Time for a flat tax

Let's just kill off the income tax completely and implement a national sales tax.

You can decide how much you want to pay by how much you spend...THEN welfare recipients can pay their share of taxes when they buy their $5000 rims for their $500 car and the big screen TV for the rowhome. :)

This COULD potentially generate more revenue for the government than an income tax. Millionaires will have a lot more of their income to spend and WILL do so.

You have to remember too that many of those European countries are more advanced when it comes to social welfare of its citizens (welfare programs, universal health care, etc), so their taxes on average will naturally be higher. And they normally don't bitch too much about high taxes because a great deal of things that would be out of pocket for Americans, are paid for by their Government.

I'd like to see sales taxes eliminated on basic necessities (food, certain articles of clothing, etc), but keep sales tax on items deemed non-essential. A lot of times, if I know I need to make one massive shop for clothing and such, I'll wait until I'm either in Delaware (no sales tax), or Pennsylvania (sales tax exempt for food, clothing, drugs, textbooks, resale items and residential heating fuels) so that I can save some money.

I'm not sure exactly what to do about Income Tax. While I'd like to see a flat tax, it doesn't make much sense in terms of revenue for the Governments.

Also, as Schneed said, to retain the same income to provide those silly things like national defense, interstate road systems and commerce, the flat tax would be crippling.

Let's look at just some basic tax rates for a family of four (H+W, 2 dependent kids) taking the standard deduction (rather than itemized) deductions:
Basic tax rates for 2006:

In general, the Family is entitled to a standard deduction of 10,300 plus 3,300/person for a total deduction of 23,500.


Taking with those as your only deductions, the applicable tax rates ARE:

Taxable Income:
23,500- 38,599: 10% of the amount over $23,500

38,600 – 84,799: 1,510.00 plus 15% of the amount over 38,600

84,800 -147,199: 8,440.00 plus 25% of the amount over 84,800

147,200 - 211,049: 24,040.00 plus 28% of the amount over 147,200

211,050 - 360,049: 42,170.00 plus 33% of the amount over 211,450

Over 360,050: 91,043.00 plus 35% of the amount over 360,050

2006 Federal Tax Rate Schedules (http://www.irs.gov/formspubs/article/0,,id=150856,00.html) (the numbers are different b/c I have factored in the standard deductions.

In addition, b/c there are two children, the Family is entitled to a 2,000 tax credit (i.e. subtract that from the amount of taxes owed).


THUS, under the current system, the taxes owed if the Family makes:

20,000: 0 (Simply did not make enough to be taxed)

50,000: 1,220 (3,220- 2000 tax credit)

100,000: 10,240 (12,240-2000)

175,000: 29,824

250,000: 53,024

500,000: 140,025


UNDER THE FLAT TAX:

20,000: 2,000 - Net Effect: 2,000 increase

50,000: 5,000 - NE: 3,800 increase

100,000: 10,000 - NE: ~240 decrease

175,000: 17,500 - NE: ~12,300 decrease

250,000: 25,000 - NE: ~28,000 decrease

500,000: 50,000 - NE: ~90,000 decrease

Taxes gathered from these five "family's" under current taxes: 234,333
Taxes under 10% flat tax: 109,500
FLAT Tax rate necessary to collect the same amount of taxes as current system from these five families: 21%

Thus:
20,000: 4,200

50,000: 10,500

100,000: 21,000

175,000: 36,500

250,000: 52,5000

500,000: 105,000

AND since the 21% rate is based on a false assumption that there is an equal distribution of families within each of the brackets, it is likely that the actual flat tax rate neccessary to gather the same amount of taxes as the current system would be in the neighborhood of 25%.

Make no mistake about it, flat taxes are THE most regressive possible. Believe it or not, I too am a died in the wool republican and oppose excessive government. But the flat tax is simply wrong both from a practical and philosophical viewpoint. Practically, its implementation would be crippling to either lower and middle income families or to the public as whole b/c the State simply could not afford to pay for the services we currently expect from it. Philosophically, it places the burden of paying for the governmental system on the backs of those who have least benefitted from it.

Also, as Schneed said, to retain the same income to provide those silly things like national defense, interstate road systems and commerce, the flat tax would be crippling.

Let's look at just some basic tax rates for a family of four (H+W, 2 dependent kids) taking the standard deduction (rather than itemized) deductions:
Basic tax rates for 2006:

In general, the Family is entitled to a standard deduction of 10,300 plus 3,300/person for a total deduction of 23,500.


Taking with those as your only deductions, the applicable tax rates ARE:

Taxable Income:
23,500- 38,599: 10% of the amount over $23,500

38,600 – 84,799: 1,510.00 plus 15% of the amount over 38,600

84,800 -147,199: 8,440.00 plus 25% of the amount over 84,800

147,200 - 211,049: 24,040.00 plus 28% of the amount over 147,200

211,050 - 360,049: 42,170.00 plus 33% of the amount over 211,450

Over 360,050: 91,043.00 plus 35% of the amount over 360,050

2006 Federal Tax Rate Schedules (http://www.irs.gov/formspubs/article/0,,id=150856,00.html) (the numbers are different b/c I have factored in the standard deductions.

In addition, b/c there are two children, the Family is entitled to a 2,000 tax credit (i.e. subtract that from the amount of taxes owed).


THUS, under the current system, the taxes owed if the Family makes:

20,000: 0 (Simply did not make enough to be taxed)

50,000: 1,220 (3,220- 2000 tax credit)

100,000: 10,240 (12,240-2000)

175,000: 29,824

250,000: 53,024

500,000: 140,025


UNDER THE FLAT TAX:

20,000: 2,000 - Net Effect: 2,000 increase

50,000: 5,000 - NE: 3,800 increase

100,000: 10,000 - NE: ~240 decrease

175,000: 17,500 - NE: ~12,300 decrease

250,000: 25,000 - NE: ~28,000 decrease

500,000: 50,000 - NE: ~90,000 decrease

Taxes gathered from these five "family's" under current taxes: 234,333
Taxes under 10% flat tax: 109,500
FLAT Tax rate necessary to collect the same amount of taxes as current system from these five families: 21%

Thus:
20,000: 4,200

50,000: 10,500

100,000: 21,000

175,000: 36,500

250,000: 52,5000

500,000: 105,000

AND since the 21% rate is based on a false assumption that there is an equal distribution of families within each of the brackets, it is likely that the actual flat tax rate neccessary to gather the same amount of taxes as the current system would be in the neighborhood of 25%.

Make no mistake about it, flat taxes are THE most regressive possible. Believe it or not, I too am a died in the wool republican and oppose excessive government. But the flat tax is simply wrong both from a practical and philosophical viewpoint. Practically, its implementation would be crippling to either lower and middle income families or to the public as whole b/c the State simply could not afford to pay for the services we currently expect from it. Philosophically, it places the burden of paying for the governmental system on the backs of those who have least benefitted from it.

Great post. Love the analytics.

People can't argue with math.

You have to remember too that many of those European countries are more advanced when it comes to social welfare of its citizens (welfare programs, universal health care, etc), so their taxes on average will naturally be higher. And they normally don't bitch too much about high taxes because a great deal of things that would be out of pocket for Americans, are paid for by their Government.

They may provide more services, but I'm not sure I would say they're more "advanced." Many European countries have dying economies with extraordinarily high unemployment rates, far less innovation, and generally fewer opportunities. They provide security for the masses, but little in the way of opportunities for making "it big."

They may provide more services, but I'm not sure I would say they're more "advanced." Many European countries have dying economies with extraordinarily high unemployment rates, far less innovation, and generally fewer opportunities. They provide security for the masses, but little in the way of opportunities for making "it big."

Thank you. I was going to post something to this effect - but my head still hurt from my prior post's math.

F... federal taxes. I think state tax should be the only tax there is. IMO, interstates, military, and the like should be funded by the states.

Can we also dispell the notion that the amount of "work" has or should have anything to do with compensation? I don't think teaching is harder than say landscaping but one is way more important than the other and should be paid more. Compensation should reflect the value of the work and the scarcity of people able to properly do the work. The reason CEOs make so much money is because there aren't a lot of people who can do those jobs and when done properly the work they do generates far more money, value as it relates to purpose, than does they guy who sweeps the floor of the CEO's office. I know I am stating some obvious stuff here but others keep talking about "working hard". That has nothing to with any part of this debate to me.

F... federal taxes. I think state tax should be the only tax there is. IMO, interstates, military, and the like should be funded by the states.

And how would the states decide how much to pay?

Whatever a state pays is just going to get passed back on to that state's residents so in effect any money paid to the mititary fund bya state would result in a federal tax on that state's residents. It simply changes the bureaucracy of it.

I strongly believe that the market is better than anything else at setting someone's economic value and thus their salary. The market, however, is not working properly in setting CEO compensation. For example, many CEOs who are "leading" companies that are failing still manage to get great compensation packages. One reason is that their salaries (at least for big companies) are determined by committees appointed by the board of directors. Who nominates the board? The officers and fellow board members. Senior officers and boards are in bed and it shouldn't be any surprise that they each scratch each other's backs.