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"Flat Tax" question
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  1. OK, I've seen the term "flat tax" mentioned here a few times now.

    In theory, it sounds like a good idea to have everyone pay the same percentage in taxes.
    But I can't seem to figure out a way to make it work.
    (the following numbers are completely hypothetical and made up because they are easy to multiply and divide)
    Lets say you have a population of 3
    a "poor" feller that makes 10k per year
    a "middle class" guy that makes 50k per year
    a "rich guy" that makes 100k per year

    poor guy pays 5% of his 10k every year = $500
    middle guy pays 15% of his 50K each year = $7500
    rich guy pays 25% of his 100k each year = $25,000

    in total these 3 pay $33,000 every year in taxes.
    government ain't gonna take a pay cut, so the 3 have to total 33k.
    33,000 / 3 = $11,000.

    That won't work.
    So take the total amount of taxes paid (33k) and see what percentage that is of the total income (160k). I come up with 20%.

    poor guy now pays $2000
    middle guy pays $10,000
    rich guy pays $20,000

    leaves you with $32,000 paid (close enough for government work)

    Now on to my question.
    How would this actually work in real life?
    I found a chart from 1997 (maybe someone here can find a newer one)
    http://www.cbpp.org/5-3-01tax.htm

    Only 0.6% of Americans were in the highest tax bracket

    Do we really want to jack up the taxes for 99.4% of tax payers so the top .6% can pay less?

    Or am I looking at this wrong?
  2. www.fairtax.org What is the FairTax plan?

    The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.
    The FairTax Act (HR 25, S 1025) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.
    The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.
    The FairTax:
    • Enables workers to keep their entire paychecks
    • Enables retirees to keep their entire pensions
    • Refunds in advance the tax on purchases of basic necessities
    • Allows American products to compete fairly
    • Brings transparency and accountability to tax policy
    • Ensures Social Security and Medicare funding
    • Closes all loopholes and brings fairness to taxation
    • Abolishes the IRS
    We offer a library of information throughout this Web site about the features and benefits of the FairTax plan. Please explore!
  3. How many folks are employed by the IRS, in addition to all of the CPAs that make a living preparing taxes? It just won't happen. It's like someone in the movie "Traffic," said about the "war on drugs." It employed too many people to stop having a drug problem.
  4. The IRS: Too Big to Fail

    :lol::hihi::rofl:

    Really, though, that's just a pathetic reason to keep something if there's a much better system of doing things. I don't disagree with your reasoning, because you're probably right. I just wish it wasn't so. There will still be things accountants will be needed for, and it won't be the first time an industry has become largely obsolete. I guess it would be different because it would be white collar jobs.
  5. Wow.....just.....wow. I'm not sure what to make of all that, other than to say, maybe its just me, but I think you really over-complicated the issue. I always thought the flat tax meant everyone pays the same percentage, regardless of income. So, using your three hypothetical wage earners, and let's just say a 15% flat tax just for sh!ts and giggles:

    the poor guy making 10k pays $1500
    the middle guy making 50k pays $7500
    the rich guy making 100k pays $15000

    (along with the fair tax, there would have to be an elimination of all tax loopholes to assure that everyone truly pays their "fair share")

    That fits the dictionary definition of "fair" - –adjective 1. free from bias, dishonesty, or injustice: a fair decision; a fair judge.
    I doubt it will fit Washington's definition of fair, and I have no doubt that it won't fit the liberal definition.
  6. Flat tax only works fairly if you also eliminate all the loopholes, deductions, depreciation, credits, shelters, and other tax evasions.

  7. That is a really good possibility.

    Right now, the country is operating at a deficit.
    So the total amount coming in by way of taxes can NOT go down.

    In order to keep that total amount the same, the ultra-rich's tax rate would be lowered, while EVERYONE else's would have to go up.
  8. It is probably all hypothetical anyway. Does anyone think the flat tax will be implemented in any form?
  9. Right, that's what I said....see VV

    Well, there is evidence out there that revenues go up when the rates go down, I guess because the money circulates in the private sector more and sales tax collections go up. You don't have to increase anyone's tax rate, you just have to encourage people to make the money flow, which most of us do naturally anyway.


    No.
  10. National Sales Tax would be even better than a Flat Tax. All hail Billy Tauzin!

    Tauzin's National Sales Tax plan would have exempted food, necessities. Average Citizens would not have to worry about tax returns, only businesses (IRS would be greatly reduced). Basically you pay as you go, giving individuals great freedom and flexibility. Percent would be based on GDP.
    A poor family's taxes could be nearly nothing. Middle income families would have great flexibility with their money. Wealthy would pay more.

    Obviously, it never made it through congress and never will, as it strips them of considerable power and transfers it to average citizens.
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