Taxes

The government has to pay for a lot more than just infrastructure. What about entitlements like Medicaid, Social Security, and Veterans' Benefits? what about economic stimuli (preferably Keynesian), and national security? Or is that also included in your 17% income tax? is that income tax a proportional, progressive, or regressive tax? What about property, gift, inheritence, etc taxes? how did you do the math on the 17% tax? did that take into account ALL individuals? what about the homeless or illegal residents? were they included in that? I think this idea needs a little more fleshing out before I can get on board with it.

I like the idea of a flat-tax, but where did the 17% come from?

The problem with our tax structure is that we, the people, dint really decide where are taxes go. There are areas in which the government will take the money and move it around. That is the fundamental flaw with this system. I believe there should be a straight forward list of subjects the government will pay for and support.

So lets take this on one side, the negative, and realize that the money we pour into the government does not always go where we think it does. Countless debates have forged on the spending of this money and if it is supporting the initial investment of the people. Regardless of the arguments, both pro and con of this spending, the government uses this money for one reason only. Power. This is good in some ways that they HAVE to support important institutions such as health, SS, infrastructures, etc.... But the looming negatives far out way the positives. For the simple reason that, our government is a paid business and owner.

If your are contempt with this, it is only because you perceive the positive more then the negative. Which is totally fine, but does not cover the fact, that it is not what this government was setup for. And for good reason.

So as far as changing the tax system? lol. I'm 23 years old and have no business trying to preach a "good" system. But....... I believe there should be a straight forward list of subjects the government will pay for and support. A smaller one at that. All else should handled by local government. People will give good reasons why it shouldn't, but again these are light considering the current. (A government, a few, should not control this much with money. It should be spread out with other institutions. With law and foreign policy.)

Heres a good question. Why can't we allocate are taxes?
I would criticize my own question by saying that alot of people are uninformed of our country and economics. Is that reason to not let them decide whats important to them? I would say no. If anything it would involve the general population. And on the idea that we elect a single Representative to express the people's will, then allocating taxes falls under the same category.

Unfortunately, We are a super power. This is bad for the people's right to decide. A good example would be our military. People dint like war. This is human nature. Countless evidence supports this. Yet we have the largest military institution in the world. Why? To protect and also to dictate. It gets deeper into philosophy when you consider that no country is right in war. Somewhere a country did wrong, and another country does the same thing against that first wrong doing. ignoring why it should or be shouldn't be done, thats what it is. And our government Is the head of that philosophy. Because of our taxes.

Allocating taxes would be huge step forward if it was recognized nation wide. in fact i believe you are allowed to do so if you choose. Interesting.......

While this may seem "fair" because it applies an equal measure to everyone, the fact remains that flat taxes are well known to disproportionately burden the poor and benefit the wealthy.

People who are wealthy have myriad ways to shelter income from tax, such as retirement accounts, itemized business expenses, mortgage payments, charitable contributions, employer-based flexible spending accounts for medical and child care expenses, etc. So their effective taxable income may be far less than 17% of their actual gross income. Poor people, on the other hand, don't even remotely have access to ways of sheltering tax money. I mean money you spend on food, rent, utilities, and transportation is NOT tax deductible, so if you're living check to check you're actually paying a HIGHER tax burden (as a proportion of your gross income) than someone rich.

So as part of your plan, you'd basically have to eliminate tax deductions. And the problem doing that is it's tax deductions that 'incentivize' people to invest in their business, to contribute to charity, to buy houses instead of renting, to invest in retirement, etc. So you're disincentivizing people to be responsible with their money if you eliminate tax deductions.

Finally, remember that 17% to someone who earns $50k a year is $8500, which leaves them with $42,500. But 17% to someone who earns $1 million is $170,000, leaving them with $830,000. In other words:

1) the vast majority of the money in this country is possessed by a small minority of wealthy

2) a tax rate that is trivial to someone wealthy could impoverish someone poor

I don't agree with Aedes points, but his conclusion is correct.

Flat taxation is regressive as dollars at different levels of income are worth more or less because of decreasing marginal utility.

Graduated taxation is probably the fairest income taxation.

This is all right when considering the tax system as it currently stands. Most people who do propose the flat-tax system though, include the stipulation that we remove the deductions/credits. The percentage (ie 17%) IS what you pay for your total income. There is no hiding or deducting from that percentage. Part of the logic behind this is that the wealthy will be more willing to fairly report their income (and more unable to actually hide money through accountants and lawyers) when they know that they are paying the same percentage as everyone else...



Investing in business, buying a house over renting, and investing retirement is all pretty well "incentivized" on its own. You don't need deductions for people to realize that say, building equity in a home is better than renting out an apartment. This argument seems to be legitimate only if you take the view that people make bad choices, and they need government to tell them what to do...like with social security.

If you want to talk about incentives, how does a progressive system of taxation "incentivize" investment? We tell you it's great to start a business and invest, but when you do, you get bumped up to a higher tax bracket...



Isn't this how it is already? We have such a "high" corporate tax rate in theory, yet with the current system, large corporations might be de facto paying as little as 2-3% in taxes after their lawyers and accountants get done with it...

Something like 40% of the population pays no taxes whatsoever. The top 10% of income earners pay for most of the tax bill.

Another big thing about the flat-tax idea, is that people hope it will reduce a lot of waste and corruption, in business, as well as in Washington. Paying a flat percentage of everything could ideally eliminate a lot of wasted spending on the IRS in examining all of these deductions and paying quite a bit in legal fees just to make sure that our current system isn't being taken advantage of. When both you and the government know exactly what you're liable for in taxes, it should be a very straightforward process; you pay what you owe, and you're fine, or you don't, and you get prosecuted. Right now we waste a hell of a lot of time and money playing cat and mouse with people and their taxes...and corruption of course is still rampant. The tax audit rate under Bush has been incredibly low (guessing this will change with Obama now).

i agree, tax dodging is incredibly easy these days, but lets say that somehow a total system overhaul was achieved. we as a people are rapildy moving toward an electronic currency (something ive been dreaming of since the age of 14), something the government could actually keep an eye on and no matter how many offshore accounts and hedge funds you have, you would still show up on the IRS's records, but not only that, it may sound hardhearted, but such incentives as tax breaks for charity donations need to stop, all they do offset the generosity of one with an increased burden on everyone, besides, the entire principle of charity is self sacrifice, so if you choose to engage in it, you shouldn't be making any money off of it. but such tricks will always come into play, the current system however, is in fact too weighted towards the poor, meaning that with a little creative bookkeeping, even the CEO of halliburton can appear to be a member of the lower middle class and get an incredible tax break, a flat tax would eliminate that incentive, people would still hide money, but the pressure would not be so great, and when the pressure is off, that is when the money launderer usually screws up.

(another reason i dream of a flat tax is that ever since i started helping my parents do their taxes, i look at the bible sized book of charts and graphs and think oh so quietly to myself "a simple function would make this a lot easier and probably more accurate")

also, i refuse to support a system based on the capability of the rich to support more, all it does is provide incentive for them to invest their resources in jamaica and switzerland where the irs cant find them, then they not only pay less, but even legally qualify for the poor people benefits. read anything by ayn rand, and you'll understand where im coming from

third note, the aforementioned incentivizing is what got us into the mortgage crisis

The thing is, by placing a flat rate, you are suggesting exactly that. Think: What's 20% of one billion compared to 20% of one million?

proportionally, there is equality, even if physicall there are huge differences

The huge differences are what matter. A 20% tax on someone netting $10,000 a year leaves them with $8000, and that extra $2000 is critical to them. How is that fair when the same tax rate leaves someone with $1 million with $800,000 left over?

would you demand that those who have more pay proportionately more. Their only crime being that they can bear it. then the government becomes a burden rather than a service, also, you are making the system inefficient and overly complicated for the sake of a minority

also, taxes are not about taking away money, it is not about how much is left for personal use, they are about revenue raising, so it is about how much the individual contributes

The government doesn't stop being a service just because it is a burden. Most services come with a burden, a cost. Further, to be taxed at all is to be burdened in some way by the government, no matter if you pay the least amount of taxes or the most.

Also, having a progressive tax scheme is no more inefficient than a flat tax. More importantly, progressive tax schemes exist for the benefit of the majority - you implement progressive schemes for the majority, not the minority. The minority would be the wealthy.



And progressive tax schemes allow the government to raise revenue without unevenly distributing the tax burden; the wealthy can afford to pay more so they do. A flat rate is a greater burden upon the majority, while a progressive tax is a greater burden on the minority. Insert a bit of utilitarianism, and progressive tax schemes are clearly preferable.

but simply taxing the wealthy more on the grounds that they can take the most fiscal punishment is not only ethically wrong, it is illogical and provides the antithesis of incentive

See, I disagree completely. If anything, flat taxes are unethical because they disproportionately burden those who are least able to afford the burden. Whereas progressive taxes are ethical because such policies have some compassion for the less fortunate.

As for incentive... I don't buy this argument. I understand that progressive taxes do not provide extra incentive to make money and be wealthy, but honestly, do we need extra incentive to make money and be wealthy? Probably not. The lifestyle alone is plenty of incentive.

The problem of disproportionality associated with a flat tax system might be alleviated by creating a system of deductions at the base. For instance you could create a 20% flat tax system with a variable deduction maximized at 2K. In effect, off course this would not really be a pure flat tax system.

elaborate, im interested in anything that could alleviate the suffering of the extremely poor without completely corrupting the system, keep in mind though that the more deductions and exclussions you add, the more topheavy, inneficient, and riddled with loopholes the system becomes