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post #1 of 10 (permalink) Old 11-03-2008, 01:25 PM Thread Starter
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Flat Tax Fairest Of Them All

You idiotic liberal Republicans should read up and understand what the fuck you're talking about before associating ANYTHING other than the progressive tax plan we've ALREADY GOT with socialism.
Flat Tax Is Fairest of Them All

John Hoover
Nov 03, 2008 10:40 am



Auditors recently revealed that the IRS paid out an estimated $1.6 billion in potentially fraudulent tax refunds during the 2006 and 2007 filing seasons. Given the track record of government agencies, that figure is probably higher - a lot higher.

This is particularly troubling, because there’s nothing yet in place to fix the problem. The fraudulent refunds are typically in increments so small that the IRS doesn’t deem them worthy of investigation. What’s worse, the IRS lacks the investigative capacity to go after so pervasive a problem, even if they deemed it worthy of attention.

The audit concluded: “This problem is becoming unmanageable." Unless the IRS cracks down, it could issue more fraudulent refunds, burdening "honest taxpayers whose tax dollars are being used to support this criminal activity," as the audit put it.

This was all apparently due to a massive and no doubt massively expensive new IRS computer system that has yet to function properly. After a year in which the big new machine simply refused to work, the IRS reverted to the old one. Go figure. What private enterprise the size of the IRS (if there is such a thing) could go a year without functioning computers? But that’s a topic for another column.

The bigger issue at hand is the wisdom of a complex tax code ostensibly designed to address economic disparity. The complexities that the computer system can’t handle include progressive tax rates, shelters and deductions. Progressive tax rates exist in order to take a larger percentage from those who can ostensibly afford to pay a greater percentage of their income. Those with low incomes pay little or nothing.

It’s only fair, right? “From each according to his abilities (to pay), to each according to his needs.” Karl Marx also said that “Democracy is the road to socialism.” The current IRS bungle is just more proof that the German philosopher was right. Excavating a little deeper, the concept of wealth redistribution revolves around the question of fairness. Now I’ve been taught that a “fair” is something that comes to town once a year. Not so with everyone. The socialist wealth redistributor, for example, sincerely believes that it’s unfair that some would have more resources than others.

I was reminded of this when chatting with a friend over dinner last Tuesday night. The subject was the election looming on November 4th. I was suggesting that, despite current financial theatrics, geo-politics, world peace, the security of the United States and Israel were really the weightiest issues.

“I mean, who do you want to have possession of the briefcase filled with launch codes come January 20th?” I asked rhetorically.

“I don’t care,” my friend replied with a straight face. “This election is about economic policy and taxes. I’m middle class, with a regular private-sector job, a vacation home at the beach, and about $250,000 socked away. I don’t want to pay more taxes.”

“Robbing Peter to pay Paul, and get Paul’s vote in the process,” I replied (letting go of my concern for the safety of our cities, seaports, drinking water and US interests abroad) “is a really worn-out campaign tactic. Don’t you think it would be fair if all Americans gave up the same percentage of their income to run our government?”

“No.”

“No?”

I set down my fork filled with mashed potatoes, sat back in my chair, and squinted curiously at my friend.

“If people can pay more,” he went on, “they should pay more.”

“Ten percent of $250,000 is more than ten percent of $50,000,” I reasoned.

“Not enough more,” he said with an almost menacing tone in his voice. “If the rich guy pays $25,000, he still has $225,000 left. The poor guy would only have $45,000 left.”

I kept squinting. “If the poor guy pays zero taxes and keeps his entire $50 large,” I said. “The rich guy still has more.”

“If the rich guy pays, say, 75%,” he went on, “now we’re talking.”

“75%,” I said, incredulously.

“We’ve had progressions that steep in the tax code before,” he said. “But the Republicans let their rich friends off the hook.”

“Whatever,” I sighed, having no desire to follow him down that path. “I’ll stipulate that the rich use shelters to pay very little and, sometimes, no taxes. But somehow I don’t think that’s going to change under the new regime. I don’t see Barbara Streisand, George Soros, or Oprah paying 75% of their annual incomes to the IRS.”

“They’re different,” my friend said.

“But what’s wrong with a flat tax?” I pursued. “No shelters, no deductions, no tax-based social engineering, no refunds, no IRS!”

“I told you, it’s not fair,” he insisted. “It lets the rich off the hook.”

“I’ll bet they would actually pay more under a flat tax than they pay now,” I suggested.

I went back to my mashed potatoes, which were now getting cold.

“Do you think the Phillies will take it tomorrow night,” I asked.

“If it doesn’t rain,” he said.

“Yeah,” I said, “That wouldn’t be fair.”

He narrowed his eyes and glared at me.

We ate in silence for a long time, which gave me time to chew 10 times before swallowing and ruminate on the whole concept of fair taxes that don’t intentionally punish people who work harder and/or simply luck out and earn more than others. A flat tax is simply that: a flat percentage rate across all incomes determining what they pay in income tax. Ten percent, 12.5, 15, whatever. The point is, the complexities of the tax code can be eliminated. The fraud, the wasteful tax collection/tax refunding nightmare that we’re only beginning to see the edges of - gone. Cheating on income taxes is a national pastime. The deduction-based tax code is inherently biased against those who don’t have the knowledge level or capacity to access the skills of a tax accountant. That’s why the progressive tax tables are a joke. Wealthy people shelter their income; some pay virtually nothing whatsoever.

The complex tax codes are how the political class protects their wealthy donors’ incomes under the righteous guise of taxing the wealthy more than the working class. This is why you don’t see either political party jumping behind a flat tax, no matter how many times it’s proposed.

Under a true flat tax, income is income, not income-minus-deductions. Income is income. The percentage charged on personal income can differ from the percentage charged on business income, but personal income is personal income; a business is a business. A flat tax will remove the monkey business that results in high-income earners actually paying a smaller percentage of their income in taxes than lower income workers.

If we as a society can’t tolerate high-earning individuals or businesses banking large sums (we have proven we can -- see above -- but we’ll assume we can’t), then invoke a tiered tax. Impose a flat rate for the first $100,000 of income, which applies to everyone. The smaller population, who earn more than $100,000, apply a higher percentage to only the amount over $100,000.

It’s punitive- but at least through the first $100,000, everybody is treated equally. In each subsequent tier, everyone is treated equally. If some poor schlub works some overtime and bags another $50,000, he or she will pay 5% more on that amount, not 5% more from dollar one. If someone sells grandma’s house (assuming she’s not around and doesn’t need it any more), that’s income, and subject to the flat rate/tiered income tax, whichever tier that qualifies for.

If we, as a society, want lower income people and businesses to pay no tax, then create a threshold below which there will be no tax. We’ve essentially done that already, but through a cumbersome and circuitous process of refunds and tax credits that costs taxpayers enormous amounts to simply fund the bureaucracy.

A flat tax can be calculated instantly. It brings the act of assessing and collecting taxes on income out of the dark, murky, treacherous, confusing labyrinth of contemporary tax law, where little $1.6 billion errors occur. And it’s fair to everyone.

I know that the upper 5% of income earners pay the larger share of the collected taxes now. A flat tax assumes that the lion will be even larger if the same tax rates apply across the board as percentage of income.

I can digest that.
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post #2 of 10 (permalink) Old 11-03-2008, 03:43 PM
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^Amen Brother!

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post #3 of 10 (permalink) Old 11-03-2008, 06:33 PM
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Um, and how does that fit with the liberal democrats, like the beloved Obama? His plan goes less flat than the current system, but even at that the problem is that lots of the people he foresees raising taxes on are legislators and those with money to buy legislators, so my guess is he won't get too far on his main tax plan, so he'll screw more of the middle class because he'll still need the income to fund the rest of his nebulous promises.

Not that it matters. At this point he could rape chipmunks (who are here illegally) and still be elected.

Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy; its inherent virtue is the equal sharing of misery. (Winston Churchill)
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post #4 of 10 (permalink) Old 11-03-2008, 06:35 PM
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Originally Posted by gregs210 View Post

Not that it matters. At this point he could rape chipmunks (who are here illegally) and still be elected.
And for that, you have to thank every person who voted for Bush and brought America to this pretty pass.
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post #5 of 10 (permalink) Old 11-03-2008, 09:57 PM
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A flat tax system in this country could work, using the caveat that the article listed of tiering above say $125-150K. And the incremental increase on that tier would not be significant. The only folks that would find a putative effect to a flat tax at that point would be those making under $25K [2008 dollars].

Using the 12.5 rate which is fairly standard in the model, it moves a $20K person down to $17,500. While that might not sound like a lot. In most economic environments, $17,500 will not break even on living expenses, much less pay for those expectations such as insurance, savings and retirement. While there are not a lot of folks making that amount, some do and that difference is the difference between making it and not making it.

Back in the dark ages there were three tiers that were not that far apart. Tier 1 for folks who made under X was around 5% [I can't find the historical tables], tier two was 17% and Tier 3 was around 20% if I remember correctly. The very largest majority of taxpayers paid the middle Tier with the 5% on either side of the bell paying more/less.

THEN we got into the concepts of INCENTIVES [spur the economy by getting a deduction for your mortgage!!!] and the dominoes started getting laid out.

McBear,
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post #6 of 10 (permalink) Old 11-03-2008, 10:09 PM
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Hell no.

Flat tax with no mortgage deduction will put last nail in the coffin of the American housing to begin with.

Then you'll have to implement some sort of VAT tax on everything which would raise the price of the durable goods/cars to the sky.

It would be totally different country after doing so.

Like EU.

Now, with the social benefits and perks that EU citizens enjoy it could be worth it.

You decide.
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post #7 of 10 (permalink) Old 11-03-2008, 10:13 PM
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I'll take 20%, I'll take 20%! Screaming, yelling, drooling, barking, tearing!
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post #8 of 10 (permalink) Old 11-03-2008, 10:14 PM
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And there begins the tradeoffs. You get nothing for free. Fair tax would work but the compromises would be many and in the big picture, most folks would not like them.

McBear,
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post #9 of 10 (permalink) Old 11-03-2008, 11:04 PM
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Flat tax is a perfect tool to finally eliminate the middle class in this country.

Remove the deductiosn, tax on the income and consumption, pretty soon you'll see the middle class becaming a poor class.

The dream of the W and Co would materialize.
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post #10 of 10 (permalink) Old 11-03-2008, 11:54 PM
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Having studied the tax code, the bigger losers would be tax attorneys.

The underlying problem is not necessarily with the graduated tax. The problems relate more to an unending thirst by politicians for more and more income from taxes, however calculated.

There are many benefits that could potentially inure to our benefit from a true flat tax; eliminating a good chunk of the Treasury department would be a plus, they could all go get real jobs and deal with a different kind of reality. For the vast majority of taxpayers, the ability to submit fraudulent returns would be gone, since the tax would be withheld and paid by the employer. (Of course, the independently wealthy and self-employed would still have that opportunity, but that's a much smaller piece of the pie.) And there are those who consider that in the context of a flat tax, people would have less of an incentive to cheat since they might not feel the tug to get a bit of self-perceived "fairness" for themselves.

However, the more studious articles I've read about the concepts of flat tax seem to accept that ultimately there would still remain certain loopholes and favoritism that would lay waste to much of the benefits that might be seen by a true flat tax.

Me, I don't really care how it is calculated, I'd much rather see it lessened and spent with some semblance of responsibility. Watching the Hill spend our money makes one consider that perhaps drunken sailors on shore leave are frugal.

Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy; its inherent virtue is the equal sharing of misery. (Winston Churchill)
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