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October 11, 2005
Flat Tax?
Brad Plumer's got a very strong post poking holes n the supposed magic of "The Flat Tax". Read it. And remember this -- there's nothing complicated about taxation. You make X dollars a year, you multiply that by the percentage you should pay, and you mail off a check. See? Easy as pie. It's not paying taxes -- getting exemptions and credits and deductions and so forth -- that's complicated. So when Republicans begin advocating for flat taxation, call it what it is: an assault on the progressivity of the system. They don't want taxes to be easier, they want them lower on the rich and higher on the poor. This debate isn't about simple taxation, it's about simple fairness.
October 11, 2005 in Taxes | Permalink
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Ah, it works now. This statement:
You make X dollars a year, you multiply that by the percentage you should pay, and you mail off a check.
Is untrue in the progressive system we currently have, even if there were not deductions, credits, exlcusions, etc.
Posted by: Ugh | Oct 11, 2005 4:36:19 PM
Yeah, it's true, you have to do some marginal taxation book-cookery, but it's still quite minor.
Posted by: Ezra | Oct 11, 2005 4:55:47 PM
Literally as it stands: not true (but I was being picky).
Posted by: Ugh | Oct 11, 2005 5:16:29 PM
This debate isn't about simple taxation, it's about simple fairness.
What could be more fair than everyone paying the same tax rate?
Let's say the flat tax rate for everyone is 17%.
You make $25,000 per year, you pay $4,250 in taxes.
You make $100,000 per year, you pay $17,000 in taxes.
You make $1,000,000 per year, you pay $170,000 in taxes.
Do you want to redistribute wealth? Punish those who strive and work hard?
Eighty seven percent of millionaires in this country are self made(they worked for what they have).
Posted by: Captain Toke | Oct 11, 2005 5:23:56 PM
It certainly isn't true when you take into account different types of income, capital gains is not taxed the same as regular income, for example.
However, that is a quibble and you are quite correct that most of the complexity is a result of deductions and special loopholes.
It is unclear to me that this is about simple fairness. Certianly you can argue that everyone paying the same rate is 'fair.' You could even make an argument that everyone paying the same ammount is 'fair.' And of course you and other proponants of progressive taxes would argue that paying different rates based upon wealth is 'fair.' None of these results is self evidently more fair than others as far as I can see, it requires a lot more to show one is more fair in specific circumstances than another.
I maintain that as a whole our tax rate is pretty flat now (the rich have a higher rate, but more access to tax shelters and loopholes), so a reduction in complexity (removal of loopholes and deductions) with our current system would be a tax hike. It is even less likely to happen than a flat tax (which I expect to see about the same time I go ice skating in hades.)
Posted by: Dave Justus | Oct 11, 2005 5:25:36 PM
What could be more fair than everyone paying the same tax rate?
Make everyone pay the same amount! What could be fairer???
If "fairness" is the goal, how do you feel about a 100% estate tax? Let's see some real fairness.
On preview: darn, Justus beat me to the "same amount" retort.
Posted by: Allen K. | Oct 11, 2005 5:42:14 PM
You make $25,000 per year, you pay $4,250 in taxes.
You make $100,000 per year, you pay $17,000 in taxes.
You make $1,000,000 per year, you pay $170,000 in taxes.
I just don't understand why conservatives would find this as acceptible. The millionaire just paid $170K to the government, and is getting the exact same return in governmental services as the 25K earner who paid substantially less. (Its possibly even less return through services, although it is more when we take into account that the government does insure a large portion of that person's estate through security and economic regulations and enforcement, but I digress.)
You may be right Dave, that this is less about fairness. Its probably more about them not wanting to pay as much as they do know, hence selfishness for some, who knows how many.
Would simplifying the tax code, drive down the cost of enforcement and drive up revenue? And if that turned out to be enough to fund government without deficits and maybe even generate short term gains on the deficit, could we able to do so at a rate that is lower than the current base, assuming no exemptions? Essentially, the base rate is down, we lowered taxes, even on the top income bracket, making it "more fair" for everyone. Once again, answers I'm not smart enough to know. But questions I'm not sure the rich care all that much about.
Posted by: Adrock | Oct 11, 2005 5:53:16 PM
"Make everyone pay the same amount! What could be fairer???"
Make that guy who makes $25,000 per year pay $17,000 in taxes? Or $170,000?
You liberals are so mean! You just want to make sure that the poor stays poor, don't ya!
Posted by: Captain Toke | Oct 11, 2005 6:06:41 PM
The real issue is that even a flat tax is heavily progressive. Liberals would like to see more and more progessivity. If you aren't poor and uneducated, you are not worthy of "fairness".
Posted by: Fred Jones | Oct 11, 2005 6:36:59 PM
If you want to unleash economic growth, repeal the corporate income tax.
Posted by: Ugh | Oct 11, 2005 7:19:26 PM
Who does corporat income tax directly impact? Hmm, Let's see the rich, white males. Enforcement -- yea ask Tom DeLay and Bill Frist about that issue.
Actually, the flat tax would keep the poor down(rebulican goal) and hurt the shrinking middle class.
Estate tax, don't even get me started!
Posted by: catherine | Oct 11, 2005 8:24:44 PM
Another thing worth mentioning is that if you changed only the income tax to a flat tax and left the rest of the code alone, the poorer would end up paying a higher rate than middle or upper class taxpayers. Taxes like the payroll tax, sales tax, and a few others hit the poor harder than other groups.
Posted by: Dustin | Oct 11, 2005 10:22:55 PM
"Actually, the flat tax would keep the poor down(rebulican goal) and hurt the shrinking middle class."
It is a good thing you pointed out keeping the poor down is a Republican goal or else some of the people reading this blog might have been tricked by my comment. You're a smart one, I can't get anything past you.
Could you explain how the flat tax keeps the poor from getting out of poverty?
Posted by: Captain Toke | Oct 11, 2005 10:36:02 PM
You may be right Dave, that this is less about fairness. Its probably more about them not wanting to pay as much as they do know, hence selfishness for some, who knows how many.
The real point is that, sooner or later, we're going to have to jack the tax rates up or become the bulk-sized Argentina. How we jack said tax rates is going to be an issue.
Posted by: Dustbin Of History | Oct 11, 2005 10:57:14 PM
It's fair if you take luck in life seriously, and I do. Read your Rawls, it's good for you.
Posted by: Ezra | Oct 11, 2005 11:48:43 PM
Ezra,
I don't see how luck in life makes one sort of tax fairer than another. Is it that you feel we must counter-balance luck in some fashion to restore fairness to the universe?
I am not sure that unfairness in the universe (luck) would justify being unfair in our dealings with one another as a result.
Posted by: Dave Justus | Oct 12, 2005 10:07:31 AM
If you follow Sully's link the iris site has updated his post with the following:
Update 3: The critics were correct: these numbers are not compelling given that the entire area appears to be experiencing extraordinary growth. I ran the numbers on the non-flat tax countries of the former Soviet Union and there is only a slight (0.3%) advantage to the flat tax group. This difference is probably not statistically significant given the weakness of the underlying reporting mechanisms.
http://www.iris.org.il/blog/archives/422-IRIS-Exclusive-All-Flat-Tax-Countries-Experiencing-Explosive-Growth-Rates.html
At least this guy tells the truth. I wonder if sully will run an update.
Posted by: Erik | Oct 12, 2005 11:25:57 AM
"It's fair if you take luck in life seriously, and I do."
People make their luck in life happen.
Someone who works a little harder than those around him or her gets a promotion. It was lucky their employer noticed their hard work.
Someone who worked hard in college, stayed at home and studied while everyone else is partying, that person gets the kick ass job out of college. How lucky can a person get?
Someone is a little more persistant and offers a better product than their competitors and makes the sale. Boy, they sure were lucky.
Someone has worked hard, researched and has figured out a way to lower their costs so they can bid a little lower and still offer the same quality, and they get the contract. What luck!
You want to punish this kind of behavior? Cuz everyone else was too lazy or stupid and would rather watch TV than try to get ahead?
Posted by: Captain Toke | Oct 12, 2005 11:30:22 AM
"You make X dollars a year, you multiply that by the percentage you should pay, and you mail off a check. See? Easy as pie."
It's obvious that you've never paid taxes (and probably won't until '07). Those W-2's aren't "as easy as pie". First you compute your TAXABLE income, which is quite different than your gross income (what you make) - and no, that's not derived directly from "loopholes" as there are social security & state taxes involved, as well as other things.
Also, you might want to do some research into the fair tax (the book was #1 last month), as the poor would pay no income taxes - just as they do now and under every feasible flat tax plan put forth. To say your rhetoric in the post is incorrect would be an understatement.
Do some research. Pay some income taxes. Then talk.
Posted by: RW | Oct 12, 2005 11:41:27 AM
Toke, could you explain how a flat tax rate is fair?
Posted by: Adrock | Oct 12, 2005 11:44:03 AM
"Who does corporat income tax directly impact"
Every person who buys a good or service from a corporation. That should've been covered in one of your 9th grade classes.
Posted by: RW | Oct 12, 2005 11:45:01 AM
RW, what are the book's claims on revenue? Do they claim the government would currently taken in more, less or the same?
Posted by: Adrock | Oct 12, 2005 11:47:15 AM
"What could be more fair than everyone paying the same tax rate?"
First of all, fairness is a relative term. To illustrate this, and how a flat tax is regressive and disproportionally punishes lower income earners, let’s look at whose life is going to be affected more by a flat tax.
Take the example being examined here. If someone making 25,000 a year is taxed 17% (4,250) that leaves 20,750 to pay living expenses: housing, food, clothes, car, gas, insurance, etc. If some has a family, these expenses are going to be even higher. For a family of 4, the poverty income level for 2005 was 19,350, which makes them only a little over a thousand dollars away from poverty status. For people like this, 4,250 could go along way in simply paying for necessities. More then likely, they will have to cut some necessities because they simply can’t afford it. On the other hand, if someone making 100,000 a year is taxed at 17% (17,000) that still leaves 83,000 to cover living expenses. That’s still a good chunk of money and shouldn’t leave the family having to sacrifice any necessities. I imagine they could live pretty comfortably on that.
What no one talks about in this flat tax debate is 17% of low income leaves even lower income, while 17% of high-income still leaves a high-income. It’s not about the percentage, but about the base income of the percentage and where it leaves people with take-home money. My point is that is it fair to tax those close to the poverty line and those earning six-figures equally and also say that how it affects each household in real life is also fair?
Posted by: Whipscrap | Oct 12, 2005 12:06:59 PM
You want to punish this kind of behavior? Cuz everyone else was too lazy or stupid and would rather watch TV than try to get ahead?
Yes, because people deserve it when they get hit by cars, or when the weather unexpectedly changes, or when their genes gang up on them and give them cancerous colons, or when Enron f'ed them in the wallet, or when their parents are less holy than thou, etc.
I'm sure you're not familiar with it, but this is commonly known as the "just world hypothesis," and is one of the many ways peopl assuage the bad feelings that witnessing suffering engenders (in normal people).
Posted by: TJ | Oct 12, 2005 12:15:03 PM
Adrock,
Read the 4th post down. Then keep reading before you write"Why shouldn't everyone pay the same amount?"
You see Adrock, I back up my assertions, unlike catherine and a lot of other people who spit out the liberal tripe on this blog. "Bush lied, People died", "Democrats want to help the poor get out of poverty", etc. all sound good to liberals and those who think they can comment intelligently on politics based on sound bites, but those statements have no basis in truth.
I have said it before and I'll say it again. The reason liberal talk radio is a resounding failure is because when you get down to talking about issues, delving into the details, the liberal side of the argument does not appeal to most Americans.
And for all you progressives, the flat tax is progressive in the sense that the more you earn, the more you pay.
Posted by: Captain Toke | Oct 12, 2005 12:15:44 PM
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