Dirk,
<<tagej: You can't be aconservative when you wheeze out faulty logic like this:
"I disagree with a flat tax though, because in a flat tax system the people at the lower end of the scale end up paying a disproportionate amount of their incomes in taxes and fees etc. Even as a conservative, I'm for a progressive tax system -- but it needs to be made more simple, with fewer loopholes"
A flat tax IS PROPORTIONATE!!! A 10% flat tax would result in a person making $25,000 paying $2,500 in tax (1/10th) and a person making $100,000 paying $10,000 (1/10th). GET IT?!?!?>>
First off, relax bud
I'm working on my PhD in Finance. I'm pretty sure I can comprehend your idea of proportionate. However, in your analysis, you seem to have forgotten two little details, that are extremely important. The income tax is not the only way the government spreads the burden of running the country among it's citizens.
Lets take your example: Family X makes $25,000 per year. Family Y makes $100,000 per year. If we assume a flat tax rate of 10%, X pays 2500 while Y pays 10,000. So far so good. Now lets introduce a problem. I'm assuming you've learned in your econ class about goods with a fairly flat demand curve - demand doesn't fluctuate much with price, for example Gasoline. Both X and Y need to drive to work. In AlGore county, where X and Y happen to live, gas costs $6000 per year, of which about 33% is government tax. Both X and Y have to pay for it. Thus, X ends up paying $2000 in taxes (or 8% of total income) to the government. Y also pays $2000 (or 2%) of income to taxes. I use the gas tax as an example to symbolize all the government imposed taxation in addition to income tax. In this example, X has just coughed up a
larger percentage of his income to the government, and in return received the exact same services as Y.
Further, there are lots of fees and costs that are absolute (think of having to pay $60 for a driver's license). Once again, the person making less is paying a larger percentage of income to support the government.
In other words, in a flat-tax environment, people at the lower end of the pay scale, the poeple that tend not to have the same degree of net disposable or savable income, tend to pay a disproportionate amount of their income to support the government. This is known as a
regressive tax system.
To combat this problem, governments in virtually every free country in the world have decided to implement a
progressive tax system -- not so much to 'hose the rich', but rather to more fairly distribute the costs of government. Of course, there's also the additional factor that people in one income bracket could pay a certain amount more in taxes and still not have it make a significant impact to their lifestyle and spending choices, whereas people in a low income bracket might be greatly affected by that same change in absolute dollars in taxation.
Hence, a completely flat tax, without an overhaul in the entire structure of government funding is regressive and unfair to those at the lower end of the pay scale.
I'm conservative and definitely not for the 'hosing the rich' mentality, but I am for a fair tax system.
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