do you want a flat tax rate?

Answer 1

No. Ever wonder why the legend of Robin Hood is so popular? Because it appeals to our sense of fairness. The people who propose Flat Tax schemes cloak their plans in visions of Robin Hood, when it's actually the Sheriff of Nottingham that's running the show.

It IS unfair to poor people. I WANT rich people to pay more. Most flat tax schemes tax wages only. I WANT rich people to pay tax on their investment income. Any economist will tell you that it's the divide between the haves and the have-nots that leads to social unrest. Progressive tax systems aide the poor in bettering their circumstances (by allowing them to keep more of their earnings), which helps reduce the gap between rich and poor, thus keeping our society on an even keel. If you're smart, you'll look beyond your own financial circumstances and instead look at the country as a whole; like economists have known for centuries, you'll find levying taxes that burden the rich without over-burdening the middle classes or the poor are the best option.

The other argument is that it's "easier". Wrong there, buckaroos. I'm an accountant, and guess what? I'll make just as much money after as I will before. Why? Because flat tax schemes only address the computation of the tax (i.e., a flat 10% vs. a graduated 0 - 35% depending on net taxable income). They most definitely do NOT address the question of "What Is Income?"

Here's some cases which will be just as complicated after as they are before:
* Business tax returns - self-employed, corporations, & partnerships are all equally complicated under a flat tax scheme as they are under a graduated tax scheme.
* Multinational issues - A guy moves to or from a country mid-year, how do you tax his income? A company has clients in Canada, does Canada get to tax that income or does the US? How does the treaty change this? Coca Cola has branches all over the world. Is it a US company or a global one? Who has first dibs on taxing the income? Who gets next?
* Your grandfather dies leaving you the shoe-repair business he began in 1930. When you sell it, how do you determine what percentage of the sale is tax-free basis?
* Your kid runs a lemonade stand and makes $1,000 over the summer. You (not your kid) spent $900 on lemons. What is the taxable income?
* You buy a bunch of stuff and sell it on Ebay a year later at a substantial profit. Are you a professional trader (i.e., running a small business)? Or is this a capital gain (sale of investment assets)? Should you get tax breaks for running a business? Or the tax breaks for sales of capital assets?
* You own a holiday home in France which you let out three months a year. You use it yourself for two months. Is it a personal home, an investment property, or a business property? How much of the expenses of operating the holiday home can you deduct? You've already paid tax in France on the income, how do you account for it on the US return? When you sell it in France, you pay tax on the sale to the French government. Can you use this to offset your US tax on that sale?
* Which of these will be considered income? Alimony? Child support? Welfare benefits? Unemployment cheques? Workman's compensation? Disability pensions? Regular retirement? Police/Fire pensions? TIAA/CREF pensions? Lottery winnings? Casino winnings? Racetrack winnings? Sales of primary residences? Stock sales? Interest? Dividends?
* Which of these will be allowed as deductions, exemptions, and tax credits? Earned Income Credit? Mortgage interest? Foreign taxes? Cost of laying your bets? Cost of goods sold? Cost of daycare? Tuition? Medical bills?

Don't kid yourself. Your own tax return may be easier to figure out, but for wide stretches of the population, computing "What Is Income", "What Kind of Income Is It", "Who Gets To Tax It First", and "Allowable Reductions" will be just as difficult under a Flat Tax scheme as a Graduated one. I'll still have a high-paying job, and you'll still be paying someone like me to figure out what you owe.

When you combine that with the fact that Robin Hood is still a hero today, you've got a bad tax idea.

Answer 2

A flat tax would be fantastic! In addition to previous comments, it would also save Americans millions of hours and dollars each year by boiling a personal return down to a single short form or postcard - which is all such a tax would warrant.

By eliminating many tax shelters, a flat tax would also close non-investment loopholes for the very wealthy, resulting in a fairer tax for everyone.

Most flat tax proposals also incorporate a lower overall tax, which would generate more federal revenue, not less, because lower taxes always spur investment and job creation. The government still gets "its" money, but it comes from more people and businesses who get to share a bigger piece of the pie.

Regarding the poor, flat tax systems do incorporate a minimum threshhold, which would be XXX% of the poverty level. What they don't do is progressivley weight the tax rate against the wealthy. Again, more money at the top translates to more investment into the economy. This means better job opportunities and higher wages from the bottom up. The only disadvantage is that politicians cannot claim credit for raising taxes to fund social programs that ostensibly "help" their constituents by giving them just enough so-called assistance to earn a vote in the next election.

Unfortunately, it's far easier to engage in class warfare and blame the rich than it is to educate the public on sound economic policy - especially through the filter of the media and an ever-decreasing American attention span.

Answer 3

A flat tax rate would be the most fair taxation system. It would also be much easier to understand.

The reason that the rate would not be unfair to the lower waged is that a tax rate is a percentage. The more you make the more you pay

Example: Tax rate = 10%
Wages = $100, then taxes = $10
Wages = $1000, then taxes = $100

The more you make the more you pay. The reality is that our system is really moving towards a flat tax rate anyway because of the AMT (alternative minimum tax). Because of the way the code is written more and more people are falling under the AMT, which is a flat tax rate. (and raising more tax funds for the government because it is harder to cheat).

Answer 4

Oh yea a flat tax would be great. But first a flat tax on corporations. An extra charge for corporations that sell here and do not manufacture here. Way too many loopholes in that area, fix that first! For the rank and file tax payer a different approach. I remember seeing a copy of the first income tax from 1911 I think. Those that did not earn $10,000. did not pay anything. Considering the average income back then that was a real deal. In the same sprit those that earn at or less than what is considered the poverty level should not pay anything.

Answer 5

Yes I want a flat rate tax. I know the argument about how it would not be fair to the poor but it isn't fair to the middle class now. The poor get more than their share of the use of the tax money, surely we can come up with a minimum that would be affordable for them. Whatever we do, we have to eliminate the loop-holes for the rich.

Answer 6

The reason flat tax rates are unfair to the poor is that it takes away a greater percentage of poor people's income. You can see by doing the numbers. If you have a family of four with total household income of $50,000.00 and they are taxed at 25% they will have to live on $37,500.00 per year. If they live in northern Maine or Minnesota and have to pay high heating oil costs along with the mortgage, property tax, car payments and groceries, they will not have a lot left over, if anything. But if you take a wealthier person who earns $10,000,000 per year and they paid 25%, they would have only $7,500,000 to work with. They might have to get rid of one of the Condos in Paris or Malaga or downsize their housekeeping staff. A progressive graduated income tax without loopholes but with an initial liability amount of $35,000 per household (below which no taxes are due) would be fair for everyone and it would still provide for necessary government revenues to build and maintain the infrastructure that is now in a sorry state as well as provide for national defense.

Answer 7

If we had a flat tax rate I would have nothing to do on those late nights that I stay up and answer tax questions on this forum!!

Answer 8

Str8Shoot... is right about saving Billions of hours and dollars a year. Imagine what could be accomplished if all the tax attorneys and CPAs applied their efforts to productive activities.

Answer 9

No. I want a national sales tax imposed on every financial transaction within our borders, no exemptions, no exclusions, no exempt entities, no exempt persons, no excluded goods or services, and no deductions. Then the tax rate would be very low.

Answer 10

No it would be unfair to the lower waged.

Its right that there should be a minimum income threshold before tax and that tax increases with income.