Why don't we have a flat tax system for personal income taxes?

[gotsmack]

What are the arguments against a flat tax?

If we had a flat tax system, for personal income tax (leave the business system alone) and got rid of all loopholes then we might be collecting even more tax revenue and have everyone pay what is perceived as mare fair.

We could do something like first $15k tax free for each working adult and $5k for each dependent up to 5. Capital gains would be taxed at the normal tax rate but long term capitol gains would have a deduction sheet decided by CPI going up to 30 years back and losses can be carried forward as long as you keep the the records.

Everything else could be taxed at a XX% federal rate. The rate would be the same for everyone and not have any brackets.



Thanks for your opinions.

 

[smack Down]

Uhh the progressive part of the tax code takes about 30 seconds to figure out for a 3rd grader.

 

[gotsmack]

eh, I just pay an accountant $125 to do my taxes. and yea it's easy if you don't have to figure out deductions.

 

[Brainonska511]

Collect more tax revenue? If you changed to a flat system, you'd have to put an even higher burden on the people making less. The people with lots of money would pay less under a flat tax, so that money has to be made up from somewhere, which would be in the higher percentage that less well-off individuals would pay. Plus, it isn't the people in the lower brackets taking massive deductions to avoid paying any taxes. It's the very well off that do that. And a lot of people (~$150k/year to $1million/year) get screwed even more because of the AMT, which has few available deductions and requires that you compute your taxes under the normal rate and then under the AMT and pay whichever is higher.

 

[dmcowen674]

Originally posted by: gotsmack
What are the arguments against a flat tax?

If we had a flat tax system, for personal income tax (leave the business system alone) and got rid of all loopholes then we might be collecting even more tax revenue and have everyone pay what is perceived as mare fair.

We could do something like first $15k tax free for each working adult and $5k for each dependent up to 5. Capital gains would be taxed at the normal tax rate but long term capitol gains would have a deduction sheet decided by CPI going up to 30 years back and losses can be carried forward as long as you keep the the records.

Everything else could be taxed at a XX% federal rate. The rate would be the same for everyone and not have any brackets.

Thanks for your opinions.

Are you Joe the Plumber making $250,000?

Make that $15K at least $150K and it won't be an assault on the middle class, otherwise bug off.

 

[Brainonska511]

Originally posted by: gotsmack
eh, I just pay an accountant $125 to do my taxes. and yea it's easy if you don't have to figure out deductions.

You got ripped off.

 

[Brainonska511]

Originally posted by: dmcowen674

Originally posted by: gotsmack
What are the arguments against a flat tax?

If we had a flat tax system, for personal income tax (leave the business system alone) and got rid of all loopholes then we might be collecting even more tax revenue and have everyone pay what is perceived as mare fair.

We could do something like first $15k tax free for each working adult and $5k for each dependent up to 5. Capital gains would be taxed at the normal tax rate but long term capitol gains would have a deduction sheet decided by CPI going up to 30 years back and losses can be carried forward as long as you keep the the records.

Everything else could be taxed at a XX% federal rate. The rate would be the same for everyone and not have any brackets.

Thanks for your opinions.

Are you Joe the Plumber making $250,000?

Make that $15K at least $150K and it won't be an assault on the middle class, otherwise bug off.

$150k/year isn't middle class? You're doing well for yourself, but not that well.

 

[frostedflakes]

Unless government drastically cut spending, we'd go broke.

There are a lot of different ways to look at fairness as well. I've read that because of sales tax, payroll taxes, etc. the tax burden as a fraction of income is higher for the lower/middle class than the wealthy.

And I could only imagine how bad the financial bubbles would be if the rich had more money to play with...

 

[gotsmack]

Originally posted by: Brainonska511
Collect more tax revenue? If you changed to a flat system, you'd have to put an even higher burden on the people making less. The people with lots of money would pay less under a flat tax, so that money has to be made up from somewhere, which would be in the higher percentage that less well-off individuals would pay. Plus, it isn't the people in the lower brackets taking massive deductions to avoid paying any taxes. It's the very well off that do that. And a lot of people (~$150k/year to $1million/year) get screwed even more because of the AMT, which has few available deductions and requires that you compute your taxes under the normal rate and then under the AMT and pay whichever is higher.

Not quite sure I understand your point. I'm saying under flat tax we would get rid of deductions except for the first tax free $15k and $5k for dependents. That would take care of the poor from paying taxes and wipe out most loopholes for the ultra rich. Unless they took a massive loss of millions they won't be deducting anything considerable and would be paying the same rate of XX% that someone making $80k a year would, but would be paying more in $$ terms because they make more money.

 

[Stiganator]

For future reference.

If you're single

0-30,000 poor
30-90k middle
90k+ rich

Family of 4
0-50,000/year poor
50k-120k/year middle
120k + /year rich

This is based on Midwest standard of living. Change by a factor of 1.5-2 if you live in a major city. Approximately 90-95% make under the rich mark.

 

[smack Down]

Originally posted by: gotsmack
eh, I just pay an accountant $125 to do my taxes. and yea it's easy if you don't have to figure out deductions.

Deductions have nothing to do with the tax rate.

 

[techs]

Gee, lose the deduction on home mortgages? What a concept.
That should really reduce the home values in America.

 

[Capt Caveman]

Originally posted by: gotsmack

Originally posted by: Brainonska511
Collect more tax revenue? If you changed to a flat system, you'd have to put an even higher burden on the people making less. The people with lots of money would pay less under a flat tax, so that money has to be made up from somewhere, which would be in the higher percentage that less well-off individuals would pay. Plus, it isn't the people in the lower brackets taking massive deductions to avoid paying any taxes. It's the very well off that do that. And a lot of people (~$150k/year to $1million/year) get screwed even more because of the AMT, which has few available deductions and requires that you compute your taxes under the normal rate and then under the AMT and pay whichever is higher.

Not quite sure I understand your point. I'm saying under flat tax we would get rid of deductions except for the first tax free $15k and $5k for dependents. That would take care of the poor from paying taxes and wipe out most loopholes for the ultra rich. Unless they took a massive loss of millions they won't be deducting anything considerable and would be paying the same rate of XX% that someone making $80k a year would, but would be paying more in $$ terms because they make more money.

No deductions? Get rid of the incentive for home ownership? So, charge the poor/middle class more and let the rich keep more?

 

[techs]

Originally posted by: Capt Caveman

Originally posted by: gotsmack

Originally posted by: Brainonska511
Collect more tax revenue? If you changed to a flat system, you'd have to put an even higher burden on the people making less. The people with lots of money would pay less under a flat tax, so that money has to be made up from somewhere, which would be in the higher percentage that less well-off individuals would pay. Plus, it isn't the people in the lower brackets taking massive deductions to avoid paying any taxes. It's the very well off that do that. And a lot of people (~$150k/year to $1million/year) get screwed even more because of the AMT, which has few available deductions and requires that you compute your taxes under the normal rate and then under the AMT and pay whichever is higher.

Not quite sure I understand your point. I'm saying under flat tax we would get rid of deductions except for the first tax free $15k and $5k for dependents. That would take care of the poor from paying taxes and wipe out most loopholes for the ultra rich. Unless they took a massive loss of millions they won't be deducting anything considerable and would be paying the same rate of XX% that someone making $80k a year would, but would be paying more in $$ terms because they make more money.

No deductions? Get rid of the incentive for home ownership? So, charge the poor/middle class more and let the rich keep more?

It's a George Bush wet dream.

 

[GTaudiophile]

I think a consumption tax is the preferred alternative...

 

[Viditor]

For raising revenue, the flat tax systems is best.
It would put less strain on the poor (you could still put a limit on what level incurred taxes), and make the country a heck of a lot more money.
If everyone was at a flat 10% with no deductions, and taxation started at the over $35k level, we would instantly be revenue positive on the budget!

However...
1. There would have to be stricter laws about corporate taxation (when it's company income and when it's personal).
2. Many charities would just stop as donations would no longer be deductible
3. Government could no longer incentivise things like school funds, housing, medical coverage, etc...

 

[gotsmack]

Originally posted by: Capt Caveman

Originally posted by: gotsmack

Originally posted by: Brainonska511
Collect more tax revenue? If you changed to a flat system, you'd have to put an even higher burden on the people making less. The people with lots of money would pay less under a flat tax, so that money has to be made up from somewhere, which would be in the higher percentage that less well-off individuals would pay. Plus, it isn't the people in the lower brackets taking massive deductions to avoid paying any taxes. It's the very well off that do that. And a lot of people (~$150k/year to $1million/year) get screwed even more because of the AMT, which has few available deductions and requires that you compute your taxes under the normal rate and then under the AMT and pay whichever is higher.

Not quite sure I understand your point. I'm saying under flat tax we would get rid of deductions except for the first tax free $15k and $5k for dependents. That would take care of the poor from paying taxes and wipe out most loopholes for the ultra rich. Unless they took a massive loss of millions they won't be deducting anything considerable and would be paying the same rate of XX% that someone making $80k a year would, but would be paying more in $$ terms because they make more money.

No deductions? Get rid of the incentive for home ownership? So, charge the poor/middle class more and let the rich keep more?

A deduction isn't going to stop someone who wants to own.

 

[gotsmack]

Originally posted by: Viditor
For raising revenue, the flat tax systems is best.
It would put less strain on the poor (you could still put a limit on what level incurred taxes), and make the country a heck of a lot more money.
If everyone was at a flat 10% with no deductions, and taxation started at the over $35k level, we would instantly be revenue positive on the budget!

However...
1. There would have to be stricter laws about corporate taxation (when it's company income and when it's personal).
2. Many charities would just stop as donations would no longer be deductible
3. Government could no longer incentivise things like school funds, housing, medical coverage, etc...

That was a great response, thanks.

I'm not sure it is the role of the Fed Govt to put incentives on things. The State govt can still do a lot with their tax structure.

I agree that many charities would go under, but it would also force the charities to really cut down on expenses and serve their causes better. People who donate will still do so, but they will be more involved with what is done with their money now that they do not get any tax benefit from it.

 

[Capt Caveman]

Originally posted by: gotsmack

Originally posted by: Capt Caveman

Originally posted by: gotsmack

Originally posted by: Brainonska511
Collect more tax revenue? If you changed to a flat system, you'd have to put an even higher burden on the people making less. The people with lots of money would pay less under a flat tax, so that money has to be made up from somewhere, which would be in the higher percentage that less well-off individuals would pay. Plus, it isn't the people in the lower brackets taking massive deductions to avoid paying any taxes. It's the very well off that do that. And a lot of people (~$150k/year to $1million/year) get screwed even more because of the AMT, which has few available deductions and requires that you compute your taxes under the normal rate and then under the AMT and pay whichever is higher.

Not quite sure I understand your point. I'm saying under flat tax we would get rid of deductions except for the first tax free $15k and $5k for dependents. That would take care of the poor from paying taxes and wipe out most loopholes for the ultra rich. Unless they took a massive loss of millions they won't be deducting anything considerable and would be paying the same rate of XX% that someone making $80k a year would, but would be paying more in $$ terms because they make more money.

No deductions? Get rid of the incentive for home ownership? So, charge the poor/middle class more and let the rich keep more?

A deduction isn't going to stop someone who wants to own.

You a home owner? No mortgage interest, property tax, points and PMI deductions. Less people would be interested in owning, again you're hurting the poor and middle class.

And you're delusional to think that people will still donate the without the tax incentive. Again, you would reduce the pool of donors to the mainly the rich. Good bye to 10,000s of good and worthy charities.

 

[piasabird]

Politicians use the tax code to pit the poor against the wealthy against the middle class. If someone proposed the flat tax then people like obama would call it a tax cut for the rich. This is part of the problem. Rich vs Poor keeps the class war of democrats alive and well.

If the tax rate were less you would not need all the exemptions and free government giveaway programs. You would be truly free, and not a slave to the government.

 

[da loser]

i'd like to see the capital gains fall under the income tax

 

[Proprioceptive]

Screw flat income tax... bring on the Fair Tax

 

[Rainsford]

Originally posted by: Proprioceptive
Screw flat income tax... bring on the Fair Tax

I don't know about that. Higher sales taxes would seem to discourage spending, while dramatically favoring people who can afford to save or invest a lot of their money. This seems like it would hurt the economy due to lower spending levels, and would hurt people at the bottom of the economic ladder because they spend a greater portion of what they bring home.

 

[JD50]

Originally posted by: gotsmack

Originally posted by: Capt Caveman

Originally posted by: gotsmack

Originally posted by: Brainonska511
Collect more tax revenue? If you changed to a flat system, you'd have to put an even higher burden on the people making less. The people with lots of money would pay less under a flat tax, so that money has to be made up from somewhere, which would be in the higher percentage that less well-off individuals would pay. Plus, it isn't the people in the lower brackets taking massive deductions to avoid paying any taxes. It's the very well off that do that. And a lot of people (~$150k/year to $1million/year) get screwed even more because of the AMT, which has few available deductions and requires that you compute your taxes under the normal rate and then under the AMT and pay whichever is higher.

Not quite sure I understand your point. I'm saying under flat tax we would get rid of deductions except for the first tax free $15k and $5k for dependents. That would take care of the poor from paying taxes and wipe out most loopholes for the ultra rich. Unless they took a massive loss of millions they won't be deducting anything considerable and would be paying the same rate of XX% that someone making $80k a year would, but would be paying more in $$ terms because they make more money.

No deductions? Get rid of the incentive for home ownership? So, charge the poor/middle class more and let the rich keep more?

A deduction isn't going to stop someone who wants to own.

It would stop a lot of people from buying a house, which was his point.

 

[L00PY]

Originally posted by: GTaudiophile
I think a consumption tax is the preferred alternative...

The problem with consumption taxes is that they are regressive when it comes to taxing personal income. The poor spend a much larger proportion of their income than the rich. Someone making the minimum wage will likely spend every penny they earn; someone making hundreds of millions will only spend a tiny fraction of that amount. This holds true at more reasonable incomes, most people earning $50k a year spend a much larger percentage of their income than most people earning $500k a year.

A flat tax is a little fairer, but you've got the same problems of the tax being a greater burden on the poor. The standard solution is an exemption. Setting it at a fixed value is a little problematic as the AMT has shown. I'd suggest setting it at the minimum wage * 40 (hours) * 52 (weeks). Any income up to that amount wouldn't be taxed.

So in 2009, there would be no taxes on the first $15,080 of income.

To handle the issue of other deductions, I'd say allow for the total of all of any additional deductions to equal that minimum wage amount. Each dependent is one quarter of that amount (there are no additional deductions above four children). Mortgage interest deductions are also capped to that minimum wage. Donations to non-profit charities would also be deductible. I can see that total value as being a bit low (for charitable home owning parents), but I'd worry that if a separate cap were set for each category, many, many categories would be created and the current morass of income tax code that allows too many loopholes would be replicated.

Of course I doubt we'll ever see significant change to the income tax code so it's a moot point anyways.