d, therefore, it was necessary to consult fairly conservative sources - I chose The Heritage Foundation (http://www.heriMany people don't know what a flat tax is, so I'll give just a brief description. The truest form of flat tax is one that taxes everyone and every business at the same, fixed rate; usually, there are no deductions or exemptions in such systems. A single mother of four making $18,000 a year would pay the same percentage of her income as would someone making $500,000 a year with no children to support. This is patently a bad idea, because it burdens the poor disproportionat
Assume a flat tax rate of 17%. The $3060 tax burden on the single mother is a more critical insult to the single mother's (and her children's) welfare than the $85,000 tax bill is for the half-million dollar earner with no kids. Because of this inequity, no serious flat tax proposals are true flat taxes - instead, they incorporate an income threshold below which there is one flat tax rate, 0%, and above which there is another flat rate, usually something under 20%. They also provide personal exemptions and exemptions for number of dependents. In such a system, with a taxable income threshold of $30,000 and the dependent exemptions, the aforementioned single mother would pay no income tax, while the wealthier worker with no children would pay the 20% flat rate. In this way, such a flat tax is progressive, or graduated, though it could be argued that there is still only one tax rate, and that those below the income threshold (or who have enough exemptions) simply aren't subject to the tax system. In any case, no serious proposals eschew the minimum taxable income "loophole."
The benefits of a flat tax are many. The most obvious benefit is simplicity. Our current tax code is some nine million words in length, and there are between eight and nine hundred forms necessary to deal with all of the exemptions, deductions, credits, exclusions and other complexities. More than 80% of the tax code deals with these issues. Under a flat tax, there would be two forms - one for individuals, and one for businesses. Both these forms would be so simple they could be placed on a post card (see, e.g., http://www.cse.
A related benefit, one that represents an almost immediate increase in personal and business wealth, is the money that would be saved by this simplification of the code. It has been calculated that Americans spend around $600 billion per year on income tax compliance; they feel compelled to hire tax accountants and lawyers and financial analysts to help navigate through the IRS rules. This expenditure would be unnecessary under a flat tax.
But there are more goodies. Without going into exhaustive detail, the following are several of the other beneficial features of a flat tax system:
- No double taxation or asset taxation. The flat tax system taxes only income, and only when it is first earned. Unlike the current system, it does not tax savings, capital gains, interest income, or dividends. There is no death tax, either. Because of this feature, a flat tax would instantly increase the value of assets held by Americans.
- Less IRS intrusion. Under a flat tax, the IRS has no need to know what your assets and liabilities are - just income. Because of the lack of deductions, exclusions, loopholes, and related audits, the IRS can be simplified and downsized, further saving Americans' tax dollars.
- Increased global competitiveness
. The current tax structure makes the U.S. one of the world's most expensive nations in which to do business. It is therefore attractive to migrate jobs and capital to countries with lower tax rates. A flat tax system, with a much lower tax rate, would eliminate this incentive to leave our shores, and would actually make the U.S. a more attractive operating arena for foreign owned companies as well. This is because the flat tax is based on "territorial taxation," meaning that only income earned within our borders is taxed. Eliminating "worldwide taxation" should make the U.S. much more competitive on the world economic playing field.
- No marriage penalty. The flat tax would apply to all earners, so both a husband and wife would get taxed at the same flat rate. It would no longer be possible for one spouse's income to push the couple into a higher tax bracket. Moreover, because a married couple's family-based allowance is twice as high as a single person's, there would be no penalty for being married and filing jointly.
- Reduction in political corruption. Much of what lobbyists and special interest groups do in the halls of Congress has to do with currying favor with regard to tax breaks and other loopholes. Under a flat tax, because of the lack of exemptions and exclusions, politicians would no longer be able to engage in the corrupt practice of trading favors with big business. This would greatly reduce corruption, but would also save corporations the immense cost of lobbyists and, thus, aid in business growth.
Fundamentally, the current Revenue Code is so complex and so flawed that some kind of tax reform is both desirable and necessary - particularly in light of the fact that world governments are jumping on the flat tax bandwagon in droves. The former communist nations in Eastern Europe have almost all adopted a flat tax system, and have achieved remarkable economic gains.
Representative Dick Armey (R-TX) has the most promising flat tax proposal here at home, and it has garnered the most support in Washington (http://www.ncpa
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16 comments:
I would argue that there may be at least one unbiased source out there on this issue, Dano. It's the Congressional Budget Office. Having to serve masters from both sides of the hall, they tend to be pretty unbias in their studies. And consequently they usually offer very little in definative conclusions. On the issue of the flat tax, the CBO also took on the "fair tax" (aka "national sales" and "consumption tax")in the same report. The best I could find was this paper: Click Here Which BTW, offers no conclusion on whether a fair tax or a sales tax would be better.
My understanding of the flat tax when it was initially thrust upon the national scene circa 1997 when this paper was published that there would actually be a minimum income requirement before it would kick in. In other words, once you hit a certain amount of income you are taxed. So it's unlikely one who isn't paying taxes on income now would be taxed.
Just about anything is better than the system we have now. However, NOTHING short of an armed revolt will change what we have now. Becuase lobbyists and politicians have too much to gain by the current tax system. That's why it is so huge and complex. It benefits those in power on both sides. While those on the conservative side of things are the ones to argue for a flat tax, you will often find that those conservatives who would argue for a flat tax and/or a fair tax are likely to be conservatives on the verge of leaving the Republican Party. Because let's face it, the Republican Party ain't fiscally conservative no more.
j.t. twilley, your CBO source is as good as there is IF you understand the scientific methods being discussed and have the time to read very pedantic and formal research papers. It is not, in my analysis, much different from the studies provided by the National Center for Policy Analysis, which also used formal economic modeling in their research analyses.
Incidently, the flat tax is, like the fair tax, a consumption tax. You can go to any of the links I provided in my post for more on that. The fundamental difference between them, structurally, is where the tax is collected. The major practical difference is that the fair tax may not provide the progressivity that the flat tax (as discussed)provides, because there may not be fixed exemptions set up in the way the flat tax's are. The other frequent complaint about the fair tax is that it hurts poor people more, because they are forced to spend the majority of their incomes on purchases for day-to-day living, whereas better-off consumers don't use as much of their income for these purposes. So, the argument that the fair tax is ultimately fair because it is possible for a consumer to control the amount of tax they pay by controlling purchases is not as true for the poorest segments of the population.
One last point...the notion of the flat tax is much, much older than 1997. It is even older than the flat tax proposed by Democrat Jerry Brown in his 1992 presidential bid. But that's not very important.
Something needs to be done, for certain. Thanks for the comments/info.
Look if you guys are going to do this thing you have to pick a side and defend it. You can't defeat your own debate within your debate. You can't let your real feelings show - which you blatently did Dano.
Here's the evidense: and I quote "This is patently a bad idea, because it burdens the poor disproportionately. Why? Because each dollar of a poor person's income is worth more to them than each dollar of a wealthy person's income. This is why our current tax system is graduated such that as a person's income increases, the rate at which each additional dollar (within given brackets) is taxed increases."
You can't have a headline that says a flat tax is fair and necessary then attack the flat tax in you own defense.
At this point I would say that your little experiment is just this side of a failure. You guys have both betrayed your position with in your assigned arguments, with your true position, more than once now. You have to totally set your own biases aside and write as though you are completely sold on the position. (Actually if you really did make the complete arguement on, selected subjects, you might find that some of your positions will change a litte bit. You might even find out the other side might have a good point.)
On the lighter side here's a website to check out.
www.glassbooth.org
and here is a great political quiz
http://www.theadvocates.org/quizp/index.html
Actually Dano the Flat Tax is an income tax. The Fair Tax is a consumption tax. j.t. is also correct, until you get to a certain income level you don't have a tax liability in either scenario. The fair tax specifically addresses this too.
Since when is taxing someone more because they make more fair by the way? That's what you call class envy and/or just plain old jealousy. Sure to the poor their dollar means more but taxing someone who makes twice as much a higher percentage isn't fair, period.
Look at it this way. If I make $250K and I'm taxed so I bring home only $150K. There is a lot of stuff I don't or won't buy as opposed to if I'm taxed to where I bring home $200K. So we have a $50K difference here.
I may higher a gardner with that extra $50K. I may buy a boat. Either way I'm providing a job or jobs. On top of that the $50K will then circulate through the economy 20 times. On the other hand the government will take that $50K and it will circulate through the economy only 1 time. Too long to give you the economic details of why it works like that here. You'll just have to trust me on that one.
In the mean time with the money going through the economy that many more times. The lady in your example making $18K may now get a raise to $24K. Yeah, I know it's far less than $250 but why should a Harvard graduate be required to support a high school drop out? That's what isn't fair.
I concede there are not built in exemptions for the "fair tax" as there could be for the flat tax. But didn't your arguement in favor of the flat tax list as one of it's pros the lack of exemptions?
The idea that a fair tax or sales tax hurts the poor for people who pay for essentials (ie the poor) versus the more wealthy who can afford to save is in my opinion hogwash.
Let's put me in the place of a wealthy indivudual. Yeah, stay with me. If I've got millions what good does that millions do me if I don't buy something with it? Whether it be stocks (to build more wealth) or a mansion or a yacht? Dano, here's $10 million bucks. You can't spend it so you can avoid the taxes. You can pass it on to your kids, but they can't buy anything with it either, because they'll have to pay taxes. And so on and so forth. At some point the money gets spent or else the wealthy are the same as you and I. And that's when you get your taxes from the wealthy from the fair tax (aka sales tax).
Actually, harkelroad, when the government spends that money it circulates through the economy just the same as if an individual kept it. The proper arguement there is that many services can be provided for cheaper by someone on a fixed budget and interested in a profit than by an organizatio that can: 1) print its own money, 2) require people to pay their own money with the threat of incarceration and 3) has not the smallest care in world about actually making budget to stay in business.
And I correct myself on the previous concession that the "fair tax" in some forms doesn't have built in exemptions. There have been proposals that include exemptions for food, clothing and shelter. Although I would argue much as Florida deals wtih food and clothing on sales tax, so should the "fair tax." "Luxury items" would not be exempt. Food, milk, vegetables, some meats would be exempt.
I also have to agree with some of what anon said above. Although clearly s/he's a coward for at the very least not registering a handle so that comments this anon makes can be consistant and not confused with other anons.
Dano, the above anon makes a point about you deveating from topic by bashing the flat tax in your defense of it. I consider that a huge flub up. And there's really no defense for it in my opinion. I noticed it the first time I read it too, but let it slide. I would also recommend that you guys really keep your comments in defense of your position when replying to the comment sectiosn of the topics that week. That has deviated in previous weeks as well.
I like you guys. But anon has a point, these types of gaffs have got to stop for this experiment to succeed. At least I'm willing to sign my REAL name to it. I can't tell you how cowardly I think it is for those who criticize to do so by posting as anon. You don't even have to use your real name (as I do). You can use a handle for goodness sake. But as least we know whether people are consistant.
To anon and j.t. twilley,
I made no flub at all. I did not deviate from my stated position and bash the flat tax. Anon, you quoted me out of context. This is what I ACTUALLY SAID (and note the connection between the newly capitalized words for the logic of the argument):
"THE TRUEST FORM OF FLAT TAX is one that taxes everyone and every business at the same, fixed rate; USUALLY, THERE ARE NO EXEMPTIONS OR DEDUCTIONS IN SUCH SYSTEMS. A single mother of four making $18,000 a year would pay the same percentage of her income as would someone making $500,000 a year with no children to support. THIS IS PATENTLY A BAD IDEA, because it burdens the poor disproportionately. Why? Because each dollar of a poor person's income is worth more to them than each dollar of a wealthy person's income. This is why our current tax system is graduated such that as a person's income increases, the rate at which each additional dollar (within given brackets) is taxed increases."
My argument was, and still is, that the flat tax would be a bad idea UNLESS it had the income threshold exemption. A true flat tax is the one that I don't advocate for, but it has never been proposed in our Congress, either. If I had said "a flat tax is..." and described one like Dick Armey's, one of you would surely have told me I don't know what a flat tax is, because flat taxes have NO exemptions.
I made it very clear that the flat tax proposals (like Dick Armey's) eliminate the loopholes, exemptions and exclusions that make up the bulk of our tax code, not that they eliminated all exemptions.
Anon, I have to tell you, I'm getting tired of reading your insulting comments. The suggestion that I don't know how to write, that I can't keep my biases from showing, that I don't know how to properly argue for a position, are simply wrong. You seem to routinely misunderstand various passages from my posts, and to therefore assume you know something about my feelings on an issue that you just don't know.
You can call this experiment a failure if you'd like. It would be just one more in a long line of ignorant and incorrect assumptions on your part.
j.t., in this case, some of the above applies to you as well (but not the "ignorant" comment). You, however, know me personally, and therefore know my truer positions on these varied matters. Because of that, you, of all people, should know that I am doing a very good job of supporting or not supporting issues in opposition to some of my beliefs. As far as whether or not Reed and I should stick to our positions in our comments as well, I would say, "WHY?" Remember, the experiment is to try to argue and persuade in the opposing posts, not to fool people into thinking we really feel one way or another. On the "flat tax is not a consumption tax" issue, I submit the following excerpt from the Heritage Foundation:
"A tax code that does not discriminate against saving and investment is considered a consumption-based tax system, regardless of whether taxes are deducted from the paycheck or collected at the cash register. In this respect, a flat tax is a type of consumption tax. The difference between a flat tax and a national sales tax is where the tax is collected. A flat tax is levied on income—but only once and at one low rate—as it is earned. A sales tax is levied on income—but only once and at one low rate—as it is spent."
harkleroad, the argument that those who make more should pay a disproportionate amount in taxes is based upon the idea that they get a disproportionate amount of benefit from the government. The argument says that being a wealthier person in our society brings with it greater access to politicians to have your voice heard, greater access to professional advice and council in legal matters (which means disproportionate access to success in the courts), greater access to protection from police and fire services, and a disproportionate need for these services because of greater assets to be protected. You can choose to accept that argument, or not. I really don't have much a of a dog in this fight.
Dano, my bad, I see what you were saying now with the flat tax = a bad idea (ie one without a minimum threshold). I stand corrected. I put the wrong em-PHAS-is on the wrong words when I was reading it. Your capitalization made a difference in how I heard the words in my head when I read them. Totally understand now. My bad.
As for the maintaining positions in your comments. I guess I understood the vision of the site as kind of a debate sight in which participants argued/debated their positions thoughtfully. And I figured the unique point was that you and Reed obviously have very similar(same?) views on most issues. I think it adds to it when you guys also defend your positions in the comments section -- kind of an ongoing debate type thing. To me it makes it more interesting if you guys stick with and continue to argue your positions in the comment sections.
j.t., thanks for getting it.
As to the comments me and Reed leave, I think, for the most part, we DO stick to our positions. But this is a consequence, mostly, of having to be defensive about how well we did or did not do in our posts. After about 15 posts between us, I maintain that we've done an admirable job of trying to support whatever position we flipped for--this is extremely difficult, particularly in terms of removing personal biases from the rhetoric. To be labeled incompetent at this task (as anonymous has done repeatedly) really is both inaccurate and insulting. So thanks again for "standing corrected."
Many years ago, I was a single mother of two. Had I not had exemptions (child care deductions and the like), we would have suffered mightily when it came income tax time. So I guess I have some personal feelings about the current tax structure: it worked for me -- at the time.
Because of this, IF I understand how it works correctly, I don't feel a flat tax would necessarily be a good idea unLESS there were exemptions and income threshholds, like you suggested, Dano. If there weren't, it wouldn't be much better than the system we have now in my opinion, as far as the less-income fortunate is concerned.
I believe in the American Dream. It is a privelige in our country to earn as much as you want.
If there is a million dollar earner, Good for him or her. But I also think people live up to their standard of living, so it would hurt a millionaire having to pay $100,000 on a mil, just as much as it would hurt a low income household to have to pay $100 on a thousand bucks -- just not in the way. The millionaires of this world have luxuries that the low wage earners don't and that doesn't mean it's not right, it's just so. We can't forget, however, that the poor folks sometimes consider food, clothing and transportation a luxury where those things are a given, for the rich. So, a flat tax might be Equitable, but depending upon the exemption thing, it might not be so fair after all, when it comes to the human factor.
A fair (consumption) tax almost seems, well, fair to me (chuckle), but if the poor can't afford to really buy anything, then when they do, that hurts them.
Rich people, lucrative businesses, are Always going to find a loophole, no matter what kind of tax there is. So I'm not sure there is any answer.
Here's an idea: a Conscience Tax.
About Reed and Dano's arguing their positions and whether they believe in their argument or not, I like to think of them as doing a job (not to make this not fun, Dano and Reed), much like a lawyer does. Like, defense lawyers don't always believe their clients aren't guilty, but to perform their jobs well, they must present their case as if the defendant isn't guilty. Or, think of it as acting.
Deb, under a flat tax system, the rich and businesses could not find any legal loopholes, because there would be none. If the suggestion is that they would find a way to skirt a tax obligation, well...that's a possibility, but it seems a tad cynical (and you risk offending wealthy people and businesses who are honest taxpayers). It may be your honest appraisal of these groups on the whole, but I doubt very much you mean to paint them ALL with such a wide brush.
Very well argued, Dano. I told you I wouldn't read yours until I posted mine, and I think that's proper.
You're right in that there are virtually no unbiased sources out there with any viable information, so it is a tough argument to make. J.T. is also correct, I believe, in pointing out that the political will to radically change the system simply doesn't exist. Does that make this a futile argument? No, because as long as we discuss and debate, the opportunity for an epiphany or a compromise exists. And tha's why I'm having a lot of problems with the comments of Anonymous (what a funny name, huh?). He seems to think that, in order to believe what you say, you must assume that your opponent is an idiot. Well, I'm sorry, but I've about had my fill, and would support limiting or excluding such rants from what we designed to be a thoughtful debate forum, not a headbutting session.
mvkiaaThat's fair, Dano. Yes, I guess I was being a tad cynical, but is that necessarily a bad thing?
In spite of my cynicism, of course I do not believe that absolutely ALL the rich, or businesses, would try to evade taxes. There are many good, rich, honest folks and entrepreneurs out there. And many are admirally philanthropic.
And to be fair, there are also many poor people who use "the system".
In essence, what I believe to be true is that even if there were no loopholes to be found with a flat tax system, there will always be some who would find Some way around it. Nature of the beast.
That being said, I also believe there are businesses and people out there who Are evading taxes or Are taking advantage of the system, but that are doing it out of some sort of necessity rather than having evil intentions.
I generally don't like to be stereotypical, but it happens. Thanks for pointing that out. Bet I'll be more careful in the future. See - this forum Is educational!
Again, I admire your ability to argue a position whether you actually believe in it or not. One can't help but have some personal beliefs bleed through now and again, if/when that happens. Very difficult job, but my hat is off to you! And Reed as well.
Deb, your story about raising two kids as a single mother reminds me of one other possible consequence of the flat tax that I did not address. The Dick Armey version of the flat tax does not provide for negative taxation, i.e., there is no provision by which the poorest of filers could ever get a tax refund larger than the amount they contributed. Under the current tax code, it is common for low-wage single (and even married) parents to receive "refunds" from the government of several thousand dollars, even if they paid in $0 tax for the year. This is possible because of the child tax credit. Detractors point out that this negative taxation is akin to a government handout (welfare), and this is a reasonable interpretation. Nonetheless, it means that, with the popular flat tax proposals, many of our poorest families will see a substantial tax INCREASE under the flat tax. The question remains, "if it's more fair, does that matter?"
There are versions of the flat tax that do provide for negative taxation, but they are not the popular plans, perhaps because, as Reed pointed out, they get bulky like the current code and don't represent a simplification as much as an Armey-type plan does.
It's hardly "fair" to classify the removal of a handout that happens to be included in the tax code rather than the social services as a "tax increase."
These very poor have $0 tax burden now. Changing to a flat tax would keep their tax burden at $0. You want to give them a handout, put it in the code where it belongs -- social services. It's bad policy to have welfare policy in the tax code. Of course I'll argue against expanding social services, but let's at least put the debate on handouts in the code it belongs.
Is that true, Dano? There are refunds distributed to no-wage earners? Had no idea. I was under the impression there were people at the poverty level that didn't have to Pay income tax, but as far as getting a refund -- for what?? This is totally different than a tax exemption. Churches, non profit orgs and the like, have tax exemptions presumably because of the nature of their business but they don't get money Back from the government on top of their exemptions, and neither should anyone else. Doesn't make sense. That's getting something for nothing. Yes, I agree it is a reasonable interpretation that this is welfare.
The question "if it's more fair, does that matter"? Yes, it matters. There is fair and there is fair. Sometimes it's plain and simple. But there are times when some flexibility is called for within that fairness, and when humans beings health and well-being are involved, that's one of those times.
If those poor families had to suddenly pay taxes when before they didn't, it most certainly is a tax increase and how does one squeeze blood from a turnip?
j.t.twilley, I do see where you're coming from where handouts are more appropriate when dealing with social services. And yes, that's a whole 'nuther subject. But same bottom line.
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