Discussion in 'Political Discussion' started by BlueTalon, Feb 21, 2006.
Another discussion, another thread...
Don't confuse a flat tax or a national sales tax? Most people these days when they are talking baout a "flat tax" are reading from the Neal Boortz Fair Tax book. Where he introduces the idea of eliminating the national income tax for a national sales tax. This way the welathy still will pay more than their fair share. It will also allow the government to more easily tax illegal revenue streams (no matter how you get the money, you will have to pay the sales tax on your new car).
The opponenets will be, of course, the people who don't pay any taxes to being with (or cheat the current tax code to pay as little as possible,like a Senator(s) from Mass). The "earned income" crowd will howl, because instead of being the beneficary of the redistribution of wealth (or as the rest of us call it: "government hand out our money to people who don't work), they will have to pay the national sales tax like everyone else.
I admit that I haven't had a chance to read the book, hopefully someone else has and can give the details. a national sales tax would be a good thing but only if the income tax is abolished and never to be returned.
I have not read Boortz's book, so I don't know what he says about it. My proposal is:
- All income is income -- that includes wages, interest, dividends, company cars, etc. and would be treated the same.
- Your first $20,000 of income is exempt.
- The government would take 20% of everything after $20,000.
- No deductions, no exemptions, no exclusions... no exceptions.
If the question is whether to have my flat tax or something like it, or the current monstrosity, I'm 100% for the flat tax.
If the question is whether to go with a flat tax or national sales tax, I'd still prefer the flat income tax but wouldn't be upset if we went the other way.
But I completely agree with you that the government should only use one source for funding. Either the flat income tax or the national sales tax, but not both.
The Steve Forbes plan is similar, and I like it better:
Not one cent to the IRS on the first $36,000. Anything over that would be taxed at a flat, fair 17%.
I like the idea of no exemptions, just pay on the income earned, too many loopholes too confusing.
Not good enough. Taxing earnings - especially wages, is wrong. A standard consumption tax with exemptions for health care, education and housing (primary residence) is the only fair means of revenue generation IMO. It will also reduce the gluttonous lifestyles we all take for granted and conserve our natural resources and ultimately improve our environment.
Why isn't it good enough? If taxing earnings is wrong, it's only because taxes in general are wrong. A consumption tax is still a tax on earnings, it's just taken at a different place in the cycle.
We seem to agree that there should be some exemption somewhere. I like the standard deduction that everyone would get with a flat tax. Whether it's $20K or $36K, everyone would get exactly the same exemption, and it's impossible to be any more fair than that.
With a consumption tax, you have to start targeting your exemptions -- you mentioned health care, education and primary residence. But then you have to ask what would be included in the health care exemption, how much of one's education costs and primary housing costs would be exempt. Would a Harvard student get a bigger exemption than a community college student? Would Bill Gates' mansion be fully exempted or just partially? Would that exemption include furniture and appliances?
And once you start asking and addressing those questions, you end up with a convoluted mess. It may be less convoluted than our current mess, but it still would be a convoluted mess.
I agree with Talon on this one, though I think the Forbes formula is best. $36000 waived, absolutely everything else is 17%, across the board. That is for every individual, institution, and entity doing business in this country. Even foreign ones. You earned it here, you pay it here. You are xyz, inc. you grossed 10 mil in the U.S. last year, you owe just short of 1.7 mil in taxes. period. No forms, no formulas, no balance sheets, no nuthin! Off the gross. Just like the average working slob. Same for investors. That is fair and equal taxation. And where my formula is based on gross earnings per individual, the average working couple could be tax free up to $72K, though few 2 income houses have both parties earning more than $36K/yr.
I'd probably go with $40K exempt and 20%, just because I like round numbers. Doing it Forbes' way means you could do a tax return on a form the size of a postcard. Doing it my way means you could do your taxes in your head.
I do agree that 20% is high, but I would use that as the starting point until the national debt was paid.
Good ideas, and just think how much money would be saved by downsizing the IRS.
It seems like a fantasy to talk taxes without talking budget. A flat tax would have to raise enough revenue to cover the costs of the services we currently support, unless you cut some of those services, which brings us full circle to where we are today, with Americans roughly split on what government services should be provided.
So, for arguments sake, let's assume the flat tax has to cover what our government provides today. According to Dole, Forbes plan would have increased the deficit by $180 million, so let's assume a flat tax has to be reasonably high (at least 20%) and then we get into the issue of deductions. Should the poor get a break. We all seem to agree on that. What about new business? What about new business people, especially those who invest in risky but important technologies? What about people who go to college? How about new home buyers? How about veterans? How about disabled people? What kind of tax incentives can the government use to get people to move, to change careers, to give to charity, etc. to achieve various worthwhile goals?
So, what we end up with is a flat tax with lots of loopholes, and the only people who benefit are the rich and poor, and the middle class get screwed.
Now as far as a national sales tax, that really screws the poor since they have far less disposable income. It also screws the economy since prices would climb substantially and people would buy less (not that that's necessarily bad).
I'm not against changing or simplifying the tax structure, but a flat tax isn't flat. It's just that rich will pay less. A true flat tax would have everyone pay the same amount. Why should the rich pay more? Anyone? Why should the rich pay more?
One thing the opponents of a flat tax always overlook is the ingerent savings to the government.
2% Social Security
(just for example)
No exemptions. No write-offs. No shelters or EIC or deductions. This would allow the government to downsize the IRS by 80% or better. Folks would save on tax prep since their wouldn't be any need (it's done on every pay statement).
In 2000, the average household income was $41,994. With a total population of 281,421,906 and an average of 2.59 persons per household, there were 108,657,106.56 households * $41,994 = $4,562,946,533,036.29 of income in 2000.
(figures found at http://quickfacts.census.gov/qfd/states/00000.html)
18% of that is $821,330,375,946.53 ... That's $821.3 billion, plus the savings of a massively reduced IRS.
This was brought up a while back, and there was some talk about exceptions for inheritance (the Death Tax). It would be exempt, as it is monies that have already been taxed. Captial Gains, however, are new monies, and would be subject to the standard percentage for income tax.
Patters -- No, no, NO! The whole point of a flat tax is that THERE ARE NO LOOPHOLES!
Everybody starts with the same amount of untouchable money. And everybody is taxed at exactly the same rate after that. There is no such thing as a tax incentive any more, at least not in terms of income tax. Why do you insist a flat tax is not flat? And why on earth do you conclude that what the rich would pay is somehow different under a flat tax? Why is this difficult?
And yes, Turd & Chevy, the government would save a bundle on IRS reduction.
Patters exemplifies the party of NO.
(1) What programs, besides the IRS, would be reduced or cut under the flat tax proposals in this thread? Social security? Food stamps? VA hospitals? The military?
(2) Why should the rich have to pay more than the poor or middle class? Why shouldn't everyone be the same? What's the moral basis for saying that everyone should pay the same percent, rather than the same dollar figure? Just because I earn $50K, why should I have to pay $6K in taxes, when someone who earns $30K would only pay $2K in taxes (assuming the first $20K are tax free)? What's the rationale?
(3) I'm all for changing the tax code, to a simpler, but more progressive tax structure. For instance, base taxes on legitimate needs and disposable income.
- The first $X is what you need to survive, so no taxes.
- The 2nd $X is what you need to grow -- education, a car, etc., so keep taxes low.
- The 3rd $X is what you need to prepare for the future, so keep taxes low.
- The 4th $X is what you need to bond with your family (vacations, etc.), so keep taxes reasonable.
- The 50th $X is what you need for gold bathroom fixtures -- make taxes high.
First, all Flat Tax and Consumption tax proposals will result in a greater amount of tax for most middle income people. DonÃ¢â‚¬â„¢t believe me? Consider this: the top tax rate is 39.6% plus various phase outs for itemized deductions and exemptions. According to most studies, there are approximately two million people in this bracket. If we have a flat tax of 17%, who makes up the difference for these two million people who will pay a lot less? Answer: WE DO!! In fact, the Cato Institute and Money Magazine (January 1998 issue) estimates that the flat tax helps those who earn over $500,000 per year and hurts most of those people who earn less. In addition, not only will most taxpayersÃ¢â‚¬â„¢ federal taxes increase, but state taxes will increase as well. Most states piggy back the federal deductions. If we eliminate interest on homes, property taxes, income taxes, charitable contributions, and the states keep the same rates, the state income rates will rise. This would result in a potential double whammy for most taxpayers. This is why many knowledgeable people refer to the Flat Tax as a Fat tax.
My main problem with Flat Tax or Consumption Tax proposals is that our tax system is integrally part of our economic system. If we make significant tax changes, we see big ripples in the economy. For example, prior to 1987, you were able to deduct all cars in business over a three year period. Since Congress changed the law, automobile sales have died in comparison. Ford Motor published their yearly sales of cars after 1987 and noted that they did not sell as many cars in any one year after the tax law change(1987) as they did prior to the tax law change, costing over 200,000 jobs lost permanently. In addition, with the slight real estate changes, real estate died. Many economists estimate that most of the cause of the two hundred billion bank bailout by the Treasury (which means us) had resulted from the simple tax law change limiting real estate deductions to real estate income. If we suddenly make a major change in our tax system by eliminating our tax code and replacing it with another, it could , not only stop our period of unprecedented economic growth, but could actually put us in a major recession! As one of the Congressmen noted to me recently, Ã¢â‚¬Å“no one really knows for sure what the economic implications would be!Ã¢â‚¬
I don't remember where the initial idea came from about the selective exemptions. I have to give it more thought when I have the time. I like the consumption or sales tax for two reasons:
1. It unburdens the average American family from concerns about income taxes. Among these are paperwork related to tax lawyers, and accountants. These two groups will see to it that NONE of these reform ideas are passed because it will destroy most of their business. (That would be good for me because these guys will have to take construction jobs, and that drives wages down in that field in which I own a business so...I WIN!). Also it removes the key weapon the government has over individuals - threat of death, imprisonment or confiscation of property for not paying your taxes.
2. It reduces our insatiable urge to make pigs of ourselves as a hyper-consumer society. We will fix things more often rather than throw them out. Pruducts will be made to be more durable. This should relieve the massive amounts of waste we generate and float by barge to Central and South America to dump. The environmental effects of this will be enormous within 1 lifetime. Oil consumption will be drastically reduced. Less war and less money for those who hate our guts. Maybe we will begin to get along with the Middle East cultures, or at least be ignored by them.
Patters confuses or obfuscates the flat tax problems with high incomes with the Fair Tax. A consumption tax such as the Fair Tax makes his gold bathroom fixture folk pay MUCH more in taxes. Working families would not be paying high consumption taxes on 1st class airfares, luxury yachts, airplanes, Mercedes & BMW SUVs, vacation homes and accessories, 52" HDTVs with home theaters, Patriots seasons tickets (OK, so no plan is perfect) and numerous other luxuries.
No IRS and better yet millions of hours of time saved by already busy and stressed working families who no longer have to spend several working days time collecting tax info and preparing or paying for preparation of tax returns.
It amazes me how hypocritical 'privacy advocates' have no problem with the IRS's intrusion into our lives.
Where on earth does this come from? This is an age where it costs far more to repair a TV than to go out and buy a new one -- unless of course the TV you have is well into the 4-digit price range. I don't see how a consumer tax would reduce "our insatiable urge to make pigs of ourselves" and cause us to "fix things more often rather than throw them out." Have you ever had to have your computer's printer repaired? It's far more economical to toss it and get a new one. So I don't agree that a consumer tax would reduce our production of garbage or reduce our consumption of oil.
I do agree with your point 1. though. As I've said before, if it's a choice between a flat tax and the current convoluted monstrosity, it's a no-brainer. If it's a choice between a flat income tax or a national sales/consumer/value-added tax, I'd prefer a flat tax, but I'd be OK with the consumption tax, as long as it was kept nearly universal (not exemptions all over the place).
Why are you penalizing success? That's exactly what you are doing. In addition, the government overhead needed to determine your various levels of income would wind up costing the American people more money than any perceived savings.
Also, where did you get the notion that SS, Welfare, VA would be cut. I said an unnecessary government entity - the IRS - would be downsized to a mere fraction of its current bloat because the straight-percentage system has all the tracking done by the employer. Heck, the VA and Medicare can split the IRS budget between them.
Either way, don't penalize someone for being successful ...
Chevy, I'm not against penalizing anyone for success. In fact, I want to create an environment where more people can succeed. I don't want success to be largely defined by inheritance, when it can be defined by opportunity and hard work. I don't want success to be defined by money, when it can be defined by entrepreneurship, education, and other contributions to our society. I might very well support a higher capital gains tax with increased incentives for those who are actually building businesses or contributing in other ways.
As far as the IRS being downsized, I'm not sure that's true with any solution. It might change, but it's still going to have make sure people are being their taxes, whether it's a flat tax or a national sales tax. One of the arguments against a national sales tax is that it would create a huge black market. I think you would agree that government always finds ways to grow and add layers of complexity, regardless of who is in charge!
None, directly. That's not the point of a flat tax, which is simplicity and fairness.
If everyone made the same income and everyone had the same costs of living, you'd have a very good point. But we don't. Locking into a dollar figure rather than a percentage is an insane argument, which you seem to acknowledge in your next point -- which makes me wonder why you made this point at all.
If you're going to ask what the moral basis is "for saying that everyone should pay the same percent, rather than the same dollar figure" (which is a straw-man argument anyway), then you need to be able to answer what the moral basis is for having differing percentages.
Who determines what those numbers are? You? Me? A true flat tax is simplicity and fairness in its purest form. Once you start arbitrarily assigning graduated increases, it stops being fair and simple.
Many "knowledgeable" BIASED people, you mean. I probably make far less money than you do, but I don't see the point of penalizing people simply because they make more money. One of my colleagues, when he was getting ready to re-enlist, had to try to figure out how to structure his bonus so that it didn't push him into the next bracket. DO YOU REALIZE HOW INSANE THAT IS?!? I need to stay this poor, because if I don't, the government will screw me out of more money.
Yes, under a flat tax, some people - including many who are not rich - will pay more taxes. If I have to pay more taxes under a flat tax, I won't have a problem with it, because the tradeoff is that the current tax structure will be lifted from my back like a heavy pack, and I will know that everyone has exactly the same tax burden that I do.
That's absolutely the weakest possible argument you could make! We have to keep the status quo, because... things might change! Yes, things would indeed change. And I think what we'd find is that the current tax structure has for decades acted like a huge weight on the economy that is suddenly lifted or constantly applied brakes that are suddenly let off. And it might take a few fiscal quarters before the American economy re-tuned itself and adapted to the new reality, and then it would take off. It sure as hell would not send us into a recession (though it might force IRS workers to get a real job -- but I can live with that).
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