Why are people so big on the flat tax?

Question

A question was posted about tax reform, and all the responses that got "thumbs up" suggested the flat tax, and all the responses that were rated poorly suggested raising taxes for the super rich. Do people feel this way?

Before you think the flat tax is so wonderful, consider this: if you tax everyone at the same percentage, you are actually taxing their DISPOSABLE INCOME at different percentages.

If the flat tax was 10%, and I made $12,000 a year, I would be taxed $1,200. Doesn't $1,200 seem like a lot of money to someone who is only making $12,000? Every two weeks, fifty dollars is taken out -- money that is badly needed to pay groceries, for gasoline, etc. 100% of my lost tax money would be reducing what I could spend on life expenses, not luxuries.

However, if I made $120,000,000 ($120 million a year), I would lose $12,000,000 in taxes. How much of that twelve million will be going to pay groceries or fill a gas tank? Probably none. It would all be vacation/luxury money.

The super-rich should be taxed at far higher rates, because filling a gas tank may take 5% of a poor person's paycheck, but 0.000000001% of a rich person's paycheck.

We are running a deficit while big corporations are creating loopholes to not pay their fair share.

How do views like this get so many thumbs down on Yahoo! Answers? Is everyone on her super rich? (If so, I really missed that boat!). I don't understand why everyone is so quick to defend the super-rich.

If you increased the super-rich tax burden by 1%, you could relieve taxes on the middle class by SEVERAL PERCENT, since it's the same amount of money.

When you are told the flat tax is "fair", it's because it's amazing what the Republican party and the super-rich can have you believe!

By the way, taking out that twelve million still leaves the rich person with $108,000,000 ($108 million.) Would it be so wrong to tax them $8 million extra, and use that money to reduce the tax burden of FIFTY THOUSAND middle class families by $160 each?? I know a lot of middle class workers that could use an extra $160 to get by! And the rich person still gets to keep $100 million of his $120 million!

"if you are successful and feel it your responsiblity to feed the world, leave." -- Wesley

America. Where we don't accept the feeding of starving children.

Wow.

"The rich didnt get rich by wishbone. They got there from backbone."

Ever heard of "old money"? Gee, I didn't realize how hard Paris Hilton had it. Or Jennifer Gates, daughter of Bill and Melinda Gates.

OR THE MILLIONS OF SONS AND DAUGHTERS OF INCREDIBLY WEALTHY PEOPLE.

Puh-lease.

Well said, whoever said "the government should not tax away one's ability to support themselves."

Answer 1

People think a "flat tax" would save them time and simplify the tax code, but think about it for a second: if you have done your taxes recently, how much time did you spend getting all your records together, figuring out what your income is, and what you can deduct? Probably a lot.

Now, how much time did you spend figuring out what bracket you are in, that is, how much tax you owe on the amount of income you have? Probably only a few seconds, you just looked it up in a table.

And there's the problem: a "flat tax" means that everyone pays the same percentage of their income, that's why it's called "flat" instead of "graduated". But most of the work in doing taxes is figuring out what your income is in the first place, and having a flat tax wouldn't change that.

So, if you're poor, with a flat tax, your taxes would go up, big time. If you're rich, guess what, you would get a huge tax break. Which of course is what most of the advocates are after.

Answer 2

I like the flat tax idea because it is the only fair tax option. I constantly hear that the rich do not pay their fair share. Well, truth be known, the rich pay almost all of the taxes. The richest 5% pay something like 80% of all income taxes while the poorest 50% pay about 5% of the taxes (these numbers are not exact, but are close enough to convey the message). Also, it is the less wealthy that use the majority of government services. Yes, the super rich pay taxes from what some may see as surplus money, but they pay big time already. With a flat 10% tax with no deductions, the rich would still pay big time (using your example, $12 million vs $1200), but everyone would be paying for a share of the cost of government. That is only fair.

It seems as though the non rich want the rich to pay for everything and exempt themselves from any obligation of paying for the government services they receive. It is a classic case of "they have more than me, so they need to give some of theirs to me". We must each make our own way in this world, and as you know, some people are more fortunate than others. Why must we penalize those who are successful? Is it for revenge or is it merely jealousy?

By the way, if we look at the world's income level, that $12,000 per year salary would put you in a category of being rich. Using the mentality that only the rich should pay taxes, you, at $12,000/yr would be required to pay much more than 10%.

One more thing, a 10% flat tax would require me to pay more than I pay now. But it would make my life much easier because I would not have such a hassle preparing my taxes. And, it is only fair that I pay the same percentage as everybody else.

Answer 3

Hello dunaja:

People love the sound of simplicity.

Probably all of the flat tax promoters are like myself and don't mind paying taxes as much as much as we dislike filing tax forms.

And they believe that many people avoid paying taxes by claiming mountains of deductions, which would not be allowed under flat-tax system.

Also, many people in this country, even poor people, have sympathy for the rich because the income of the rich is taxed at a higher rate. And they don't like that even if they are poor.

Some people may be sympathizing with the more wealthy because they believe that once they cross into a higher income bracket then all of their income is taxed at a higher rate.

Somebody please tell me if you think that I'm mistaken, but I believe that income up to a certain amount is taxed the same for everyone.

When a person's income crosses into the next tax bracket then only the income that exceeds a certain amount is taxed at the higher rate.

Maybe, I believe, that if some of the supporters of the flat tax would think about that then maybe they would be more supportive of the current progressive tax system.

Answer 4

Whoever posted the additional details two hours ago, taking another eight million dollars of the 120,000,000 earner would not be abiding by the flat tax and creating a loophole to benefit yourself.

The people who seem most concerned and angry at our current tax situation should stop and think about some of their arguments. How long does it actually take to:
Go to the post office and get you w-2 from your employer. While there get your 1040.
get a calculator at wal mart
go home
fill in the blanks
mail it in.
If you feel like everyone owes you something, or everything isn't fair. This will seem like a burden. If not stop complaining,
the average person making less than 40k paid $0 income tax in 2005. Thank you EIC.

Answer 5

The reason some people support the FLAT tax is becouse they do not either beleive or understand that history will repeat itself. A flat tax has been implemented on a number of times, only to be changed later. Either the percentages will be modified or the limits get adjusted OR BOTH. Then there are changes to what is taxable. The result to date is the 60,000 plus pages of the IRS tax code.

The only real tax reform that will be effective is a major change in the base of what gets taxed. The FAIRTAX does this by changing the base from "income" to "consumption". It uses a single FLAT percentage for everyone but it applies to all new retail purchases and services. There are no exemptions. The goods aer only taxed one time (new), After that, they are not taxed. Individuals have the power and control on how much tax they will pay by 'HOW THEY SPEND THEIR MONEY". Politicians lose control and cannot play any "class games" pitting one group against another.

There are NO taxes on businesses. This is because the business does not pay taxes NOW. The tax that is charged to a business is merely just another cost of doing business. They are passed on to the customer in a higher price. The FairTax helps keep prices down.

Answer 6

It depends on what the minimum exemption was and how it was scaled for inflation. And also on whether there are other sources of tax revenue besides income tax. But I believe the answer is yes, as long as the resulting government programs in health, education, infrastructure, and energy were targeted towards lower income households. To give a concrete example, both Iceland and the Czech Republic have flat taxes but they also have universal healthcare and basically free university education.

Answer 7

I favor the flat tax mainly because of the very large inefficiencies in the current tax system. An extraordinary amount of effort is wasted in searching for tax loopholes, in paying for CPAs and tax preparers because the whole damn thing is so complex, and of course we have to pay for a larger IRS staff because of the complexities as well. There is a lot of unfairness in the little fine print that politicians put in for their favorite industry/company/state/union/etc.

It is correct that we might have a flat tax that is then corrupted in the same sort of ways that the current system is corrupt. But that also means that *at worst* it would resemble what we have now.

I have no patience with those who simplify tax policy down to "soak the rich". First of all, they always seem to define the rich as anyone making more than themselves. Secondly they have no grasp of the importance of incentives in the free market system and how that has made countries with free markets so much more economically strong than the rest. I actually heard one of these folks propose a law that would require everyone to be paid, as a minimum wage, at least the median wage.

"Where everyone's salary is above average..." Sheesh.

Answer 8

The benefits I see to the flat tax are:
1) A tremendous savings of time. I'd guess that collectively Americans spend over a billion hours per year either trying to calculate how much they owe or trying to figure out ways to pay less. A flat tax would be simple and easy and a lot of good useful work could be done with all that extra time.
2) It would be harder to cheat on. Today, people come up with all kinds of schemes to avoid paying their share of taxes - under-reporting income, over-reporting deductions. With a simple flat tax (and especially a sales tax collected by someone else every time they buy something), it would be a lot harder to cheat.

That said, I agree with you that a straight flat tax is not fair to lower income people. One thought I had on how to compensate for that is to have the government send rebates to every legal American citizen - enough to offset the taxes paid on the basic necessities of life. That way people that barely have enough to get by would get a rebate for every penny they paid. Those that have more would get a rebate enough to cover a basic lifestyle, but not enough to cover the more extravagant lifestyle that they're likely leading. And wouldn't that be an interesting concept - the IRS sending you money :-)

Answer 9

Probably they have flat heads and still think the Earth is flat. You point out the biggest flaw in this in the part after your initial question. Now do you know why the rich and the Republicans think this is good? Anything the rich or the Republicans think is good, especially regarding taxes, run from it. Run fast and run far. The interest of the middle class is the last thing they have at their tiny black hearts.

Answer 10

Because it is simple and easy. What they don't realize is how regressive it is.

Imagine a 10% tax. If you make $20k, you pay $2k. If you make $40k, you pay $4k. Sounds easy.

However, you have to have a minimum income to feed, clothe and house yourself. It's much easier to do that with $36k than with $18k. If that minimum is $19k, then the poorer fellow is taxed below his ability to suport his family, will the second fellow has plenty to spare.

The government should not tax people's ability to support themselves. The only way a flat tax would work is with an very high personal exemption and family exemptions, and a high tax rate. Say $40k exemption and 50%. Otherwise, the poor will be starving while the rich get huge tax breaks.

Like Bush would ever let that happen!