Whats wrong with a flat tax?

[ShawnD1]

Ultimately, money withdrawn from 401K's & IRA's is taxed at regular rates, other than Roth IRA's. It just grows tax free, as does money invested in hedge funds & private equity firms.

I'm throwing out too many ideas at one time. I'll stick to the topic of how rich people should be taxed. I'll save the 401k and IRA talk for later

About the bolded part, sort of yes and sort of no. It depends what kind of growth it is. Stock price going up is tax free because that's theoretical gains; it doesn't translate into real dollars until it is sold. When sold, you pay tax on the gains. Interest on bonds is taxed. You buy bonds, it pays interest, you get taxed on the interest even if you didn't sell the bond. Dividends are taxed as well. Even if the money goes back into buying more shares (Dividend Re-Investment Program), you're still supposed to pay taxes on the cash value of the dividend. Of course a lot of people don't since it's harder for the government to track things like that...

Forget 401K and forget IRA. Let's talk about the money that rich people deal with. You own a large number of shares in a business (such as owning the entire company) and its profits are considered capital gains. How should this be taxed? Let's take some numbers out of the air to show what I'm thinking. Let's say the business grosses $1,000,000 per year and the costs are $800,000 per year. Operating costs are tax deducted like normal and we're left with $200,000 of capital gains. Maybe the first 100k of that would be tax free; a reward for your doing a good job of being a Job Creator. Let's say the rate of regular income tax is 30% for all money over $80,000 for someone with a regular job. If you had a normal salary job and you made $200,000, you would be taxed at 30% for $120,000 of that income, and the first $80,000 would be taxed at a lower rate; you pay tax on the whole thing (not including deductions).
Because you're a super awesome Jerb Creator with a successful business, that 30% tax rate would kick in at 100k instead of 80k, and none of the first 100k would be taxed. That sounds like a pretty sweet deal, right? If you start your own plumbing company, you could make quite a bit of money before the tax man comes after you. If you were a super rich bastard like John Kerry or Mitt Romney, my suggested plan would actually be a HUGE tax hike. They don't pay anywhere near 30% at this time.

 

[bfdd]

Whats wrong with a flat tax?

It's unfair to those with limited income because they spend nearly their entire income to live on.

except how is that unfair? that's the whole fucking point of taxes, we all pitch in to pool our portion of our wealth to dole out social services. why should the impoverished or poor be excluded from that? why should they be allowed special treatment? this hugely fucked up tax law we have is so convoluted that literally anything would be more fair and progressive. only the rich can afford to get around our tax code and the poor don't even qualify to pay taxes. WHAT THE FUCK!?

flat sales tax(which btw would have me paying far more tax than I already do),but hell i love my fellow americans so much i'd even settle for a flat income tax.

 

[uclabachelor]

except how is that unfair? that's the whole fucking point of taxes, we all pitch in to pool our portion of our wealth to dole out social services. why should the impoverished or poor be excluded from that? why should they be allowed special treatment? this hugely fucked up tax law we have is so convoluted that literally anything would be more fair and progressive. only the rich can afford to get around our tax code and the poor don't even qualify to pay taxes. WHAT THE FUCK!?

flat sales tax(which btw would have me paying far more tax than I already do),but hell i love my fellow americans so much i'd even settle for a flat income tax.

Everyone gets charged a 10% rate on their income from $0 - $15k whether you earn $15k a year or $100k a year. Both will be paying $1500 in taxes for their income up to $15k. The person earning $100k a year would then be paying additional tax on the remaining $85k based on the bracket. This is what MOST PEOPLE FAIL TO REALIZE and automatically assume that because they're making $100k fall in the 25% bracket when in fact their effective tax rate is more like 18%.

By having a flat rate of 20%, you're effectively raising taxes on the $15k incomer by 10% and on the $100k incomer by 2%.

This is not even considering any deductions that you might have, such as interest paid on a mortgage, which poor people can't even consider because they're struggling to get by. When you factor that in, your taxable income and effective tax rate drops even more while the poor, who is most likely renting, cannot include rent as a deduction on their taxes.

 

[Inspector Jihad]

not sure if troll or stupid.

 

[OutHouse]

Whats wrong with a flat tax?

It's unfair to those with limited income because they spend nearly their entire income to live on.

how do other countries do it?

 

[Tom]

You guys make it seem like working hard and earning a lot of money is an evil thing to do. People are rich because they earned it, why should they pay for EVERYONE else?

Who said that ?

There's a very fundamental reason why people who make more money should pay more.

They are by definition benefiting more from the society they are a part of then people who make less. That's what money is, a measure of how one is doing relative to others.

And, there's a misconception about tax brackets, the fact is everyone pays the same rate on the same earned income. By that I mean everybody pays the same rate on the income they have within a certain bracket.

If the top bracket is 35% that doesn't mean that a person with high income pays 35% on all their income, they only pay 20% on their income that falls in the 20% bracket, and so forth.

So bracketed taxes can be completely fair. Now, our current tax system favors things like having kids or buying a home; and doesn't tax dividends and capital gains at the same rate as earned income, so in those areas there is some unfairness.

 

[bfdd]

Everyone gets charged a 10% rate on their income from $0 - $15k whether you earn $15k a year or $100k a year. Both will be paying $1500 in taxes for their income up to $15k. The person earning $100k a year would then be paying additional tax on the remaining $85k based on the bracket. This is what MOST PEOPLE FAIL TO REALIZE and automatically assume that because they're making $100k fall in the 25% bracket when in fact their effective tax rate is more like 18%.

By having a flat rate of 20%, you're effectively raising taxes on the $15k incomer by 10% and on the $100k incomer by 2%.

This is not even considering any deductions that you might have, such as interest paid on a mortgage, which poor people can't even consider because they're struggling to get by. When you factor that in, your taxable income and effective tax rate drops even more while the poor, who is most likely renting, cannot include rent as a deduction on their taxes.

With a flat tax the bolded wouldn't be an issue at all as there would be no deductions. Fact of the matter is we breed discontent amongst each other by setting up different classes or groups we fit into based on arbitrary shit. This is a society and we're supposed to be working together and that's not what the current system encourages. Flat 20%, everyone pays and then you can dole back out redistributed wealth based on socio-economic level. Doing it before or during the process of collection is retarded and has lead to far to much abuse of our tax law. Which btw most of the abusers are of those with more than enough to pay their taxes, they just also happen to have the ability to pay their way out of it for a lesser sum.

I land right around the average american in terms of household income, I have no issue with a flat tax even if it put more burden on me.

 

[uclabachelor]

With a flat tax the bolded wouldn't be an issue at all as there would be no deductions. Fact of the matter is we breed discontent amongst each other by setting up different classes or groups we fit into based on arbitrary shit. This is a society and we're supposed to be working together and that's not what the current system encourages. Flat 20%, everyone pays and then you can dole back out redistributed wealth based on socio-economic level. Doing it before or during the process of collection is retarded and has lead to far to much abuse of our tax law. Which btw most of the abusers are of those with more than enough to pay their taxes, they just also happen to have the ability to pay their way out of it for a lesser sum.

I land right around the average american in terms of household income, I have no issue with a flat tax even if it put more burden on me.

So you're saying raising tax on earners with salary < $15k by 10% and on earners with salary at $100k by 2% is a good idea?

When in the history of civilization has that worked out well?

Convenient of you to pick out the deductions but ignore the tax brackets. In case you missed it, let me state it again.

Everyone gets charged a 10% rate on their income from $0 - $15k whether you earn $15k a year or $100k a year. Both will be paying $1500 in taxes for their income up to $15k. The person earning $100k a year would then be paying additional tax on the remaining $85k based on the bracket. This is what MOST PEOPLE FAIL TO REALIZE and automatically assume that because they're making $100k fall in the 25% bracket when in fact their effective tax rate is more like 18%.

 

[bfdd]

So you're saying raising tax on earners with salary < $15k by 10% and on earners with salary at $100k by 2% is a good idea?

When in the history of civilization has that worked out well?

but I'm raising both of them to 20% and everyone pays the same regardless. that person making 100k might not make 100k next year, they might make 20k or 1,000,000,000 dollars, who the fuck knows nor do I really care. I also don't think we should be creating arbitrary exceptions and deductions based on such non-sense either. It breeds discontent or have you not heard the rally cries of "THE RICH NEED TO PAY THEIR FAIR SHARE" or "50% OF AMERICANS DON'T PAY ANY TAXES!!!!" neither of things would be an issue, everyone would pay and everyone would pay the same rate. Those on the lower end would benefit more from social services as those who make more won't need to as they can fund themselves. Kind of like how society currently functions, except there's no bullshit loopholes or deductions for any one of us to use to skate around it. Simpler is better, right now our tax system is an over-engineered pile of junk and it became that way out of trying to be "fair" to everyone. Sadly now it's anything but.

 

[uclabachelor]

but I'm raising both of them to 20% and everyone pays the same regardless.

Paying a 20% flat tax IMPLIES raising the lowest income bracket by a different of +10% and the $63k-$128k bracket by +2%.

 

[bfdd]

Paying a 20% flat tax IMPLIES raising the lowest income bracket by a different of +10% and the $63k-$128k bracket by +2%.

Yes I know what you're saying because the current broken system uses "progressive" bracketing, so they would pay more now. Except what would really be happening is equalization of tax rates and whining about others having advantages. Simple fact, we're not all born equal and luck plays a huge part in where we are in our lives. Whining about it and trying to make it "fair" by hindering others at unequal levels breeds discontent and hate. We arbitrarily create separate classes of tax payers for what reason? To be "fair"? Oh that's great, divide people up and some how that won't cause any problems....

Remember when you were in elementary school and you had some candy and the teacher would say "I hope you brought enough for everyone." Do you know why they said that? Because they know all the other little kids are going to be pissed the fuck off that you have candy and they don't, because children are irrational creatures. It has something to do with them being human. Flat tax does far more to represent the perception of equality and actualized equality than any sort of lame ass "progressive" tax system which will simply lead to fraud, abuse and corruption.

 

[brianmanahan]

its funny how everyone who doesnt agree with you is a troll

 

[uclabachelor]

Yes I know what you're saying because the current broken system uses "progressive" bracketing, so they would pay more now. Except what would really be happening is equalization of tax rates and whining about others having advantages. Simple fact, we're not all born equal and luck plays a huge part in where we are in our lives. Whining about it and trying to make it "fair" by hindering others at unequal levels breeds discontent and hate. We arbitrarily create separate classes of tax payers for what reason? To be "fair"? Oh that's great, divide people up and some how that won't cause any problems....

Remember when you were in elementary school and you had some candy and the teacher would say "I hope you brought enough for everyone." Do you know why they said that? Because they know all the other little kids are going to be pissed the fuck off that you have candy and they don't, because children are irrational creatures. It has something to do with them being human. Flat tax does far more to represent the perception of equality and actualized equality than any sort of lame ass "progressive" tax system which will simply lead to fraud, abuse and corruption.

Except it's not going to work out the way you think it is.

Take a look at this data.

Go to 2007 on the first set of data and look at the numbers. Can you tell me which group will benefit the most on a flat 20% tax rate? Which group will suffer the most?

Which group has the most amount of taxpayers? Which one has the least?

 

[soundforbjt]

how do other countries do it?

Here's the countries that have a flat tax.

1. Bosnia-Herzegovina
2. Bulgaria
3. Albania
4. Czech Republic
5. Estonia
6. Georgia
7. Guernsey
8. Hungary
9. Kazakhstan
10. Iraq
11. Jersey
12. Kyrgyzstan
13. Latvia
14. Lithuania
15. Macedonia
16. Mongolia
17. Montenegro
18. Mauritius
19. Romania
20. Russia
21. Serbia
22. Slovakia
23. Ukraine

Anyone want to move?

 

[Rainsford]

The "fairness" problem with a flat tax becomes pretty obvious if you look at tax rates as a percentage of DISPOSABLE income. Cost of living doesn't scale linearly with income, even when you factor in the increased cost of nicer things like better food, transportation, housing, etc. In other words, a 20% tax places a much greater real burden on someone making $30,000 per year than it does on someone making $300,000 per year, despite the wealthier person paying 10 times as much in taxes.

This is a pretty decisive argument for me, if only because the differences in terms of disposable income at different income levels are pretty obvious. And despite the whining from certain people, I think we can all agree that a good tax policy has the minimum impact on the population as possible at any given government income level. A progressive tax seems like the obvious way to achieve that.

 

[bfdd]

Here's the countries that have a flat tax.

1. Bosnia-Herzegovina
2. Bulgaria
3. Albania
4. Czech Republic
5. Estonia
6. Georgia
7. Guernsey
8. Hungary
9. Kazakhstan
10. Iraq
11. Jersey
12. Kyrgyzstan
13. Latvia
14. Lithuania
15. Macedonia
16. Mongolia
17. Montenegro
18. Mauritius
19. Romania
20. Russia
21. Serbia
22. Slovakia
23. Ukraine

Anyone want to move?

I believe China also has a flat tax in certain places as well.

ucla, you're missing my entire point and you also forget why we have taxes in the first place. to pay for social services, something of which you use more of as you move down the socio-economic scale. someone making 10k should absolutely pay the same rate(percentage) as me making 50k. We pool our money to give back and we will still do it and it will feel more "fair" because everyone contributes the same amount. We'll all be in this mess together rather than feeling disconnected from each other. There is great social benefit to be gained through equal fair taxation.

 

[michal1980]

If we are to tax income, it should be made fairer. In my world it would be based on the % of the total income a given bracket makes.

 

[bfdd]

http://www.ncpa.org/pub/ba452

Oh snap look at that, actual evidence of going from a "progressive" bracket system to a "regressive" flat tax system without widespread poverty occurring and revenue generation increasing.

 

[uclabachelor]

ucla, you're missing my entire point and you also forget why we have taxes in the first place. to pay for social services, something of which you use more of as you move down the socio-economic scale.

Do you have a source for that statement?

http://www.ncpa.org/pub/ba452

Oh snap look at that, actual evidence of going from a "progressive" bracket system to a "regressive" flat tax system without widespread poverty occurring and revenue generation increasing.

The two economies are different. For one, Russia's economy is way more corrupt with their shadow economy and having a flat tax rate improved their collection rates.

 

[SP33Demon]

Stupid idea from people that have very little grasp on economics.

Flat tax gives me roughly ~50% tax break (I'm in the top say 5% of the income distribution) and people under $30K about 100% increase in tax liability. It is incredibly regressive with income, and that's even ignoring marginal utility of money.

Then if people earning 30K are unhappy with it, then it may be incentive to get off their asses and make more.

 

[bfdd]

Do you have a source for that statement?



The two economies are different. For one, Russia's economy is way more corrupt with their shadow economy and having a flat tax rate improved their collection rates.

A flat 20% or 30% income tax rate would improve our collection rates and raise our revenue.

also in response to your first part, it's in the constitution

Article I, Section 8, Clause 1:
The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.

So yeah, that's why we're taxed it has a specific reason. It's the exact reason why the ACA is legal constitutionally.

 

[nehalem256]

A flat 20% or 30% income tax rate would improve our collection rates and raise our revenue.

Having a flat 20% or 30% rate is not what would raise collection and revenue it is the elimination of deductions and credits.

You could keep the progressive rate structure and just eliminate credits and deductions and accomplish the same thing.

 

[Rainsford]

I believe China also has a flat tax in certain places as well.

ucla, you're missing my entire point and you also forget why we have taxes in the first place. to pay for social services, something of which you use more of as you move down the socio-economic scale. someone making 10k should absolutely pay the same rate(percentage) as me making 50k. We pool our money to give back and we will still do it and it will feel more "fair" because everyone contributes the same amount. We'll all be in this mess together rather than feeling disconnected from each other. There is great social benefit to be gained through equal fair taxation.

I don't know, I feel like the push for a flat tax has an incredibly negative social impact. The problem is that an equal tax rate on gross income doesn't automatically seem like the same as "fair" to a lot of people all across the income spectrum. I make a decent amount of money, enough so that I don't really have to worry too much about it at least. And I'd feel like a pretty colossal tool going to someone making way less who's worried about how he'll pay his bills and telling him I think it would be more fair if I payed less in taxes and he payed more.

And that's not just liberal guilt talking. Calling a flat tax rate "fair" requires us to ignore a whole number of factors that have a pretty big impact on the fairness of any given tax rate. If we're really all in this together, if we're really aiming for tax rates that don't make us feel disconnected from people making more or less, our tax rates should be designed to have a flat rate of IMPACT on each income bracket. And doing that requires a progressive income tax rate, IMO.

 

[Incorruptible]

http://www.ncpa.org/pub/ba452

Oh snap look at that, actual evidence of going from a "progressive" bracket system to a "regressive" flat tax system without widespread poverty occurring and revenue generation increasing.

Well said. Peoples income shouldn't be taxed

 

[a777pilot]

I fail to see how a 20% flat tax is bad for anyone. You make 50K a year you pay 10K in taxes, you make 1M a year you pay 200K in taxes, that seems fair to me. The rich are still payign more than their fair share and the poor are giving peanuts.

What is wrong with it is that it still taxes the wrong thing......income.