The Problem With a Flat Tax, Made Simple

[Arkady]

Since someone brought up a flat tax, I thought I'd post a link that illustrates the difficulty of making a flat tax work, very simply:

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=456

If you look down to the last line of the first chart, you'll see the average federal tax rate for households by income level was:

Average for all quintiles 18.1%

Lowest Quintile 1.5%
Second Quintile 7.2%
Middlet Quintile 11.5%
Fourth Quintile 15.6%
81st-90th Percentiles 19.3%
91st-95th Percentile 21.6%
96th-99th Percentile 24.9%
Top 1% 29.4%

In order for a flat tax to bring in as much revenue as the current system, the rate has to be 18.1%. If you set the rate there, the poorest Americans will be taxed twelve times as much as they currently are, and the lower-middle class will be taxed two and a half times what they're currently taxed. How do they come up with that kind of money, when they're already struggling?

Meanwhile, the bottom 80% of Americans are going to have a tax hike. Those in the 81st to 90th percentile will come out a bit ahead -- for a household earning $120,000 per year, it would be about $1440 in tax savings (which you can use to buy bars for your windows, to keep out the increasingly impoverished masses). But the real action is for the rich. If you earn $1 million per year, for example, the change would save you $113,000 per year. That's why the wealthy -- people like Steve Forbes and Ben Carson, talk up flat taxes. Flat taxes amount to a radical redistribution of the tax burden from the top 20%, and especially the top 1%, to the bottom 80%.

If your household earns $120,000 or more per year, maybe this is a good thing for you, and you're willing to watch the poor and middle class suffer for your savings. But for most Americans, supporting a flat tax comes down to basic ignorance of the numbers.

 

[marvin martian]

Of course, if Obama were suggesting it, you'd be singing the praises of a flat tax...

 

[connieb]

Since someone brought up a flat tax, I thought I'd post a link that illustrates the difficulty of making a flat tax work, very simply:

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=456

If you look down to the last line of the first chart, you'll see the average federal tax rate for households by income level was:

Average for all quintiles 18.1%

Lowest Quintile 1.5%
Second Quintile 7.2%
Middlet Quintile 11.5%
Fourth Quintile 15.6%
81st-90th Percentiles 19.3%
91st-95th Percentile 21.6%
96th-99th Percentile 24.9%
Top 1% 29.4%

In order for a flat tax to bring in as much revenue as the current system, the rate has to be 18.1%. If you set the rate there, the poorest Americans will be taxed twelve times as much as they currently are, and the lower-middle class will be taxed two and a half times what they're currently taxed. How do they come up with that kind of money, when they're already struggling?

Meanwhile, the bottom 80% of Americans are going to have a tax hike. Those in the 81st to 90th percentile will come out a bit ahead -- for a household earning $120,000 per year, it would be about $1440 in tax savings (which you can use to buy bars for your windows, to keep out the increasingly impoverished masses). But the real action is for the rich. If you earn $1 million per year, for example, the change would save you $113,000 per year. That's why the wealthy -- people like Steve Forbes and Ben Carson, talk up flat taxes. Flat taxes amount to a radical redistribution of the tax burden from the top 20%, and especially the top 1%, to the bottom 80%.

If your household earns $120,000 or more per year, maybe this is a good thing for you, and you're willing to watch the poor and middle class suffer for your savings. But for most Americans, supporting a flat tax comes down to basic ignorance of the numbers.

I get the numbers. Its win for me. I hope it passes.

 

[UPNYA2]

Since someone brought up a flat tax, I thought I'd post a link that illustrates the difficulty of making a flat tax work, very simply:

http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=456

If you look down to the last line of the first chart, you'll see the average federal tax rate for households by income level was:

Average for all quintiles 18.1%

Lowest Quintile 1.5%
Second Quintile 7.2%
Middlet Quintile 11.5%
Fourth Quintile 15.6%
81st-90th Percentiles 19.3%
91st-95th Percentile 21.6%
96th-99th Percentile 24.9%
Top 1% 29.4%

In order for a flat tax to bring in as much revenue as the current system, the rate has to be 18.1%. If you set the rate there, the poorest Americans will be taxed twelve times as much as they currently are, and the lower-middle class will be taxed two and a half times what they're currently taxed. How do they come up with that kind of money, when they're already struggling?

Meanwhile, the bottom 80% of Americans are going to have a tax hike. Those in the 81st to 90th percentile will come out a bit ahead -- for a household earning $120,000 per year, it would be about $1440 in tax savings (which you can use to buy bars for your windows, to keep out the increasingly impoverished masses). But the real action is for the rich. If you earn $1 million per year, for example, the change would save you $113,000 per year. That's why the wealthy -- people like Steve Forbes and Ben Carson, talk up flat taxes. Flat taxes amount to a radical redistribution of the tax burden from the top 20%, and especially the top 1%, to the bottom 80%.

If your household earns $120,000 or more per year, maybe this is a good thing for you, and you're willing to watch the poor and middle class suffer for your savings. But for most Americans, supporting a flat tax comes down to basic ignorance of the numbers.

Sooo..........in reality you are NOT in favor of treating all citizens equally? Because it would just be too "difficult".

We should NOT assign a tax to people based on one set dollar amount, as in everyone pays $1000 a year for example.

We should NOT assign a tax to people based on one set percentage, as in everyone pays $10% of what they earn in a year for example.

That would be too "difficult".

To treat everyone "equally" we need to charge some various percentages of what they earn/have, others nothing of what they earn or have and still others we need to actually GIVE some of what OTHERS paid.........

Yeah, THAT is much more "simple", right?

 

[BitterPill]

I get the numbers. Its win for me. I hope it passes.

It's not going to pass, yet your selfishness is noted.

 

[Jen]

Looking at it that way I say ..............bring it on!

However, maybe we could look at a Consumption Tax first. That's where I think we ought to go.

 

[connieb]

It's not going to pass, yet your selfishness is noted.

I pay quite a bit of taxes - and think that those who think that we should keep growing gov't keep sepening more, keep expanding services, should have to pony up. That is't selfishness - that is self preservation.

 

[BitterPill]

Sooo..........in reality you are NOT in favor of treating all citizens equally? Because it would just be too "difficult".

We should NOT assign a tax to people based on one set dollar amount, as in everyone pays $1000 a year for example.

We should NOT assign a tax to people based on one set percentage, as in everyone pays $10% of what they earn in a year for example.

That would be too "difficult".

To treat everyone "equally" we need to charge some various percentages of what they earn/have, others nothing of what they earn or have and still others we need to actually GIVE some of what OTHERS paid.........

Yeah, THAT is much more "simple", right?

You are hopelessly confused.

Listen, progressive tax rates are equal because they apply to everyone equally. If you don't want to pay a higher tax rate, then don't make the money, but it would be a stupid idea. There are plenty of people who would gladly take the money.

 

[UPNYA2]

It's not going to pass, yet your selfishness is noted.

Why is it the desire to keep more of what one has or earns, NOT all mind you, just more, to do with as they see fit is deemed to be "selfish" or "greedy" by the people who, oddly enough, lust for more of what others have or earn to do with as they desire and who love to label THEMSELVES as, "compassionate" or "caring of others"?

 

[BitterPill]

I pay quite a bit of taxes - and think that those who think that we should keep growing gov't keep sepening more, keep expanding services, should have to pony up. That is't selfishness - that is self preservation.

If you don't want to pay the tax, then don't make the money, but it would be a mistake.

Let's say you make $8,926 a year. The first tax bracket, 10%, ends at $8,925. That means the first $8,925 you make is taxed at 10%. The last dollar you made would be taxed at 15%:

• 
  
  
  • 10% on taxable income from $0 to $8,925, plus
  • 15% on taxable income over $8,925 to $36,250, plus
  • 25% on taxable income over $36,250 to $87,850, plus
  • 28% on taxable income over $87,850 to $183,250, plus
  • 33% on taxable income over $183,250 to $398,350, plus
  • 35% on taxable income over $398,350 to $400,000, plus
  • 39.6% on taxable income over $400,000.

 

[connieb]

If you don't want to pay the tax, then don't make the money, but it would be a mistake.

Let's say you make $8,926 a year. The first tax bracket, 10%, ends at $8,925. That means the first $8,925 you make are taxed at 10%. The last dollar you made would be taxed at 15%:

• 
  
  
  • 10% on taxable income from $0 to $8,925, plus
  • 15% on taxable income over $8,925 to $36,250, plus
  • 25% on taxable income over $36,250 to $87,850, plus
  • 28% on taxable income over $87,850 to $183,250, plus
  • 33% on taxable income over $183,250 to $398,350, plus
  • 35% on taxable income over $398,350 to $400,000, plus
  • 39.6% on taxable income over $400,000.

I want to make money - and keep as much of my money as I can. If those want to lower thier tax rates under a flat tax - they can figure out how to make more. That is not my problem. Keeping what is mine, mine, is my problem.

 

[BitterPill]

I want to make money - and keep as much of my money as I can. If those want to lower thier tax rates under a flat tax - they can figure out how to make more. That is not my problem. Keeping what is mine, mine, is my problem.

Nonetheless, progressive taxation is fair.

 

[Jen]

If you don't want to pay the tax, then don't make the money, but it would be a mistake.

Let's say you make $8,926 a year. The first tax bracket, 10%, ends at $8,925. That means the first $8,925 you make are taxed at 10%. The last dollar you made would be taxed at 15%:

• 
  
  
  • 10% on taxable income from $0 to $8,925, plus
  • 15% on taxable income over $8,925 to $36,250, plus
  • 25% on taxable income over $36,250 to $87,850, plus
  • 28% on taxable income over $87,850 to $183,250, plus
  • 33% on taxable income over $183,250 to $398,350, plus
  • 35% on taxable income over $398,350 to $400,000, plus
  • 39.6% on taxable income over $400,000.

I am sure that if we had a flat tax the first $10 to maybe $25k wouldn't be counted. Our government is not going to suck money from the poorest of the poor. So really, no sense in getting all verklempt about it at this point............when there isn't even a bill up there to complain about.

 

[connieb]

Nonetheless, progressive taxation is fair.

What is fair is that everyone get to keep as much of what they earn as possible.

 

[UPNYA2]

You are hopelessly confused.

Listen, progressive tax rates are equal because they apply to everyone equally. If you don't want to pay a higher tax rate, then don't make the money, but it would be a stupid idea. There are plenty of people who would gladly take the money.

Listen, progressive tax rates are NOT equal because what they fund is NOT applied to everyone equally.

"If you don't want to pay a higher tax rate, then don't make the money,"
Then who would fund all of the gubment programs that provide for those who take your advise and do not earn?
Perhaps we could offer the mirror opposite of your advise, "If you want a higher tax rate, then make the money and pay it yourself."
But we BOTH know THAT would be deemed to be a stupid idea by those of you intent on gaining access to the fruits of the labors of OTHERS, right?

Yeah, there are plenty of people who would gladly take the money, not so many who will gladly make the money. Hence our position.

 

[BitterPill]

What is fair is that everyone get to keep as much of what they earn as possible.

I guess that's fair enough, more of a platitude than anything else, yet it doesn't change the fact that progressive taxation is also fair.

 

[BitterPill]

Listen, progressive tax rates are NOT equal because what they fund is NOT applied to everyone equally.

Progressive taxation is unequal because of how the money is spent?

I'm afraid I don't follow.

Then who would fund all of the gubment programs that provide for those who take your advise and do not earn?
Perhaps we could offer the mirror opposite of your advise, "If you want a higher tax rate, then make the money and pay it yourself."
But we BOTH know THAT would be deemed to be a stupid idea by those of you intent on gaining access to the fruits of the labors of OTHERS, right?

Yeah, there are plenty of people who would gladly take the money, not so many who will gladly make the money. Hence our position.

Some sort of rant, but I can't decipher it.

 

[connieb]

I guess that's fair enough, more of a platitude than anything else, yet it doesn't change the fact that progressive taxation is also fair.

Um... no not really. What is "fair" would be for people to pay an individual rate for the services they use. We know how much it costs for our military to run - so divide that up by person - that is each person's "fair" share. Perhaps if people had a bigger stake in what they paid in' they would figure out - that they don't like paying for everyone else's "share".

connie

 

[BitterPill]

Um... no not really. What is "fair" would be for people to pay an individual rate for the services they use. We know how much it costs for our military to run - so divide that up by person - that is each person's "fair" share. Perhaps if people had a bigger stake in what they paid in' they would figure out - that they don't like paying for everyone else's "share".

connie

Then the rich would be able to afford whatever government services they wanted while the not so rich might not. The poor certainly wouldn't. That's hardly fair.

 

[connieb]

Then the rich would be able to afford whatever government services they wanted while the not so rich might not. The poor certainly wouldn't. That's hardly fair.

No, everyone would pay the per-capital cost for that service. If the service doesn't matter enough for you to pay for it, maybe the next time you can - you vote for someone who will cut the budget of that service. And, besides which "fair" is you get what you can afford. There is nothing "fair" about availing yourself to something that someone else ahs paid for. In fact, depending on the situation, that is frequently know as theft.