Would you be in favor of individuals and businesses paying one flat tax with no deductions? ?
March 31st, 2010This would be payable to the Federal Government. They would give each state and local government a percentage.This would eliminate all other taxes including local, state and sales.
Replys
One needs the details. At 15.3%, the FICA tax takes in almost as much as income tax. So, 15.3% FICA plus about 15-16 "income" tax. We’re talking about 30+% minimum.
I believe the states have a constitutional right to raise their own taxes, so this couldn’t affect state tax.
Still, at that, 30+% tax, there will be some winners (high income earners) and some losers (the poor, big time). Perhaps something like the earned income credit, to refund some of the tax to the low income workers?
Need more details.
it sounds good, depends on the rate and if it would end up costing you more. Our current system is way too complicated. Problems is few politicians will massively change our tax system because that would mean massive job cuts for the IRS, a federal agency, thus friends with the feds.
it would depend the rate. if it was astronomical, then your better off paying 7% sales tax.
My biggest concern is that most flat tax proposals cause those with lower incomes to pay a higher proportion of their income in total taxes than the rich (which sometimes happens now). If there were an exemption to address this I’d be all for a flat tax.
I really like the part about no deductions. The simplicity of the tax code doesn’t really come from its structure (flat v progressive), it comes from defining what is taxable. With no deductions it would be simpler regardless of the tax structure.
No, not in either case, since most folks would wind up paying MUCH more in taxes than they do now. If you were just going to replace the Federal income tax with a flat tax it would have to be around 25% to generate the same revenue as the current graduated tax does. And if you were to add in all state taxes as well, the rate would have to hit close to 40%.
Only the wealthiest taxpayers pay anywhere near a 25% net rate and even fewer pay 40%. The average wage earner pays much less than 20% in total income taxes.
A single parent with 2 kids scraping by on $8.50 an hour would see their cash flow plunge by nearly $9,000 per year under such a tax burden. They’d be on the streets in a few weeks. Even a family of 4 earning around $40,000 per year would be decimated by such a burden as their tax would rise by over $14,000 per year! They’d go from "doing OK" to below the poverty line overnight.
Small businesses would buckle and fall like dominoes, throwing millions of people out of work. The loss of that taxable income would force massive tax rate increases to make up for the lost revenues, further worsening the situation. Eventually the economy would collapse completely.
The wealthiest would see a nice tax cut, at the expense of the working poor and middle class. NO THANKS!
Some wealthy folks like to whine about their tax burden, however a graduated income tax is the ONLY tax that always adheres to the first law of taxation: Make sure that the taxpayer can AFFORD to pay the tax. When taxes become widely unaffordable by the majority of taxpayers as they would be with a flat tax the entire system is in danger of collapse. I’d happily trade incomes and tax burdens with one of those whining brats — I should have such problems!
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