeless child sufficient? We need to demand transparency in the system so that people will be shamed into reasonable spending habits because no "revolution" is ever going to happen. *Spending reform* is what's necessary, and then and only then will it be clear if it's time for tax cuts or increases.

The problem with your view (IMO) is that the Govt doesn't practice its spending habits based on what is being spent "wisely and efficiently," a somewhat subjective measure anyways. Delay assures us there is no fat in the budget. So if we limit our tax increases based upon the Govt spending wisely and efficiently, all that happens is that revenues are insufficient to cover spending, and we borrow 1/2 trillion a year from the next generation, who will have to pay for it.

Putting that aside -- despite what Delay says I agree pork spending is totally out of control with the folks running our Govt. But if you are unwilling to consider at tax increase, where do you think we can feasibly cut $550 billion out of spending?

 

[Canuck]

Can you give us some data to back up this assertion? This is not my understanding at all.

bushes' taxes, that he pays. are only a trifle what he should. most of his money is in off shore banks.
all your elite are doing the same.they pay little to no taxes on their holdings,
all the rich do it. it is a legal,we all can do it
but we dont have enough money to make it worth while
ill chk around for a link

http://www.thestreet.com/funds/taxes/756351.html

tell me if this is what a president and wife make who have personal friends that are trillionaires and a cia working for him
http://www.ctj.org/pdf/bushchen.pdf
I submit that
his personal savings are in off shore havens and he only pays on his salary
he owned oil wells a baseball team and his pals are sheiks of saudi arabia
and he only pays tax on his salary ?

dont worry its all legal as long as its in a foeign bank with a numberd account tied to a bussiness
http://slate.msn.com/id/2083852/:shock:

 

[Kandahar]

Where can we feasible cut $550 billion out of the budget? According to Delay, there is no fat in the budget after 10 years of lean Republican fiscal leadership.

Tom DeLay is an idiot, and I don't think any conservatives agree with him about that.

I don't think we really need to cut THAT much out of the budget, but here is where we could feasibly cut $550 billion in the immediate short-term if we needed to. The following is a list of DISCRETIONARY spending only.

Department of Defense: $183.9 B
Department of Homeland Security: $28.3 B
Department of Justice: $18.7 B
Department of State: $10.3 B
Department of the Treasury: $10.8 B
Executive Office of President: $0.3 B
General Services Administration: $0.2 B
Judicial Branch: $5.4 B
Legislative Branch: $4.0 B
Other Agencies: $6.5 B

Since the above is a list of necessary DISCRETIONARY spending, this budget would cut $550 B without touching social security, medicare, or our interest payments. However, we can save money in the long-term by privatizing social security, privatizing medicare, auctioning off our unused military bases around the world (worth at least $10 T), and using any surplus to pay off the national debt.

 

[Iriemon]

bushes' taxes, that he pays. are only a trifle what he should. most of his money is in off shore banks.
all your elite are doing the same.they pay little to no taxes on their holdings,
all the rich do it. it is a legal,we all can do it
but we dont have enough money to make it worth while
ill chk around for a link

http://www.thestreet.com/funds/taxes/756351.html

As this article says: Offshore shelters do shelter assets, for example from creditors. But they don't shelter income.

tell me if this is what a president and wife make who have personal friends that are trillionaires and a cia working for him
http://www.ctj.org/pdf/bushchen.pdf

I submit that
his personal savings are in off shore havens and he only pays on his salary
he owned oil wells a baseball team and his pals are sheiks of saudi arabia
and he only pays tax on his salary ?

According to your cite, Bush paid 27% in taxes, far different from the "little or no taxes" assertion you made.

I agree that Cheney's 13% tax rate (tho' still a lot more than none) is a good example of how the truly wealthy can decrease their taxes because returns on investments are taxed at lower rates. Ever wonder why Republicans want to eliminate capital gains taxes (which Bush lowered)? This is why. It is kind of outrageous, in my opinion.

As far as the rest of your contentions, I can't argue against your rank speculation. I don't find it reliable as data either.

http://slate.msn.com/id/2083852/:shock:

This article discusses how tax breaks for the poor get far less positive attention from the current Govt than those for the rich.

I don't deny that tax policies over the last four years have benefitted the wealthy and not the poor. I certainly agree they have. I wouldn't even mind that much if they weren't borrowing away our future to do it.

I did doubt your contention that the wealthy pay little or no taxes. The data you provided on the President and Vice President are hardly conclusive data on this point, but perhaps illustrative.

 

[Iriemon]

Tom DeLay is an idiot, and I don't think any conservatives agree with him about that.

I don't think we really need to cut THAT much out of the budget, but here is where we could feasibly cut $550 billion in the immediate short-term if we needed to. The following is a list of DISCRETIONARY spending only.

Department of Defense: $183.9 B
Department of Homeland Security: $28.3 B
Department of Justice: $18.7 B
Department of State: $10.3 B
Department of the Treasury: $10.8 B
Executive Office of President: $0.3 B
General Services Administration: $0.2 B
Judicial Branch: $5.4 B
Legislative Branch: $4.0 B
Other Agencies: $6.5 B

Since the above is a list of necessary DISCRETIONARY spending, this budget would cut $550 B without touching social security, medicare, or our interest payments. However, we can save money in the long-term by privatizing social security, privatizing medicare, auctioning off our unused military bases around the world (worth at least $10 T), and using any surplus to pay off the national debt.

I only count about $250 billion in savings there. You are still $300 billion short. Even if your proposals were politically feasible.

Privatizing SS won't save money, unless we just yank benefits of those that are already receiving SS.

In fact, the SS generates a surplus, about $150 billion a year (which is supposed to be building up in a trust fund but in fact is being stolen every year to fund the deficits). Eliminating SS payments and taxes won't help the current deficits. (It will help long term solvency issues, however).

I am against private accounts for other reasons, but that is for a different thread.

 

[Technocratic_Utilitarian]

Aren't their any "departments" that are less necessary than others? Are they all needed? I don't know.

 

[Canuck]

I only count about $250 billion in savings there. You are still $300 billion short. Even if your proposals were politically feasible.

Privatizing SS won't save money, unless we just yank benefits of those that are already receiving SS.

@@@correct it would actually increase it you would have to pay more

In fact, the SS generates a surplus, about $150 billion a year (which is supposed to be building up in a trust fund but in fact is being stolen every year to fund the deficits). Eliminating SS payments and taxes won't help the current deficits. (It will help long term solvency issues, however).

@@@ Correct again all surplus funds are used elswhere

I am against private accounts for other reasons, but that is for a different thread.

SS may be lost outright
If the PEtro euro comes into effect in dec alot of programs will shut and cease to exist

 

[Iriemon]

Aren't their any "departments" that are less necessary than others? Are they all needed? I don't know.

That is a difficult question. On one theory, the various government programs are funded to the level they are now, based on the give and take of the political process -- ie they are already funded at their politically proportionately proper levels. Based on this view, it would be politically difficult to select one program for cuts as opposed to another. Therefore the most politically viable way to inflict a major cut is to cut across the board.

 

[Kandahar]

I only count about $250 billion in savings there. You are still $300 billion short. Even if your proposals were politically feasible.

I should've clarified. The previous list was a list of SPENDING, not cuts. All discretionary spending NOT listed there would be cut, for savings of about $550 billion.

Privatizing SS won't save money, unless we just yank benefits of those that are already receiving SS.

In the short term, you are correct. In the long term, SS is simply unsustainable as it is currently structured and privatization will most definitely save money.

In fact, the SS generates a surplus, about $150 billion a year (which is supposed to be building up in a trust fund but in fact is being stolen every year to fund the deficits). Eliminating SS payments and taxes won't help the current deficits. (It will help long term solvency issues, however).

Agreed. SS will only continue to operate in the black for another few years (I think 12 years is the current estimate). After that, it will start operating in the red like every other government agency.

 

[Kandahar]

Aren't their any "departments" that are less necessary than others? Are they all needed? I don't know.

Not really. We could do without most of them. The only ones that I think most people would agree are truly needed are Defense, Homeland Security, State, Justice, and Treasury.

With that said, some of them are worse than others. While I disagree with it, a reasonable argument can be made for the existence of a Department of Transportation and Department of Education. Less excusable is the existence of a Department of Agriculture (which starves foreigners) and a Department of Housing and Urban Development (which creates ghettoes).