Flat tax vs progressive taxation.

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from the December 01, 2003 edition

US moves - quietly - toward a flat tax

Without much public debate or even awareness, the United States is heading toward an almost flat tax. That means the middle class will pour nearly as large a share of its income into tax coffers as millionaires and billionaires do. Throw in another tax cut along the lines of the two successfully supported by President Bush, and the middle class could actually pay a little more.
That change would reverse decades of US policy and constitute a major victory for some conservatives who have long advocated a flat tax.

Flat tax vs progressive taxation what is your opinion?

http://csmonitor.com/2003/1201/p13s01-wmgn.html

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Taxes largely end up either paying for the military, warehousing federal prisoners or paying for the transportation infrastructure. Regulation, despite what is needed, uses no significant amount of the federal budget.

The wealthy benefit most from public services. Our military assures the stable, peaceful society in which they profit. Federal sentencing laws are so slanted against the poor, that a reasonable argument can be made that those laws keep people off the street who are unpleasant to the wealthy--those whom they would rather not see or hear. State and local taxes most definitely go into public services, as well as a goodly sum of Federal revenue sharing.

The wealthy benefit most from all that Federal and State and local governments do to make society safe and profitable. Let them pony up for the services which help assure their wealth.

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Setanta wrote:

The wealthy benefit most from all that Federal and State and local governments do to make society safe and profitable. Let them pony up for the services which help assure their wealth.

they do with a flat tax. the question isn't whether or not the wealth should pay their share, but whether or not they should pay a disproportionate share.

the income tax under any breakdown makes no sense to me. we should have a federal sales tax instead.

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Sales taxes are regressive as hell . . . a pair of shoes for one's child cost a proportionately higher amount of a working class man's income in sales tax than it does for a wealthy man.

Your response seems to me to indicate that you completely failed to take my meaning.

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I would also take note a simple fact, which bites in the ass proponents of either system. This is a democracy. If the majority of voters choose leaders who increase high-end taxes, and reduce low-end taxes, then so be it. If the majority of voters are seduced in to supporting an administration which gives the wealthy campaign contributors big tax breaks, they have gotten what they deserve. At that point, and from that angle, end of argument.

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I've come to the conclusion that the middle class pays essentially all the taxes that have to be paid. The poor can't pay taxes -- the rich won't pay taxes.

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Setanta wrote:

Sales taxes are regressive as hell . . . a pair of shoes for one's child cost a proportionately higher amount of a working class man's income in sales tax than it does for a wealthy man.

Your response seems to me to indicate that you completely failed to take my meaning.

of course a sales tax would be much more complicated that simply a flat across the bard sales tax. there would be exceptions or credits for necessities (food, clothing...).

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ye110man
A national sales tax would hit those least able too pay the hardest. Consider that people whose income is too low to pay taxes under a flat tax or progressive tax plan would under a sales tax plan be paying taxes.

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au1929 wrote:

ye110man
A national sales tax would hit those least able too pay the hardest. Consider that people whose income is too low to pay taxes under a flat tax or progressive tax plan would under a sales tax plan be paying taxes.

you're right. that is a problem. many advocates of the federal sales tax incorporate some sort of tax return into their plans. for example, a check for every household to cover the cost of the sales tax up to the poverty level. so the poor, in effect, would have no tax burden. the advantage of that over an exception on necessities is that it would eliminate the upward price pressure on those items.

the advantages over an income tax are numerous. it would encourage savings, reduce tax evasion, and eliminate the complicated annual income tax filing. currently $5.20 out of every $1000 you pay in taxes goes to the irs to collect it!

most economists favor some sort of consumption-based tax. plus it just makes more sense being taxed on your purchases rather than your income.

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au1929 wrote:

ye110man
A national sales tax would hit those least able too pay the hardest. Consider that people whose income is too low to pay taxes under a flat tax or progressive tax plan would under a sales tax plan be paying taxes.

A tax system that included people paying no taxes could hardly be described as a a flat tax, could it?

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roger
Even a flat tax system has a floor. Income below that floor would pay no tax.

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ye110man

Quote:

most economists favor some sort of consumption-based tax. Plus it just makes more sense being taxed on your purchases rather than your income

.

You must realize under that proposal lower income individuals in many instances will be paying a greater percentage of their income then the rich.

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Everyone should pay taxes. How else will they feel they have a stake in their government's actions.

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au1929 wrote:

ye110man

Quote:
most economists favor some sort of consumption-based tax. Plus it just makes more sense being taxed on your purchases rather than your income
.

You must realize under that proposal lower income individuals in many instances will be paying a greater percentage of their income then the rich.

with the rebate, low income individuals would have little to no tax burden. those at the top can no longer avoid the tax burden. the middle class would benefit by being able to take their entire untaxed paychecks home.

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ye110man
You have the poorest of the poor paying sales tax that they have to wait to get back at some future date as a rebate. These people live from week to week and every penny counts they can't wait for a rebate. In addition how are they to determine the amount of this rebate. Do they keep records and submit them at end of year? Not realistic?
What I said about the poor holds true for the middle class they could end up paying a greater percentage of their income in taxes than the rich. This scheme it seems would benefit the wealthy the most.

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ok,

federal poverty line is around $18,000 for a family of 4. say that the federal sales tax is 20% (just to keep calculations simple).
each month starting on the day that the new plan starts, every family of 4 in the US would receive a check for $300 (($18,000 x 20%)/12).

The National Sales Tax: Who Bears the Burden? by Gilbert E. Metcalf
http://www.cato.org/pubs/pas/pa-289.html

Quote:

When I examine the change with a universal rebate based on poverty thresholds using the annual incidence method, the results indicate that the plan is still much more regressive than the current system. The average family in the lowest income decile would see its tax liability rise by 41 percent, while the wealthiest households would see their tax liability fall by almost 6 percent.

Quote:

The story changes dramatically when I rank people by lifetime income (see Table 6). Now there is no clear pattern to the change in average tax rates. The change, a remarkably close fit to the current income tax distribution, ranges from a decrease of 2 percent (decile 8) to an increase of 2.2 percent (decile 1). Ranking households by lifetime income, the Suits Index for the sales tax with rebate (0.054) is nearly the same as for the current income tax (0.068).

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au1929 wrote:

What I said about the poor holds true for the middle class they could end up paying a greater percentage of their income in taxes than the rich. This scheme it seems would benefit the wealthy the most.

In most of the proposals for a sales tax based system "necessity" type items are tax exempt. You wouldn't pay sales taxes on things like food, shelter, clothing/furniture items under a set $$ limit, medical/dental care/supplies, etc..

That pretty much eliminates the tax from applying to the low end of the income scale and reduces the liability percentage on the middle income. Because of those exemptions the tax that does remain ends up being higher (i.e. an 8% sales tax instead of 5%) and ends up being paid almost exclusively by those at the higher end of the "middle income" scale as well as those that are "well off".

The problem with those proposals is they fall well short when tax revenues are needed most. When times are hard and people rely on the government more tax revenues are also at their lowest so you'd see (IMO) large swings in government budgets between huge surpluses and huge deficts.

IMO, there is no "one size fits all" tax system that works. I do think a 3 tier system based on Income taxes, sales taxes and "User fees" that is better structured than our existing taxes could work though.

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The "Fair and Progressive" breakdown of the U.S. Income Tax burden according to 2001 IRS Figures:

The top 50% of wage earners pay 96.03% of ALL Federal Income taxes collected.

The top 10% of wage earners pay 64.89% of Federal Income taxes collected.

The top 1% of wage earners pay 53.25% of Federal Income taxes collected.

So precisely WHERE is the "progressiveness" in that system?

Who exactly is paying their "fair share" and who is getting out of paying at all?

I love buzzwords like "progressive", it makes people believe that it just can't be a bad thing.

It is class envy and wealth discrimination made legal.

Think about how much of your "fair share" you are paying next time you fill out your 1040 form.

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Federal
Progressive in this sense only means the percentage paid is based upon your income. The Greater the income the higher the percentage.

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Federal

Quote:

The top 50% of wage earners pay 96.03% of ALL Federal Income taxes collected.

The top 10% of wage earners pay 64.89% of Federal Income taxes collected.

The top 1% of wage earners pay 53.25% of Federal Income taxes collected.

Have you any idea how the percentagers quoted relate to percentage of the wage earning population.

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Flat tax vs progressive taxation.

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