man, while i agree with you in principle, i hate to admit that it just doesn't work that way. a flat tax would either really hurt the poor, or if it was low enough not to hurt them, the gov't would be broke due to taking a huge cut in tax income.
How is that class warfare?
All "classes" are treated equally.
Having one group pay nothing and the other group pay everything is pitting the classes against each other.
I'll take a stab at this and suggest that he meant the law of diminishing marginal utility. Let's say I'm giving you $10 more to spend on your lunch today. If you've only got $1 in your pocket, that extra $10 can make a huge difference in your lunch. It makes less of difference if you've already got $20 in your pocket. And it makes next to no difference if you've already got $1,000 there.
The same applies to a flat tax on income. If you're making $20k a year, that $2k buys a lot in terms of basic necessities and can make the difference in whether you go hungry or have your electricity turned off. If you're making $2 million, that $200k isn't going to affect your lifestyle all that much at all.
The only way I could see a flat tax working is if it were actually much higher and with a poverty level based indexed exemption. For example, you could not tax any income below two and a half times the poverty level and then tax a flat 33% of any income above that. Based on 2011 HHS Poverty Guidelines, a single person making $50k a year would end up paying ~$7600 in taxes (around 15.2% which is less than the current marginal tax rate of 17.25%). Single people making $100k would be hit with a slight tax hike (24% vs 21.6%) as would people making $500k (31.5% vs 30.5%).
The biggest difference would be that without any other exemptions or deductions, the code would be greatly simplified.
This is just a very basic idea that I've been thinking about a lot. 10% tax. Across the board. 10% federal tax. 10% state tax. 10% property tax. 10% sales tax (or maybe a 10% VAT). 10% tax on corporations/businesses. No loopholes. No deductions.
What do you guys think?
Actually it's not that money's worth less, but rather that you get less use out of the same amount. That $5 is still worth $5. It's just that $5 more meant more then than it does now. So that diminishing marginal utility means that 10% tax on lower incomes is a much larger economic burden than that same 10% tax on higher incomes.OK, so money is theoretically worth "less" to someone who has more than someone who has less. I get that, I've been there. I only made around $20k last year, but $5 now is worth "less" to me than it was a few years ago when I was a poor college kid that maybe made $2000 for an entire year.
However, what I do NOT agree with is saying "well money isn't worth as much to people above x income level, so increase the tax rate on them" - That's bullcrap. Increasing the tax rate because it theoretically "doesn't matter as much to them" isn't right.
You do understand that a 10% property tax is outrageous, don't you?
Imagine an old person who lives in a "average" house, worth about $300,000. This retiree has been living in the house for decades and owns the house free and clear. In most counties, that person would pay about $3000 in property taxes. But you're going to have that person pay $30,000 a year? That exceeds the maximum SS payment, so you're going to bankrupt them and force them out of their house. And any apartment they tried to move to would be similarly taxed, so the rent would need to be outrageously high, to cover not only the mortgage but also the property tax. So apartments would become unaffordable for retirees (and many other people), and they'd have absolutely nowhere to live, except on the street.
Great idea.
Oh, and your income tax "solution" is equally absurd.
The market would eventually react to such a high property tax rate and property would be valued less to compensate for the future costs inherent in owning it.
So that 300k house would be devalued to 30k so the 3k a year property tax would be reasonable? And the person who saw 270k of property value vanish doesnt get screwed how?
I think a pure sales tax system would be much fairer.
Pay taxes on what you buy, not make.
Anything imported has to have taxes paid as well.
Tax reform is a bit complicated to talk in a non-live forum. People tend to go off on tangents and read too much into what another mentions.
The problem with your example is that equating government not taking your money with government giving you money establishes government's right to the money. I and many others have a big problem with the concept that all money belongs first to government, which then allows you to keep what it thinks you need. Government should be the entity that is allowed only what money we think it absolutely needs, not the people who earned the money.I'll take a stab at this and suggest that he meant the law of diminishing marginal utility. Let's say I'm giving you $10 more to spend on your lunch today. If you've only got $1 in your pocket, that extra $10 can make a huge difference in your lunch. It makes less of difference if you've already got $20 in your pocket. And it makes next to no difference if you've already got $1,000 there.
The same applies to a flat tax on income. If you're making $20k a year, that $2k buys a lot in terms of basic necessities and can make the difference in whether you go hungry or have your electricity turned off. If you're making $2 million, that $200k isn't going to affect your lifestyle all that much at all.
The only way I could see a flat tax working is if it were actually much higher and with a poverty level based indexed exemption. For example, you could not tax any income below two and a half times the poverty level and then tax a flat 33% of any income above that. Based on 2011 HHS Poverty Guidelines, a single person making $50k a year would end up paying ~$7600 in taxes (around 15.2% which is less than the current marginal tax rate of 17.25%). Single people making $100k would be hit with a slight tax hike (24% vs 21.6%) as would people making $500k (31.5% vs 30.5%).
The biggest difference would be that without any other exemptions or deductions, the code would be greatly simplified.
That's true of high wage earners who save money, but not of the truly wealthy, who almost always make their money with capital gains. A consumption tax would arguably hit the truly wealthy more since their income is currently being taxed at 15%. Muni bonds are often tax free, for that matter, whereas spending the profits would still be taxed under a consumption tax. And of course only a consumption tax hits those whose income is from illegal activities. Assuming a pre-bate like the FairTax, those at the poverty level would pay no federal taxes (including the very regressive payroll taxes) unless they were spending savings or illegal income, and those who earn less than the poverty level would be subsidized. As income and spending increase, the FairTax would become increasingly progressive, but would become effectively a flat tax on spending fairly quickly. And of course, that portion of income not spent would be available for investing, building the economy.The problem with that is the poor generally spend all of their disposable incomes on Taxable items. Whereas the Rich spend only a small percentage; and therfore would only be taxed a small percentage of that small percentage..
So, yet another idea that "feels" good on the surface fails in real life.
The problem with that is the poor generally spend all of their disposable incomes on Taxable items. Whereas the Rich spend only a small percentage; and therfore would only be taxed a small percentage of that small percentage..
So, yet another idea that "feels" good on the surface fails in real life.
Lolwut? First you'd have to get rid of all the loopholes of course.
You'd also more than likely extend the tax free system on pure medicines and food supplies.
At the end of the day the rich will buy far more than the poor and pay higher taxes.
There is no system that you can put in place in a capitalist nation that would be fair if the percentage in taxes vs income was identical.
If by "Rich will pay more than the Poor" in the sense that a rich guy buying himself a Porche pays more than the Poor guy who bought clothes for his kids? Then yah.. But your being completely ignorant of the fact that the Rich guy does not spend all of his income. And under your idiotic scheme, whatever he doesn't spend doesn't get hit by any taxes at all.
A pure 'consumption' tax is - in and of itself - a loophole large enough to drive a truck through. When you're rich enough to not have to spend everything, then whatever you save is tax exempt. Everyone else gets hit 100%. And the Richer you are, the smaller %age of your income needs be spent maintaining your lifestyle. So you save more... Make ever more... and over time spend a smaller and smaller %age of your income to maintain that lifestyle.
Great Deal! The rich get richer, and pay less and less and less of a %age of their money in Taxes... So they can pay less tax... and get richer... and pay less tax... While the working classes continue to get Taxed on nearly everything they make.
The richs already pay far more in terms of dollars: Why?? They have most of the money. What they aren't doing is paying as much of a percentage of their incomes as the Lower Middle, middle classes and 'working rich'.
And who the F*ck are you to say what I would and wouldn't do? Especially since you are mind bogglingly WRONG.
It's really simple:
Keep (a version of) the current Progressive tax system, the difference being we cut/reduce the loopholes and breaks - (capital gains, AMT, etc: - It's all income, so tax it as Income. Period) - that let the rude~ly wealthy get away with not paying what they should.
There: The wealthy pay their fair share, the government gets more money than they already do, and we didn't f*ck the poor any more than they already are.
What you fail to realize is the rich having money left over is ok. Are you saying they should only have the same disposible income as the average man?
There is nothing that is going to fix the poor being poor and like I said discussing this in a non-live method leaves no room to clarify. Perhaps giving them the first $2000 in purchases tax free...i don't know.
A pure sales tax system would increase our tax base, obviously sales tax would rise to 10% or more easily.
You also sound like a raving lunatic. I am taking a guess you are in the lower income bracket.
IMHO many of the rich are more or less tax exempt due to owning businesses that they use to dilute their money and purchases. A pure sales tax system would cause someone to pay that tax.
A progressive tax is only fair to those with lesser income.
There should be no reason the rich cannot remain rich nor be penalized for being such.
In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.7%. Table 1 and Figure 1 present further details drawn from the careful work of economist Edward N. Wolff at New York University (2010).
Nice - Go for the insults... I make a high 5 figure salary, plus bonus. I own my own house, and pay half my income in Taxes of one form or another. But it's very kind of you to pull yet more rhetoric out of your ass and make yet more mind bogglingly asinine statements about shit you have no clue about. Goes to show that you really have nothing to say, or you would back your bullshit with actual facts.
Income Level Matters when compared to the Cost of Living. It doesn't kill a 6 figure wage earner to pay a little more. OTOH, it hurts a LOT when you're at the bottom of the income scale.
The problem with your idea is the Tax Base would fall mostly on the lower 80%: Who make only 15% of the money. Rather than on the people who make the most. You also ignore the fact that the Rich will *still* have plenty of money left over.
That 15% would *all* be taxed because out of simple necessity that 15% will all be spent on living expenses.
Whereas the remaining 85% would be taxed less and less the more of it the individual has; simply because they don't need to spend it to maintain their lifestyles. Indeed, your idea would provide more and more incentive for the Rich to spend less: In a Sales Tax Only system, anything saved is automatically Tax Exempt. Savings which gets plowed into more and more earnings.
A pure Consumption based tax would NOT increase the tax base: It would radically DEcrease it.
I think you underestimate what the wealthy spend and what they can get away with tax-free.
I really don't think you understand what you are arguing. I am also doubting your claims to such a high salary and that you are paying out 50% in taxes in today's system.
Link?
edit: I found this link from 1992 to 2005...I certainly dont see taxes collected "plummeting" from the rich
http://www.visualizingeconomics.com/2008/03/30/top-400-taxpayers-income-and-taxes-paid-1992-2005/
And if you look at historical data for taxes collected here: http://www.irs.gov/taxstats/article/0,,id=175888,00.html combined with the data that the top 1%'s share of taxes paid has been climbing, Im not seeing how the statement that taxes collected from the top 1% have been...."plummeting" is anything but bullshit.
How the fuck are you paying 36% in federal taxes? You realize the top tier is 35% and that's only on what's about almost $400k....
Sorry - 26%
Property Taxes amount to $8k/year (that's the killer)