Third Party & Independents: Archives

I am in complete agreement on a flat tax. It just makes sense and would be easy to execute. The only question now is what percent of income should it be?

I will support a flat tax when taking 30% of 30,000 and 30% of 300,000 makes for an equal burden. Problem is, the benefits of wealth scale up, while the cost of living doesn’t scale down. A progressive tax is fairer because it allows you to adjust the burden according to the needs of society. What complicates tax law isn’t the brackets, it’s all the tax breaks that have been written in, often for the wealthy or the corporate taxpayers.

Stephen, I often agree with your perspectives. I am not sure if I can on this tax issue. First, why is there a problem with flat tax scaling up the benefit to the wealthy? If we have a flat tax, and we get a fiscally responsible President who will veto Congressional irresponsibility, all income tax payers pay the same rate. If the Government needs less money, everyone gets a cross the board tax cut. And vice versa. (I would want to see a poverty line exemption for the employed, however).

To argue progressive taxation is to argue for the current taxing system which is subject to lobbying efforts by those who can afford to lobby and and legally bribe the politicians (the wealthy). The current system is broke and failing far, far too many millions of Americans.

To change the current tax system, an alternative must have selling legs based on fairness. The flat tax alternative is the only one that fits that bill, in my opinion.

The flat tax lacks the robustness and flexibility of a progressive system. With a flat tax, there is only one rate that can be adjusted. Because of that, a difficult balancing act will have to be achieved in order to set the rate, in order to tax all fairly.

Additionally, the necessities of life will not necessarily scale down with the available funds that the flat tax would leave. We already have a cutoff in place that respects the low earning power and relatively high ratio of necessities to income that those in poverty must deal with.

To argue for progressive taxation is to argue for a system that deals with that ratio of necessities to income. To argue for the flat tax is to argue for a tax, that reasonably set, would like take more, relatively speaking, from the pockets of the poor than the rich.

At the same time, Clinton did use a progressive tax plan if I am remembering correctly. If it worked then it should work the same; however, it would not be as embraced with open arms.

A progressive tax could be applied later on after the flat tax has become established and people have become comfortable with it.

Stephen—I have heard your argument before and each time I do I understand it less. With a flat tax, ALL taxpayers pay the same flat rate, how is that unfair to lower income people, since those in the higher income brackets are paying progressively more of their income to the federal government? Within my system there would be no more deductions for anything, therefore the rate of tax could be drastically lowered to say 10 – 15%. Tax shelters would go as well, and corporations would be required to pay the same tax rate as individuals, and those corporations that wish to flee off-shore to escape taxes (Ingersol Rand comes to mind), would be classified as foreign entities and treated as such under U.S. law.

Social security and Medicare taxes would be folded into the flat tax rate.

And along with the implementation of the flat tax would come universal health care (which would include prescription drug coverage), coupled with prescription drug pricing regulations. Under my plan, those who can afford to pay for Health Care would pay fully, while those in the lower income brackets would have their health care taken care of; but that is the subject of another piece.

The same rate can have a different effect on different ranges of income. When I wrote: “I will support a flat tax when taking 30% of 30,000 and 30% of 300,000 makes for an equal burden.” I meant to point out that different incomes can take a certain percentage of taxation better.

The person earning 30,000 has just seen their income reduced to 21,000. If the previous tax system only took half of that amount, they’d have 25,500 dollars. On the other hand the person who earns 300,000 would see 90,000 taken out of their salary, but would be left with a nifty sum of 210,000 dollars a year. Who’s been hurt the most?

I believe the flat tax penalizes poorer and lower middle-class people for not having the money to spare, and it only gets worse the higher the rate gets.

As for Tax shelters, and everything else, I’m sure that people could get very creative with your legislation real fast. I wouldn’t expect the real world version of that bill would turn out so pure. Given a few years, it would be as if nothing had happen, only, the rich would have a lower nominal tax rate, one they wouldn’t have to pay tax lawyers to maintain.

I think the foreign company idea has good merit, though. I think if they’re so hot to be foreign companies, let them go, and see how they like losing all the benefits of being an American company.

We will discuss the health care issue on that other promised posting.

Stephen, that is why a flat tax would only sell to Democrats if a cutoff is in place for the poor employed. In addition, a flat tax would sell to many corporations and wealthy if it is not progressive. As for tax loop holes, they are what created the mountain of tax codes today. I would certainly hope that the Congress could muster two wits between the parties to realize that a flat tax plan is worthless if loopholes are permitted.

Foreign companies born in the U.S. should not be permitted to sell their wares in the U.S. without company specific tariffs equal or greater than the taxes they would have paid had they remained headquartered in the U.S. instead of setting up a mailbox in Brazil and calling it Headquarters.

I’m not as knowledgeable as I probably should be to comment on taxation issues, but…

It occurs to me that perhaps a hybrid approach might work to address the needs of the poorest if a flat tax is applied. I.e. define by some formula (and therein will be the single point of hottest debate/lobbying) two distinct yearly household income threshholds. The flat tax is applied without exception above the higher of these two threshholds. There is no tax whatsoever below the lower of the two threshholds. Between the two threshholds, the tax percentage is exponentially reduced from the higher to the lower threshhold.

The benefit of this approach is that there is no sudden taxation impact when one’s income passes an “absolute” cutoff threshhold — the existence of which could encourage those living below the “poverty line” to remain there, since crossing it would be financially prohibitive.

With the application of a limited, consistently progressive exponential curve up to the flat tax, the better someone does financially, the more tax they pay, up to the full flat tax rate, but each improvement in income incurs only a marginal, relative taxational impact, and thus does not discourage (as much) folks from increasing their income level.

And calculation of taxation for those below that higher threshhold remains extremely simple.

The only challenge to this approach (other than getting buy-in from those that benefit more from the present system) would seem to be the definition of what those threshholds would be, and what criteria would be used to determine them.

It essentially takes the bracketed system, but removes all loopholes, exemptions, and potential for abuse, and extends the top bracket down to the bottom 10% or lower of the income scale, leaving a flat tax for the 90% or better at the top.

Eh?

Cheers,

Patrick Stickler

The progressive tax system actually costs less, for the average person. Let’s divide up 50,000 dollars into 5 brackets of ten thousand each.
1)15%
2)20%
3)25%
4)30%
5)35%
Now, 35% of 50,000 dollars is 17,500 dollars.
But the tax on the bracketed, progressive system is 12,500- a difference of 5000 dollars

How is this possible? Shouldn’t a full income of 50,000 dollars taxed at a flat rate come out to the same amount as one taxed progressively? The answer is no.

Look at the progressive tax system as the government trying to decide how much of a pie to take. A flat tax system assesses for the whole pie, for the whole income. But a progressive system takes set sizes of slices of that pie and then takes the rated amounts only from those individual slices.

The result: instead of a straight percentage take, The Progressive tax system creates what’s called an arithmetic series, one which adds together the result of each take from each bracket.

I did the operation above like so:
1)15%*10,000 = 1500
2)20%*10,000 = 2000
3)25%*10,000 = 2500
4)30%*10,000 = 3000
5)35%*10,000 = +3500
———
12500

The flat tax is greater because in essence it takes the rate for the highest income bracket, (5), and multiplies it five times.

The flat tax actually takes in more money, which theoretically means it could take in more money at a lower rate, but it means the following:

1)Any tax rate set low enough below that of higher incomes today will effectively be tax cut for those who earn much more than that current rate. For those at about that rate, it will actually drain more of their income than before, because of the loss of progressively lower rates below their own.

2) If spending is increased, and taxes to match it, the Middle class and the poor outside of the range of the cutoff will get hit hardest.

3)If a cutoff is enacted, problems of feasibility and class warfare become entangled in the argument. It may turn out that one’s cutoff will have to be set so low as to benefit very few. Republicans will surely carp about the poor not taking on their fair share.

4)there are no guarantees that all the complication formerly written into the tax code won’t return, and that the inherently higher burden on the middle class won’t be made worse over time.

You have to think about who it is who introduced the idea of the flat tax- the rich or the poor. It’s only the super-rich with their high taxes who really benefit. Is it any wonder that Forbes and DuPont and others were the first to suggest it?