Is there any case whatsoever for a flat tax?

[Lone_Wolf_Moderate]

Meaning, is their any scenario in which a flat tax could be economically viable? (i.e. eliminating tax loopholes, etc).

[dogman]

1. For FICA, yes.

Remove the cap so the wealthy don't pay progressively less.

[BlueEyedSon]

2. "Economically viable", sure. Fair and/or moral, no. nt

[Dr.Phool]

3. Sure there is

If you happen to be rich. If not, you lose.

[Gothmog]

4. Flat Tax proposals are thinly disguised tax cuts for the rich

Every major flat tax proposal ends up being a massive tax cut for the rich and a shift of the tax burden to the middle class. There is no way to justify a flat tax.

Progressive taxation is a good idea. The fact that the repugs hate the concept of progressive taxation is enough justification for the fact that this is a good concept for me.

[BlueEyedSon]

6. Between loopholes and cap gains, we have a defacto flat tax.

[Lexingtonian]

5. historically

to the extent that I can recall, flat taxes tended to be put on goods and irregularly levied during wartime emergencies. The wartime emergency rationale was that everyone's stuff was equally at risk, and thus a socialism was warranted.

As a peacetime rationale it's incongruent with the facts. Progressive income taxes reflect taxation not just differential amounts of wealth but differential amounts of social privilege, i.e. access, to wealth. Progressive taxation is an enforcement of duty (or service) on those with privileges.

What flat taxation in peacetime means is that social privilege has no duties or service to society enforced on it. It means entitlement, i.e. lack of reciprocity for social privileges.

You could see progressive taxation as enforcement of the social contract, because privilege is rightfully conceded to individuals in return for service. In times of no crisis the privilege of high income is not revoked in the absence of personal service, as a practical matter, so progressive taxation amounts to the social token of the reciprocity agreement- some of the wealth is returned to society because no commensurate service was delivered.

Flat taxation thus has a social meaning of greatly reduced obligation of the high status and low status people to each other. As the high status people see it, taxation just becomes an insurance pool for both and a competition to abuse it develops, absent the contractuality for privilege/service.

Economically, all kinds of stuff can be argued. What is really at stake politically is the obligation structure of society.

[mcscajun]

7. Economically viable? Yes. Regressive? You Bet Your Ass.

A flat tax will always hit the poor hardest.

[RaleighNCDUer]

8. It doesn't seem to me that would generate quite enough revenue.

How about a flat tax of, say, 32%, starting at $20,000. But that would mean a person making $20,500 would take home less than the person making $19,500. So we give them a break, an between $20,000 and $26,000, let them pay only 12%. Then between $26,000 and $34,000 they pay 18%. Between $34,000 and $44,000, 27%. $44,000+, 32%.

That's a flat tax I could live with.

[benevolent dictator]

13. If you paid the 32% on the extra $500 instead of the whole $20,500

then it could work.

My dad has always said that people should get enough to live on (say, the first $20,000 per person in a household) tax free, then after that it could be a flat tax, and it wouldn't matter how much because everyone would be gauranteed at least enough to live on.

So if you are a single person making $21,000 per year, your taxes are $320. If you are a family of four making 180,000 a year (for the sake of easy math. Yay easy math!) your taxes would be $32,000 - but you would still have 148,000 left.

[fasttense]

9. I would go for a flat tax if the repukes weren't establishing it.

They will find a way to steal my middle class tax and give it to the rich just like they are doing now. Flat taxers think there are no loop holes, yeah right. If there is a lying, cheating repuke involved in this you can bet your last tax dollar, he will find a way to turn our money over to the wealthy.

[dcfirefighter]

10. A 'flat tax' with an exemption

isn't flat at all. It's progressive. How progressive it is depends on the amount of the exemption and the rate of the tax.

Another poster mentioned that we have a defacto flat tax as it is, with payroll taxes, AMT, loopholes, and dodges. There are 'flat' taxes that would be more progressive than existing taxes.

Regardless, the selling point behind most proposed tax schemes is ease of compliance and enforcement, so that our economy doesn't spend $X Billion a year in tax compliance and collection - - non-value added processes if there ever were one.

I personally think that as long as we are taxing incomes, jobs, wages, etc., we are relatively doomed. Most progressives become deaf after you mention eliminating the income tax.

I prefer taxing wealth. A flat tax on wealth would be acceptible.

But when you look at the chain of production of wealth, much wealth is produced by normal folks working in factories, or behind desks, or wherever, by folks outside of the top 1% elite. A tax on yachts puts a lot of blue collar boatbuilders out of work...I hope you get the picture.

So, If you'll pardon the expression, I prefer a tax on the use of god's gifts. (Substitute nature, great spirit, as you see fit). Taxing these things puts no one out of work, as their going price now is not affected by their cost of creation - merely by the need for, and ability to pay for these things - 'demand'.

But, back to the flat tax idea, and the idea of (relatively) flat taxes (on income) that could be more progressive than our current taxes: current personal income in the US is around $9T, I think total income is around $12T. Total government revenue is around $2T. Spending is around $2.4T. Total population is around 290B, with roughly 15% as minors. Poverty level is around $10K + $3K for each additional family member. Most welfare programs are phased out between 1.5 and 2 times poverty level.

Poverty level income for the country is roughly $2.6T.
Just for kicks, give each family a demogrant based on poverty level income. And fix the deficit, for a total government spending $5T.

$5T from $12T is 42%. So you get $10K, but pay 42% on income.

A demogrant of 1/2 poverty level for all (and balancing the budget) is $3.7T from $12T, or 31%.

Of course, you have to figure out a way to calcuate the income of a corporation - gross revenues would kill low-margin companies - which are exactly the companies that are playing fairly.

You also have to figure out a way to calculate the income of a person: does $100,000 of home apprecition count as income? How about the appreciation on a vacation home? How about the appreciation on a vacant lot downtown?

[Warpy]

11. Only if you're in that top 0.5% of wealth holders that owns

about 40% of the pie. Then your taxes will go down and you'll be able to afford even more mansions and fine art and antiques looted from working people who have to sell off their heirlooms because they're not being paid enough to live on.

For the other 95.5% of us the flat tax is the stupidest idea to come along since trickle down economics. We never even got damp from that one, so excuse us for rejecting this one. Remember Reagan? His "flatter, fairer tax" was supposed to be a flat tax, was changed to a two tier tax at the last minute, and was still supposed to be easy enough to send in on a postcard. Guess what happened there. It will happen with any flat tax. They got rid of all OUR deductions, but there is a thirty pound book out there detailing the ones THEY got.

The flat tax only sounds fair to people who can't add and subtract.

[Massacure]

12. The flat tax is the 'fairest' but it doesn't help the middle class.

The middle class is the bread and butter of any nation.

[fasttense]

18. You do understand the system. Go Massacure. n/t

[Warpy]

21. What is fair about

telling working people who may barely have enough to live on or who may even be living in homeless shelters that they have to spend an extra 20% of the wages that already don't go far enough to support them on a sales tax?

What is fair about telling them that, while telling Soros, Scaife, Buffet and Gates that their 36% tax rate will be DROPPED to 20%, but only on what they actually spend on goods and services, giving most of them an effective tax rate LESS THAN A SINGLE DIGIT?

THE FLAT TAX IS NOT FAIR!

[sendero]

14. Here's the thing....

... when people talk about a "flat tax", they are really talking about 2 main changes. The first is the elimination of almost all deductions and other "incentives" built into the tax code. The second is to make the tax rate the same regardless of income.

Proponents cleverly roll both of these changes into a single proposal. But really, it is the crazy-quilt of incentives built into the tax code that are the problem. Having different rates for different incomes it trivial, I could teach an average 7 year old to calculate their tax.

So, "flat tax" as generally proposed is a trojan, you "get" reduced complexity and you get stuck with "flat tax rates".

What would really make sense to me would be to do the former (toss 99% of the "incentives" built into the tax code) and forget the latter (keep tax rates progressive, make them moreso :)).

The chances of any of this ever happening are near zero. Congress gets paid big campaign money to add special favors into the tax code. And they all love getting to use the tax code to promote their pet ideas and squelch that which they oppose.

[FormerDittoHead]

16. You got it.

This whole idea of tax simplication is, as you state, a ruse to install the flat rate. You can eliminate deductions, but as long as people try to game the system, the code will remain.

The fact is that the "complicated" (Schedule A) deductions are there *for* the middle class...

The upper classes live on investment (rents and royalties) income which is taxed at a lower rate (and no social security taxes at all) as well a run their own businesses while they use their business's resources for their personal use out of the butt, everything from company vehicles to cell phones - something which W2 workers don't get to do.

I ALWAYS find it FACINATING that NO ONE EVER SUGGESTS (caps because I'm SHOUTING) making the "flat" tax apply to investment income and dividends!

..and to stir up the pot further...
I believe also that a revenue neutral national property tax based upon value (same concept as is already done by every city and every state) would be a good idea... Opponents have no problem dismissing my suggestion, yet NO ONE opposes localities doing exactly this. Doesn't make sense. People would say that property valuations are different in different parts of the country, but aren't salaries and costs of living? OK, I know the counter-arguments, the best one being it will never happen...

[dcfirefighter]

22. A high personal property tax has negative effects on the economy

Not that high wage and income taxes don't.

Who's going to build houses if they're taxed at 10-20%?

A better option, imho, would be to tax 'unbuilt' property - the land value beneath buildings: taxing it doesn't put anyone out of work, because no one is employed buildign land.

It should have positive effects on land and energy use, as properties would tend to be developed to 'highest and best use' . . . tall buildings in city centers, smaller buildings towards the edge, smaller suburbs, and more green space.

It should have beneficial effects on homeonwership and housing costs, as the speculative value of real estate would be diminished, and the actual housing stock becomes un-taxed.

It should end 'zoning for dollars' where localites primarily funded by sales taxes zone for car dealerships and mega malls, while localities primarily funded by (built) property taxes zone for luxury apartments and office buildings.

Originally, the federal government was funded by tariffs, and payments from the states - who raised their money with property taxes.

[suneel112]

15. A fair tax proposal

I think an excellent way to tax people is to have the tax RATE be equal to a certain percentage TIMES a person's income, with a maximum cap to be determined. The tax bracket idea is kind of dumb, so instead of a stair-stepping tax, there should be a general incline. For example, your tax is equal to 0.00035 % TIMES your yearly income in dollars. In this case, a person who makes $10,000 / yr would be taxed at 3.5 percent, and a person who makes 100,000 / yr would be taxed at 35 percent. The maximum cap could be 45 percent, so there would be a "flat tax" for the Reaganites and the "Liberal Elite".
A simple incline is simple, but it probably isn't fair, so an S-Curve would probably be a better idea for taxation rates. Since taxes are filed electronically these days, a computer could easily determine where on the S-Curve you are (given your income) and determine the taxation rate.

[dcfirefighter]

23. The actual marginal rate

is a steepening curve, not a stair step - the brackets are the bends.

[0rganism]

17. How about we start with a flat tax of 100% on all income

Then, after the government pays for its annual budget, the money is returned to the taxpayers according to their demonstrated needs: credit for dependent family members, necessary medical expenses not covered by insurance, outlay required for jobs, rent, mortgage, and education. Then whatever's left over gets doled out absolutely evenly to all who paid in.

Flat enough for you? :D

[nickinSTL]

19. I do hope you're being sarcastic

Because...a lot of people would end up *d by that.

1. anyone who's got a life partner (but isn't married) won't get money for supporting a second person (if there's only one income)

2. what is a 'necessary medical expense'? There are a lot that are 'necessary' without being 'emergency'...where do you draw the line?

3. do the unemployed get the medical coverage? If they don't pay in...do they still get the benefits?

[0rganism]

20. Extreme? yes. Sarcastic? maybe.

First, let me point out that I'm not a proponent of flat taxes. I think a linear or geometric marginal rate makes much more sense, but the topic of the thread is flat taxes. Since flat tax notions are so often advanced in the spirit of sparing the ultra-wealthy from what is perceived as an unreasonable tax burden without any regard to the well-being of the nation, let alone the rest of humanity or the biosphere at large, my flat tax proposal starts from the other direction.

As for your concerns,
1. I have no objections to life partners registering as such and being included as family. That's a matter of implementation, not core to the policy in general.

2. Congress would have to define necessary vs. optional medical expenses, a job currently relegated to the tender mercies of the insurance industry.

3. That, too, would be up to the government. They could change nothing, and the situation would be just as lame as it is now, or they could allocate some of the budget to providing services for the unemployed, disadvantaged, or exceptional cases which exceed the means of the payer. Depending on their policy decisions, they would be re-elected or not.

The easiest criticism of the proposal is, what happens to federalism under this system? How do the states take in revenue? Do they simply make a case to the central government for receiving a certain amount of distributed funds, or would the states get first cut at taxing at some lower flat rate? That's a thorny one.

[dcfirefighter]

24. How are people encouraged to work

I can work hard or hardly work and receive the same pay? I think I'll go play golf.

[Linette]

25. A steeply progressive, no-loophole income tax is best...

...for everyone, including the rich.

See James Kroeger's The Progressive Income Tax: Theoretical Foundations to understand why.

[dcfirefighter]

26. Any tax on income

is less than ideal. A steeply progressive one is a better proxy for ideal than a flat one, but, regardless, no matter how you cut it, taxing income reduces incomes. Taxing income for the sake of taxing income keeps people out of jobs. Period.

We need to tax wealth.

Specifically, we need to tax the sort of wealth that doesn't keep people out of productive industry: if you tax houses, fewer houses will be built, fewer folks will be employed building houses, and wages overall will suffer. Same goes for cars, boats, planes, factories, electronic goods, foodstuffs, artwork, landscaping, etc.

What that leaves us to tax is that which was not created by individual effort: natural wealth, so to speak. The big one is land values, but this also includes pollution rights, water rights, mineral and oil rights, and even patent and utility monopoly rights.

If you tax these things, they'll be consumed less, but, by the fact that no one is employed creating them, no one is out of a job. If you tax these things, the free market will work correctly, and wealth will be distributed more equitably. If you tax these things, and untax the other things we tax, we'll see full employment, which means we'll see a rise in wages, which means we'll see a more equitable distribution of wealth. We'll also see a reduction in energy use, and a larger reduction in fossil fuel use. Housing costs will go down, because we'll cease paying for the speculative value of property, we'll cease paying taxes on housing, and while we'll still pay the full value for the land we'll take, that payment will go to pay for government services, rather than the previous landowners' vacation home.