isn't a flat tax just another scam like school vouchers? i mean just before it becomes law then would the rich

Question

just buy everything they need and put it in storage while the rest of us who live paycheck to paycheck have to start paying the tax imediately?

Answer 1

A flat tax is a scam, but it's highly unlike the rich would buy everything they need and put it in storage - because if I need a 2010 Cadillac CTS, they're not making them yet!

When tax laws change, people's behavior changes - for example, the US government thinks that home ownership is a good idea, so mortgage interest is subsidized. Canada, however, doesn't value home ownership, so you cannot deduct your mortgage interest, and most urban residents live in apartments.

The problem with a flat tax is that when certain deductions are removed, the market will flow - take away the mortgage deduction, and housing will take a worse battering than it is right now. What you will see is more underground income and elaborate schemes to handle tax avoidance - and remember, the people who vote on these bills are generally wealthy individuals, they do not want to cook their own goose.

Answer 2

Yes, the flat tax is a scam touted by the wealthy, as they are the ones who would benefit.

For a flat tax to be of any benefit it would have to be around 27% to equal the revenue generated by our current graduated rate system.

The ultra-wealthy have a marginal tax rate of 35% so it's easy to see why they LOVE a flat tax -- Gates, Forbes, and Buffett would put MILLIONS of extra $$$ in their pockets at the expense of the middle class and the working poor.

The average middle-class working schlub -- most of you reading this right now -- would see their total tax bill double or triple or even more.

The working poor, who generally pay little or no income tax, would be tossed in the streets as they could no longer afford rent and food with a 27% levy on their minimal income.

Anyone who thinks a flat tax is a good idea should pull out their latest tax return and figure it out for themselves. Take the total income section and multiply that by .27. Now compare that to the Total Tax line and see where you'd REALLY sit with a flat tax. Not a pretty sight, is it? Didn't think so!

Answer 3

Buying everything you need and putting it in storage is a strategy for coping with bad inflation. The flat tax means lower taxes for the rich than the progressive tax we have now. The flat tax is proposed by the publisher of Forbes magazine and I see no chance for it to pass in the current Congress. "Soaking the rich" by increasing the tax rate at the high end of the scale is more likely. That never raises enough revenue, however because there aren't enough rich people. The rates have to be raised on the middle class to make serious money for the government.
I remember back in the late '70's, when the top tax bracket was over 70%, a tax law professor told us it just didn't make economic sense to work hard enough to get yourself up in that bracket. you'd have just as much jingle in your pocket if you didn't work so hard.

Answer 4

I am having trouble understanding your question. If you mean a "consumption tax" instead of a "flat tax", I suppose your scenario is plausible although the few wealthy whom I know have greater endeavors than buying goods and putting them in storage.

With a consumption tax which, I think you are referring to, you and I will not sit down every April 16th or 17th this year and account for every dollar we earned and how we spent it and when we get our pay check it will have no deductions out of it.

Additionally if you are concerned about the rich not paying their fair share... as it is with over 10,000 pages in the tax code they have time enough and money enough to pay accountants to keep from paying income taxes... the criminal element pay no income taxes... the only people who pay income tax in America are the honest, hard working low and middle income citizens.

Think about it.

Jim Sharp
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