The Flat Tax

Off Topic Politics and World Issues
21

So here’s the thing about a consumption tax being regressive:
The definition of a regressive tax is that it taxes the poor more than the rich.

A uniform tax on all items for all people is regressive because poor people SPEND a greater portion of their income than rich people (Rich people INVEST or SAVE some of their income because they don’t need it to survive).

Since poor people SPEND a higher percentage of their income than rich people, they are TAXED a higher percentage of their income.

Therefore, a uniform consumption tax is regressive.

If you wish to make a consumption tax less regressive, you can do as you apparently have in Canada (sales taxes in the US are administered by individual states. I know Texas has one, and it is much like you describe- rent and most non-luxury foods are not taxed, neither is public transportation… but man, if you’re using public transportation in Texas… may God have mercy on your soul).

There are huge problems with consumption taxes, though.

First, people don’t mind paying a tax they don’t see (automatic witholding), but they REALLY mind paying an exorbitant tax they do see (we’re talking about 20-30% sales tax, or at least those were the numbers we were throwing around in my tax class when Huckabee was still a contender for the 2008 nomination).

Second, the papers sited by Gambit_Lost above mention (and I don’t know how rigorous the academia here is, but…) sales taxes are next to impossible to enforce at high levels (high levels defined as 12%<) because there’s so much incentive to skirt the system.

Third and last, it KILLS tourism. Tourists don’t get to take advantage of the lack of income tax, but they sure have to pay the sales tax, which inflates the price by a hefty percentage- hell, if they wanted to pay those prices, they’d stay in Europe. This doesn’t matter in Texas- Austin’s the Music Capital of the World, but very rarely do we get foreigners. California and New York don’t necessarily see it the same way though.

22

Why not just get rid of the income tax, and not replace it?

23

[quote]Sloth wrote:
Why not just get rid of the income tax, and not replace it?[/quote]

How else will you pay for the military?

24

[quote]Otep wrote:
Sloth wrote:
Why not just get rid of the income tax, and not replace it?

How else will you pay for the military?[/quote]

I’d bring them home from around the world, retrain some as border patrol, and cut it’s size in half. At the least.

25

Some good ideas going around.

Gambit, I’m not sure how you see a flat income tax as regressive since, by definition, a regressive income tax means that those of lower income are taxed a greater percentage than higher income brackets. I didn’t read all of what you guys wrote, so maybe I missed your explanation.

IMO, it just makes so much more sense to have a flat rate and not allow for exemptions. That would not only fall more in-line with the idea of promoting success and hard work, but greatly simplify the complexities of the IRS. Hell, with a flat tax the government could use their tax revenues as a much clearer indication of fluctuations in gross income and therefore changes in demand composition and GDP, making it much easier to implement accurate fiscal and monetary policies.

26

[quote]BlakedaMan wrote:
Some good ideas going around.

Gambit, I’m not sure how you see a flat income tax as regressive since, by definition, a regressive income tax means that those of lower income are taxed a greater percentage than higher income brackets. I didn’t read all of what you guys wrote, so maybe I missed your explanation.

IMO, it just makes so much more sense to have a flat rate and not allow for exemptions. That would not only fall more in-line with the idea of promoting success and hard work, but greatly simplify the complexities of the IRS.

Hell, with a flat tax the government could use their tax revenues as a much clearer indication of fluctuations in gross income and therefore changes in demand composition and GDP, making it much easier to implement accurate fiscal and monetary policies.[/quote]

How are you going to overcome the argument that it “gives money to the rich” ?

The correct reply that in fact it still takes money from the rich, in fact much more money from the rich than the non-rich, will fall on deaf ears.

That argument never worked on those who claim that taxing “the rich” 33% instead of 39% constitutes “giving money to the rich,” so it would not work on those who would claim the flat tax gives money to the rich.

Second, under the Bush tax code, approximately the first 50% of income earners paid no or almost no percentage of their income as income taxes, or in fact received money as “tax credits” (that is to say, a check, despite having paid no income tax.)

This will likely be changed now to 51% or more paying nothing or receiving a check.

Why would these 51% vote for any politician that thinks they should bear any portion of the burden whatsoever, rather than having the other 49% or less carry ALL the income tax burden, while they themselves enjoy all income-tax-funded societal benefits for free or even get a check?

27

Unfortunately, that has become the rationale; our nation is filled with people who want a personal bail-out and don’t want to contribute.

28

[quote]Sloth wrote:
Otep wrote:
Sloth wrote:
Why not just get rid of the income tax, and not replace it?

How else will you pay for the military?

I’d bring them home from around the world, retrain some as border patrol, and cut it’s size in half. At the least.[/quote]

So you’d eliminate the income tax by 100%, and the military by 50%.

Deficit spending FTW.

On a more serious note, America may be able to rein in it’s spending (may), but even if it does, it’s got a hideous amount of debt to pay off. It’s going to be a long time before it can justify dropping taxes in the name of fiscal responsibility. That’s why I wouldn’t drop the income tax just yet.

29

I favor a flat tax also.

Because I know there’s no chance in hell some really rich guy is paying the taxes I’m paying. No, he has consultants and a tax shelter and deductions. When they get rid of all that, I’m in favor a flat tax.

But they never will. They’ll want a flat tax and then they’ll want their privileges.

And when they catch him cheating on taxes, I want a pound of his flesh.

30

[quote]Otep wrote:
Sloth wrote:
Otep wrote:
Sloth wrote:
Why not just get rid of the income tax, and not replace it?

How else will you pay for the military?

I’d bring them home from around the world, retrain some as border patrol, and cut it’s size in half. At the least.

So you’d eliminate the income tax by 100%, and the military by 50%.

Deficit spending FTW.

On a more serious note, America may be able to rein in it’s spending (may), but even if it does, it’s got a hideous amount of debt to pay off. It’s going to be a long time before it can justify dropping taxes in the name of fiscal responsibility. That’s why I wouldn’t drop the income tax just yet.[/quote]

  1. I said at the least.
  2. There would be other budget cuts.
  3. We’d still have tax revenue equaling about what we had 10 years ago.
31

[quote]Otep wrote:
So here’s the thing about a consumption tax being regressive:
The definition of a regressive tax is that it taxes the poor more than the rich.

A uniform tax on all items for all people is regressive because poor people SPEND a greater portion of their income than rich people (Rich people INVEST or SAVE some of their income because they don’t need it to survive).

Since poor people SPEND a higher percentage of their income than rich people, they are TAXED a higher percentage of their income.

Therefore, a uniform consumption tax is regressive.

If you wish to make a consumption tax less regressive, you can do as you apparently have in Canada (sales taxes in the US are administered by individual states. I know Texas has one, and it is much like you describe- rent and most non-luxury foods are not taxed, neither is public transportation… but man, if you’re using public transportation in Texas… may God have mercy on your soul).

There are huge problems with consumption taxes, though.

First, people don’t mind paying a tax they don’t see (automatic witholding), but they REALLY mind paying an exorbitant tax they do see (we’re talking about 20-30% sales tax, or at least those were the numbers we were throwing around in my tax class when Huckabee was still a contender for the 2008 nomination).

Second, the papers sited by Gambit_Lost above mention (and I don’t know how rigorous the academia here is, but…) sales taxes are next to impossible to enforce at high levels (high levels defined as 12%<) because there’s so much incentive to skirt the system.

Third and last, it KILLS tourism. Tourists don’t get to take advantage of the lack of income tax, but they sure have to pay the sales tax, which inflates the price by a hefty percentage- hell, if they wanted to pay those prices, they’d stay in Europe. This doesn’t matter in Texas- Austin’s the Music Capital of the World, but very rarely do we get foreigners. California and New York don’t necessarily see it the same way though.
[/quote]

In the UK, VAT of 17.5% is included on all purchases other than those deemed non-luxury. The sticker price in the store will include this tax so it is to all intents and purposes invisible.

Tourists can claim back the VAT that they have paid when they leave the country as long as they are taking the purchased item with them.

Tourism is huge business in the UK so not sure if your arguments stack up.

I guess the issue is with introducing the tax, in the UK it has been there for a long time so is just accepted. When they increased it to 17.5% 10/15 years ago there was a bit of an uproar.

32

[quote]Wreckless wrote:
I favor a flat tax also.

Because I know there’s no chance in hell some really rich guy is paying the taxes I’m paying. No, he has consultants and a tax shelter and deductions. When they get rid of all that, I’m in favor a flat tax.

But they never will. They’ll want a flat tax and then they’ll want their privileges.

And when they catch him cheating on taxes, I want a pound of his flesh.[/quote]

But I bet they are still paying a much larger actual dollar amount than you.

33

[quote]Cockney Blue wrote:
Wreckless wrote:
I favor a flat tax also.

Because I know there’s no chance in hell some really rich guy is paying the taxes I’m paying. No, he has consultants and a tax shelter and deductions. When they get rid of all that, I’m in favor a flat tax.

But they never will. They’ll want a flat tax and then they’ll want their privileges.

And when they catch him cheating on taxes, I want a pound of his flesh.

But I bet they are still paying a much larger actual dollar amount than you.[/quote]

And effective rate. What about the money it costs them to hire all these people?

It would be nice if people commenting on this would take 5 minutes and actually look at where a majority of tax revenue comes from. I’ll give you a hint, it’s not the poor or middle class.

34

Yeah, but taking only say one hundred thousand dollars a year instead of $150K per year from a doctor, or a million dollars per year instead of $2M per year from a man who has 30 employees in his business, constitutes “giving money to the rich.”

And that is just angering to many of those that do not produce goods or services worth that amount of money and thus do not earn that much themselves.

35

[quote]Bill Roberts wrote:
Yeah, but taking only say one hundred thousand dollars a year instead of $150K per year from a doctor, or a million dollars per year instead of $2M per year from a man who has 30 employees in his business, constitutes “giving money to the rich.”

And that is just angering to many of those that do not produce goods or services worth that amount of money and thus do not earn that much themselves.[/quote]

All too accurate.

36

[quote]Cockney Blue wrote:
Otep wrote:
So here’s the thing about a consumption tax being regressive:
The definition of a regressive tax is that it taxes the poor more than the rich.

A uniform tax on all items for all people is regressive because poor people SPEND a greater portion of their income than rich people (Rich people INVEST or SAVE some of their income because they don’t need it to survive).

Since poor people SPEND a higher percentage of their income than rich people, they are TAXED a higher percentage of their income.

Therefore, a uniform consumption tax is regressive.

If you wish to make a consumption tax less regressive, you can do as you apparently have in Canada (sales taxes in the US are administered by individual states. I know Texas has one, and it is much like you describe- rent and most non-luxury foods are not taxed, neither is public transportation… but man, if you’re using public transportation in Texas… may God have mercy on your soul).

There are huge problems with consumption taxes, though.

First, people don’t mind paying a tax they don’t see (automatic witholding), but they REALLY mind paying an exorbitant tax they do see (we’re talking about 20-30% sales tax, or at least those were the numbers we were throwing around in my tax class when Huckabee was still a contender for the 2008 nomination).

Second, the papers sited by Gambit_Lost above mention (and I don’t know how rigorous the academia here is, but…) sales taxes are next to impossible to enforce at high levels (high levels defined as 12%<) because there’s so much incentive to skirt the system.

Third and last, it KILLS tourism. Tourists don’t get to take advantage of the lack of income tax, but they sure have to pay the sales tax, which inflates the price by a hefty percentage- hell, if they wanted to pay those prices, they’d stay in Europe. This doesn’t matter in Texas- Austin’s the Music Capital of the World, but very rarely do we get foreigners. California and New York don’t necessarily see it the same way though.

In the UK, VAT of 17.5% is included on all purchases other than those deemed non-luxury. The sticker price in the store will include this tax so it is to all intents and purposes invisible.

Tourists can claim back the VAT that they have paid when they leave the country as long as they are taking the purchased item with them.

Tourism is huge business in the UK so not sure if your arguments stack up.

I guess the issue is with introducing the tax, in the UK it has been there for a long time so is just accepted. When they increased it to 17.5% 10/15 years ago there was a bit of an uproar.[/quote]

Hmm… you make good points.

37

[quote]Bill Roberts wrote:
Yeah, but taking only say one hundred thousand dollars a year instead of $150K per year from a doctor, or a million dollars per year instead of $2M per year from a man who has 30 employees in his business, constitutes “giving money to the rich.”

And that is just angering to many of those that do not produce goods or services worth that amount of money and thus do not earn that much themselves.[/quote]

I wonder why that is though.

There seems to be a hardwired assumption in the human psyche that economics is a zero sum game.

If that truly is that way, teaching even basic economics is always an uphill battle.

38

It also I think results from belief that others do not have any legitimate ownership of property or of their earnings: that in fact it all belongs to the government (or “society”) and government generously LETS these other people keep some of it.

So when your viewpoint is that s person who earned a large amount of money, say for the sake of having a figure $500,000 this year, is temporarily being allowed to have in his hands that money, but it is not his. If the government taxes him $200K, then they are generously GIVING him the remaining $300K.

If they cut his taxes to $150K, that means – to such a person – they are GIVING him an additional $50K.

Thus, the tax cut is “giving” money to “the rich.” Unacceptable!

Another reason of course is sheer nastiness, hating for others to have more than oneself, and many people, sadly, are this way. And vote.

39

[quote]Bill Roberts wrote:
It also I think results from belief that others do not have any legitimate ownership of property or of their earnings: that in fact it all belongs to the government (or “society”) and government generously LETS these other people keep some of it.

So when your viewpoint is that s person who earned a large amount of money, say for the sake of having a figure $500,000 this year, is temporarily being allowed to have in his hands that money, but it is not his. If the government taxes him $200K, then they are generously GIVING him the remaining $300K.

If they cut his taxes to $150K, that means – to such a person – they are GIVING him an additional $50K.

Thus, the tax cut is “giving” money to “the rich.” Unacceptable!

Another reason of course is sheer nastiness, hating for others to have more than oneself, and many people, sadly, are this way. And vote.[/quote]

Who are you responding to?

Is someone on my ignore list or something? I’ve seen you arguing this whole thread but I can’t tell who the fuck you’re talking to.

(Genuinely confused here <_<)

40

[quote]Beowolf wrote:
Bill Roberts wrote:
It also I think results from belief that others do not have any legitimate ownership of property or of their earnings: that in fact it all belongs to the government (or “society”) and government generously LETS these other people keep some of it.

So when your viewpoint is that s person who earned a large amount of money, say for the sake of having a figure $500,000 this year, is temporarily being allowed to have in his hands that money, but it is not his. If the government taxes him $200K, then they are generously GIVING him the remaining $300K.

If they cut his taxes to $150K, that means – to such a person – they are GIVING him an additional $50K.

Thus, the tax cut is “giving” money to “the rich.” Unacceptable!

Another reason of course is sheer nastiness, hating for others to have more than oneself, and many people, sadly, are this way. And vote.

Who are you responding to?

Is someone on my ignore list or something? I’ve seen you arguing this whole thread but I can’t tell who the fuck you’re talking to.

(Genuinely confused here <_<)
[/quote]

His first reponse was a general reply to the first few posts in the thread.

His second response was to Otep.

His 3rd response he quoted the person he was responding to.

His 4th response was to wreckless and several other who also reponded to wreckless.

His 5th response was to orion.

If this confuses you should you really be in here talking polotics?

V