Flat Income Tax

**Epaphras** · 09-23-2008, 09:35 AM

What are the relative merits of abolishing the current marginal tax rate system and establishing a flat income tax of, say, 18% on incomes over 75% of the median income?

So for example, if the median income is $40,000, then everyone earning $30,000 or less would not pay income tax. There would be no deductions of any kind and the tax return could be a one-page, one-sided postcard with a payment envelope (if the person owes).

What are the economic implications? Social? On whom would the tax burden lie in such a case?

Bryan · 09-23-2008, 10:19 AM

i am all for a very simple tax plan, but I still think a progressive tax is the way to go.

**Epaphras** · 09-23-2008, 11:40 AM

Quote:

Originally Posted by Bryan

i am all for a very simple tax plan, but I still think a progressive tax is the way to go.

But a flat tax on everyone but low-income earners is inherently progressive, since the tax burden is stacked toward middle- and high-income earners, is it not?

Unfortunately the tax attorney and H&R Block folks would put up a big stink about changing the system since they profit greatly from being the only ones who understand it.

Ax · 09-23-2008, 11:49 AM

There are no merits in any direct taxing of income. None.

Bryan · 09-23-2008, 01:48 PM

same merits of taxing something else, it gives the government the funds necessary to operate.

JerryLove · 09-23-2008, 08:14 PM

Quote:

Originally Posted by Epaphras

What are the relative merits of abolishing the current marginal tax rate system and establishing a flat income tax of, say, 18% on incomes over 75% of the median income?

So for example, if the median income is $40,000, then everyone earning $30,000 or less would not pay income tax. There would be no deductions of any kind and the tax return could be a one-page, one-sided postcard with a payment envelope (if the person owes).

What are the economic implications? Social? On whom would the tax burden lie in such a case?

Well, to begin with that particular plan would mean that someone making $30,0001 has less take-home than someone making $29,999, by about $5,400!

No deductions, of course, means that we would be taxing people on income they never made, or that they "need to live". For example, someone who's suffering extreme medical distress, and who gives every penny to medical bills, would be in debt to the IRS.

Quote:

There are no merits in any direct taxing of income. None.

A government budget?

tlj009 · 09-24-2008, 08:09 AM

What about using the sales tax instead of the income tax? So the more you buy, the more taxes you pay. The wealthy obviously buy more than the poor, so most of the taxes would be placed on them.

**Epaphras** · 09-24-2008, 10:51 AM

Quote:

Originally Posted by tlj009

What about using the sales tax instead of the income tax? So the more you buy, the more taxes you pay. The wealthy obviously buy more than the poor, so most of the taxes would be placed on them.

You could make certain items like groceries or other "staple" items tax-exempt. Of course then you'd have every lobbyist in Washington clamoring to convince lawmakers that their product is "essential" and therefore exempt from taxation.

And you are suggesting a national sales tax in place of a federal income tax, not in addition to it, right?

tlj009 · 09-24-2008, 11:03 AM

Quote:

You could make certain items like groceries or other "staple" items tax-exempt. Of course then you'd have every lobbyist in Washington clamoring to convince lawmakers that their product is "essential" and therefore exempt from taxation.

And you are suggesting a national sales tax in place of a federal income tax, not in addition to it, right?

Yeah. Some states already have different taxes on some items like groceries. Not everyone knows that and they get charged more than they should. But it is done.

According to wiki, Arizona doesn't really have a sales tax but instead has a transaction priviledge tax. The only difference seems to be that the vendors pay taxes on their receipts and they pass the cost to the consumer. That may be the way to go if the sales taxes are to change depending on what is purchased.

JerryLove · 09-24-2008, 01:58 PM

Quote:

Originally Posted by tlj009

What about using the sales tax instead of the income tax? So the more you buy, the more taxes you pay. The wealthy obviously buy more than the poor, so most of the taxes would be placed on them.

Do you tax all transactions, attempting to profit from people who are sick or trying to eat, or do you only tax "optional purchases"?

Do you tax transactions in the US (meaning you get no cut of exports, including raw materials), or by the selling company (meaning you are taxing imports as heavily as domestics, resulting in functional tarrifs)?

tlj009 · 09-24-2008, 02:56 PM

Quote:

Do you tax all transactions, attempting to profit from people who are sick or trying to eat, or do you only tax "optional purchases"?

I would think tax all of them but at different rates. I would think that it would be easy to cateogorize most things. If the seller is responsible for the taxes rather than the consumer, then I think it would be easier to sort.

Quote:

Do you tax transactions in the US (meaning you get no cut of exports, including raw materials), or by the selling company (meaning you are taxing imports as heavily as domestics, resulting in functional tarrifs)?

The selling company.

JerryLove · 09-24-2008, 04:17 PM

Quote:

Originally Posted by tlj009

I would think tax all of them but at different rates. I would think that it would be easy to cateogorize most things. If the seller is responsible for the taxes rather than the consumer, then I think it would be easier to sort.

Sounds complex (admittedly, so is the existing system)

Quote:

The selling company.

So imports where the sale is overseas would be tax exempt: I could not pay taxes on my BMW by buying it in Germany.

tlj009 · 09-24-2008, 04:53 PM

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Sounds complex (admittedly, so is the existing system)

Yeah, but complex for whom. If you tax the seller, then it is going to be businesses who need to hire an accountant. I personally think that most business already do that. It would also mean that the number of people responsible for paying taxes drops drastically.

Quote:

So imports where the sale is overseas would be tax exempt: I could not pay taxes on my BMW by buying it in Germany.

I don't see why what I am suggesting would prevent tarriffs.

JerryLove · 09-24-2008, 05:42 PM

Quote:

Originally Posted by tlj009

I don't see why what I am suggesting would prevent tarriffs.

It would be another, different, tax.

tlj009 · 09-25-2008, 08:34 AM

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It would be another, different, tax.

So would property taxes, the death tax, etc. The tax structure in the United States is going to be complicated simply because there are too many lawyers looking for loopholes. And no one can seem to agree on anything. So the concessions made cause it to become complicated. My thinking was simply to make things easier for the general population in their private lives and in doing so save money. Business should have accountants already. And the larger the business is (such as international corporations), the more complicated their taxes will have to be.

Most small business would still be able to figure their taxes fairly easily. The exception being those who deal in a wide range of merchandise that may have different tax rates. Larger business would have to deal with the more complicated tax structure simply because they have a more complicated business.