Could we truly have a flat tax?

[ameiko]

I mean an across the board flat tax. As an evil right winger, I hate the progressive tax system: the idea that it's ok for the government to take more of my money simpy because "I can afford it." Heck we can all "afford it."

Everyone paying the same rate strikes me as fair: you earn 10 times as much, you pay 10 times in taxes. One could argue I support that said person is not using the roads ten times of often, have ten times the law enforcement protection, but work with me.

So could we have a TRULY flat system: no deductions or credits of any kind (including child tax credit, 401k, mortgage interest, etc...)?

Also, all forms of income, including capital gains and muni bonds (you could grandfather in existing ones but new muni bonds would not be tax exempt which would probably require the states issuing new ones to issue higher returns).

So, is it possible?

[ameiko]

I also wonder how this would work for businesses?

I always here that businesses write off this expense or that expense such that they are only taxed on their profits rather than their income.

Under a truly flat tax, does this ability to write off expenses go away and what does this do to business? Should we treat corporations which has the primary aim to earn profit the same as for people who have the aim to live?

Would it be misguided to tax the business in the same manner as the individual? Sure, the wages they pay to the worker (and those evil CEO's ;D) they may get to write off but that money is taxed as personal income.

I'm interesting in hearing more from people experienced in this matter.

Thank you.

[pappyjohn99]

It is possible. Everyone should have some skin in the game. I will not happen though because a little tax break for donors and supporters is the favored method of reward by our politicians. Thus we have a 60,000 page tax system with over 4000 IRS forms.

Ain't it insane?

[Bluerobin]

Flat tax, yes. Taxing muni bonds would guarantee that you don't sell them. Right now, they pay a lower rate of return, because they are tax free.

[pappyjohn99]

Do you prefer the method we have now Blue? The top 5% pay 55% of all Federal tax and some say this is not enough. 47% pay none and demand more benefits. There has to be a better way imho.

[billisonboard]

So the 47% start giving more money to the government.
The top 5% start giving less money to the government.

The 47% have less money to spend on consumer goods and thus buy less which means that the top 5% end up making less money.

Net win for who?

[Bluerobin]

Pappy, I prefer someone else pays, but I support flat tax. Those not making it, can get it back through all the aid packages we offer.
I just don't support getting rid of tax free bonds. Let's face it, they just can't compete. Keep the tax free status on the muni's.

[pappyjohn99]

Yes Blue, we need muni's to fund major projects. The tax free status would be safe with me. And anyone has the option to buy some, not like the income or payroll tax that is mandated. But i will stand on my position that everyone should pay something. It gives them an interest in the spending of government. When all some people do is collect and demand they could care less about fiscal discipline.

[fairlycrazy23]

I prefer a tax on consumption vs a tax on income, that is one reason I support the Fairtax. Also it doesn't really make since to tax businesses, they just pass that along to the consumer anyway, so why not tax at the POS.

[pappyjohn99]

>>Net win for who?<<

Everyone Bill. When we all have to pay it makes the electorate more interested in restraining government spending. We cannot continue at the current rate and survive. We've been burrowing 42 cents on every dollar spent for 10 years. Any reasonable knows we can't keep this up.

[pappyjohn99]

Fair- The fairtax is a fine option also. I agree with your point about taxing businesses. Eliminate the business tax and draw manufacturing back to this country. We need a complete overhaul of the tax system.

[dancinmama]

The tax code is nothing but the government trying to manipulate the free market system into doing something that the government wants to happen - subsidies for this, tax credits for that, deductions for something else. And how well has that worked for us? If a product or service or R&D is going to beneficial in the free market system, it will happen without government intervention. I do not want the government trying to influence people or corporations any more with what they think is best.

Example: Government taxpayer credit for home buyers. The government wanted to stimulate the housing market so they offered a tax credit to people buying homes. People WERE encouraged to go out and buy, but at a huge cost to the taxpayer. The housing market did see a VERY, VERY, VERY small bump.

And how are those homeowners who got that taxpayer paid for credit doing? Most of them are living in homes that are now worth less than what they paid for them. They were encouraged to buy a house as a result of a tax credit, but in the short run it cost them AND US (the taxpayer) money.

Government needs to get out of the business of trying to manipulate the market and let the free market system determine the costs for goods and services.

[henryclay]

It was explained to me years ago that the federal government cannot tax state and local activities and vice versa. It was said to be in the Constitution. The interest on US treasuries, (and all other US obligations, (including any interest they pay on tax refunds), is taxed by the feds, but not by the states. Interest on state and municipal obligations may be taxed, , , or not taxe, , , by the state of origin, and are not taxed by the feds, but are ALWAYS taxed by other states. That means if you have a mutual fond of municipals, your state my not tax the interest you get on bonds from within your state, but you will pay your state an income tax on the interest your mutual fund pays you on bonds from all other states.

If anyone knows of any exceptions to this would you please tell us about them?

As for a flat tax, it will never work becaue we should all realize that only the wealthiest people, the 5% who now pay 55% of the taxes, will benefit from a flat tax. That is, unless you make the tax ONLY apply to incomes above a certain level, and that leve will have to be close to,or even higher than some presently unknown figure, but probably close to $75,000 a year. If you do that, then how can it be called a flat tax?

Everybody should have some skin in the game, (thanks pappy), and like it or not, that means everybody should have to carry the burden of government. Figure it out any way you care to, , , just don't leave anybody out. We have all heard the phrase, "Freedom is not free". Okay, let's make it so.

And a "fair tax" will be even more difficult to administer.

And all the bruhaha about how the world is not fair won't fly. Everybody is born naked, but everybody has the same chances as everybody else.

Don't agree? Then explain how a half black, half white kid, born in one of the most ethnically biased places on the planet to one of the most unstable families imaginable, and bounced around the world, living with first this one and then that one, and never having anything but fantasy for a role model, could grow up to be president?

Kwitcherbellyakin and start paying attention to your possibilities.

[ugonow]

Then explain how a half black, half white kid, born in one of the most ethnically biased places on the planet to one of the most unstable families imaginable, and bounced around the world, living with first this one and then that one, and never having anything but fantasy for a role model, could grow up to be president?

Affirmitive action? Acorn? Rigged elections? A plant from Russia? Or Bush/McCain/Palin?

[sesfw]

I'm for a flat tax. 15-17% on anything over $12K annual. All 1099s and W-2s.

I don't know enough about business taxes to comment.

[formerexpat]

So, is it possible?

If I were king for a day, I would completely eliminate all federal taxes, including those on business and implement a national sales tax that would be placed on all items, except for essential foods, homes and clothing.

This would insert progressiveness into the tax system since the poor spend more of their income on these items than the rich but it would allow the poor to buy the basic items they need to live without the mark up from taxes AND it would not penalize financial success.

Arguably, prices of those essential goods would drop since the embedded corporate taxes would be eliminated from the price of goods that consumers pay.

[shelby]

"except for essential foods, homes and clothing."

This is the problem I have with flat tax too I read things like daycare and child support would be taxed as well (seems to punish single parents). clothing is not an issue for me it is taxed already. Also the tax on home purchases, how could that help the already crippled housing market and already struggling home owners who cannot sell their homes. Seems to shift the burden more to the poor when high income people spend such a little percentage on consumption of housing and food. So other than those items I can agree with it. I just think it would create a cluster F in the transition period.

[formerexpat]

This is the problem I have with flat tax too I read things like daycare and child support would be taxed as well

I would prefer a flat tax via a national sales tax - no income tax. So child support income would not be taxed but when you spend it, it would be taxed...if you spend it on non-essentials.

Daycare would be taxed but would likely decrease in the price you pay. If you currently pay $1000 a month, it's because the company has to pay over $200-300 in taxes on that. If we eliminate corporate taxes and only tax it at the point of sale then prices would remain stable and in most cases, actually decrease.

clothing is not an issue for me it is taxed already.

Depends on the state. Some states don't tax clothing, like PA for example.

Also the tax on home purchases, how could that help the already crippled housing market and already struggling home owners who cannot sell their homes.

I said, in my world, homes would be exempt from the national sales tax. None would be paid.

To help the lower income brackets though, rents would decrease since the owners aren't paying taxes on the income. That would help.

[Deleted]

Could we truly have a flat tax?

I would like one but I don't think there is any way in the world that we could have one. It would be fought tooth & nail by liberals unless the poor were exempt & that would cost Mr Unaverage tax payer even more (unaverage in that he actually pays taxes).

[shelby]

This is the problem I have with flat tax too I read things like daycare and child support would be taxed as well


I would prefer a flat tax via a national sales tax - no income tax. So child support income would not be taxed but when you spend it, it would be taxed...if you spend it on non-essentials.

Like I said from what I read child support would be taxed. I do have a big problem with taxing rent but not homes we should not tax either. It would be a punishment to those who cannot afford to by a home. This would be the biggest unfair aspect of the flat tax if that is how it would be set up. Yes I would fight tooth and nail if we taxed rent but not home purchases.

[henryclay]

Dick Armey, congressman from Texas, introduced a national sales tax bill to tax everything at 23% about six years ago. He included a rebate plan for the poor so that they would wind up with no actual tax after they got their rebates.

The bean counter number crunchers had a field day. It was a masterpiece on how to make everybody suddenly fall into the poor category, and even if it didn't do that and the economy boomed, it still was not enough to run the government.

And when the rubber hits the road, it won't stop wasteful government spending. To make up for that all the politicians will have to do is vote to increase the rate of tax on everything anyway. So where is the stability going to come from?

To me it's like the problem we have with illegal immigration. Some people want reform there, just like some people want tax reform. But until the border is secured there will be no end to illegal immigration, and until wasteful government spending is brought under control there will be no tax reforms that will solve any problems either.

[formerexpat]

Like I said from what I read child support would be taxed.

All depends on the "flat tax" system you implement. Is it income based or sales tax based?

I thought child support was taxed already [and tax deductible for the payer]?

Dick Armey, congressman from Texas, introduced a national sales tax bill to tax everything at 23% about six years ago. He included a rebate plan for the poor so that they would wind up with no actual tax after they got their rebates.

The bean counter number crunchers had a field day. It was a masterpiece on how to make everybody suddenly fall into the poor category, and even if it didn't do that and the economy boomed, it still was not enough to run the government.

Every flat tax proposal I've seen from Mr Armey [he's had both sales tax based and income tax based], has been revenue neutral.

[henryclay]

Every flat tax proposal I've seen from Mr Armey [he's had both sales tax based and income tax based], has been revenue neutral.

Yes, as long as no one took advantage of the loopholes and morphed themselves into the category of being too poor to participate.

And that's the single biggest problem with funding the government. It's probably no different in any country in the world. Finding out how, and then exploiting what you learn, , , inside the law, , , , to avoid taxes is a way of life no matter what your status is in society, or what society you are part of. It's just part of taking care of yourself first.

Of all the proposals made so far, each and every one of them includes a provision to "take care of the poor, the infirm and the needy", as well as loopholes for others to avoid taxes that some could not avail for themselves. We have an overabundance of such programs in place now, and they are eating the country from the inside out. Even John Kerry, tried to beat Massachusetts taxes by tieing his new yacht up in a different state, , , and it wasn't illegal for him to do it.

Theere will always be ways to avoid taxes. One way is to stay poor, even if it's just on paper. The flat tax and fair tax proposals encourage it.

The problem is not tax collecting, or who pays what. The problem is how it is spent, and until that problem is attacked, and attacked hard and relentlessly, no tax system will solve the problem.

[ameiko]

May 14, 2011 10:28:47 GMT -5 Bluerobin said:

Flat tax, yes. Taxing muni bonds would guarantee that you don't sell them. Right now, they pay a lower rate of return, because they are tax free.

I did note this above.

[ameiko]

May 14, 2011 10:50:14 GMT -5 billisonboard said:

So the 47% start giving more money to the government.
The top 5% start giving less money to the government.

The 47% have less money to spend on consumer goods and thus buy less which means that the top 5% end up making less money.

Net win for who?

Well given that the top 5% would then have more money to invest in jobs and are not being run out of America by high taxes and thus will keep jobs here for us, including that lower 47%, it sounds like a win for everyone!

Also, if the lower half had to pay, maybe we'd go back to the good old days when governments (combined state, local, and federal) were only 5% of GDP instead of 40% as it is now. Smaller government means less taxes sucked out of the producers to be given to leeches.

Again, this is a win-win... unless you're a leech.

Why does it have to be a bad thing to have EVERYONE have skin in the game and not only not punish people for success but ALSO get rid of those tax breaks that supposedly lets those evil rich people get away with not paying taxes. So it sounds like we might actually get MORE money according to yours and other's theories if we have a flat tax with NO deductions.

Wow, so simple even a liberal can understand it!

[ameiko]

May 14, 2011 10:56:10 GMT -5 Bluerobin said:

Pappy, I prefer someone else pays, but I support flat tax. Those not making it, can get it back through all the aid packages we offer.
I just don't support getting rid of tax free bonds. Let's face it, they just can't compete. Keep the tax free status on the muni's.

Sorry but no: that violates a flat tax. As I noted in my initial post, it just means that going foward that the states would have to offer a higher return on this bonds. It's not a nation breaker but allowing ANY deduction just opens the flood gates again so, therefore, new muni bonds will be subject to tax. They will be competitive if they offer a higher rate; you act as if not a single muni bond will ever be sold again which is clearly NOT true.

[ameiko]

May 14, 2011 11:14:14 GMT -5 fairlycrazy23 said:

I prefer a tax on consumption vs a tax on income, that is one reason I support the Fairtax. Also it doesn't really make since to tax businesses, they just pass that along to the consumer anyway, so why not tax at the POS.

Could you expand that please? I would love to hear more since how we tax busineses is just so out there for me; write off this, write off that- how does one operate a business in a no deduction environment? how are they taxed? Or, I guess you are suggesting, why tax them at all?

[ameiko]

It was explained to me years ago that the federal government cannot tax state and local activities and vice versa. It was said to be in the Constitution. The interest on US treasuries, (and all other US obligations, (including any interest they pay on tax refunds), is taxed by the feds, but not by the states. Interest on state and municipal obligations may be taxed, , , or not taxe, , , by the state of origin, and are not taxed by the feds, but are ALWAYS taxed by other states. That means if you have a mutual fond of municipals, your state my not tax the interest you get on bonds from within your state, but you will pay your state an income tax on the interest your mutual fund pays you on bonds from all other states.

Interesting: so it would not be constitutional to tax state and local muni bonds? Hmm... well in that case I guess that's the exception but at least it's not a federal deduction.

If true, thanks for the info.

[ameiko]

As for a flat tax, it will never work becaue we should all realize that only the wealthiest people, the 5% who now pay 55% of the taxes, will benefit from a flat tax.

Why would this not work though? What does it supposedly benefiting only 5% of the people have to do with the ability execute it? It might drop taxes across the board as people have to grapple with the decision to either be taxed or stop feeding from the government teat and that would hopefully lead to smaller government and thus less taxes.

[billisonboard]

May 14, 2011 18:41:14 GMT -5 ameiko said:

May 14, 2011 10:50:14 GMT -5 billisonboard said:

So the 47% start giving more money to the government.
The top 5% start giving less money to the government.

The 47% have less money to spend on consumer goods and thus buy less which means that the top 5% end up making less money.

Net win for who?

Well given that the top 5% would then have more money to invest in jobs ...!

And 47% will have less money to purchase goods and services so businesses would have to lay off people.

Wow, so simple even a conservative can understand it!