Yes. They would add up all they made plus subtract all they lost and pay on the remainder. Now there's going to be stocks, bonds , interest, as well as many other things which will have to be considered "income'.
Paying Taxes: What is Fair?
- Thread starter BenTheMan
- Start date
Yes. They would add up all they made plus subtract all they lost and pay on the remainder. Now there's going to be stocks, bonds , interest, as well as many other things which will have to be considered "income'.
Pandaemoni
Valued Senior Member
The flat tax proposals I have seen eliminate the corporate income tax. The theory is that it is a double tax, since corporations distribute their profits (ultimately) to owners after those earnings are taxed, and then the owners have to pay tax on the dividends.
On a different point the economic argument for a graduated marginal tax rate system is not that rick people "owe society" more than poor ones, it's that rich people value money less than poor ones. Let's say you earn $20 million and the government takes half. You still earn $10 million. The difference in your lifestyle and overall happiness is probably not that great. You are a multi-millionaire either way. If you each $200,000 a year and the government takes half, that is a bigger hit. At $100K per year, you are still doing pretty well, but major medical expenses, college tuitions, buying a new car, these are things you might require debt or savings to be able to afford, when on $200K you'd have had more of a cushion If you only earn $40,000, though and the government takes half, you only earn $20,000 that year. The difference in your lifestyle and general level of satisfaction is likely to be far more noticeable. Yet both paid 50%.
Even the flat tax people implicitly acknowledge this economic concept--the "diminishing marginal utility of money"--which is why no one ever proposes a true flat tax...just a *less* graduated one. When you let people earning less than $30,000 pay $0, that is a 0% tax rate, so there are two, rather than 5-6, tax rates in the "flat tax" proposals.
But is two rates are good, why not three to let the $75K-$300K income bracket off the hook mentioned above?
There is some notion that a flat tax is "simpler" but the rates in question affect only Section 1 of the tax code. The other 500,000 pages would remain unchanged. That's okay, because the flat tax people want to chuck those. But why not keep graduated rates and chuck all the other pages then? In short, there is nothing inherently much simpler about a flat tax.
Also, who here is ready to give up their child tax credit, the deduction for local income taxes paid, the mortgage interest deduction, education costs deductions...flat taxers want to eliminate all of those. Every deduction has a constituency that would fight to keep it because (they feel) "but that is we NEED."
Meanwhile, it has to be admitted that the constituency most likely to save its deductions and loopholes are the wealthy, because they just have more pull in the political realm.
One problem with your argument is that almost all of the tax brackets are for people who make less than 100k, and there certainly is no 10 million dollar tax rate. Does a person earning 32k really value his money less than the guy making 33k? I mean, sure, maybe your argument applies to someone making 10 or 20 million dollars; but our "progressive" tax rate doesn't treat them any different from someone making $372,950.
Furthermore, most people consider a tax system where everyone pays the same percent to be fairer than what we now have because we all know that our current ultra complicated system full of loopholes allows many of the ultra rich to buy off politicians to get special deals that let them off scot free.
Finally, as an example of what the ultra rich do when confronted with "progressive" tax rates, consider the Rolling Stones, who have paid just 1.6% on their hundreds of millions in earnings thru the use of various tax shelters.
Why did they go to all that trouble if their money wasn't worth as much to them as mine is to me?
Ten million dollars is ten million dollars. Nobody wants to give that to the government and the ultra rich have the means to avoid high taxes and end up paying less under your "progressive" tax systems than they would under a fair flat tax that was low enough for them to not go to the trouble of avoiding.
Add to that, if they weren't so concerned with hiding their income to avoid unfair progressive taxes, they might have invested that money in their home country. This would have created jobs there rather than in Fiji or whereever the hell they stashed the money.
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It would have to be zero far higher up than the "poor", if the middle class is not to be destroyed as well.madanth said:
If you can't tax the rich, you can't tax the rich- the percentage at which you can't tax them is irrelevant. Besides: there is no percentage low enough to both please the wealthy and pay for the infrastructure of a modern industrial society.madanth said:
Can't we get rid of the income tax altogether? There wasn't even an income tax before 1913, and the income tax accounts for about 30% of federal revenues, so if we can cut 30% in spending, we can get rid of the income tax. We should also get rid of the corporate tax and become more business friendly.
Now you're changing your argument.
To avoid paying 40%, the Rolling Stones hide their income and even moved out of the UK. A reasonable flat tax would not only not chase the wealthy out of the country, it might attract others from outside the country.
You're forgetting that Obama is running a 40% deficit, so we'd have to cut spending by 70% to eliminate the need for income tax. Not to mention the programs Obama wants that he has yet to pass (healthcare) that would cause the deficit to explode. Check out this video of Rep Paul Ryan owning Obama at the recent healthcare summit:
http://www.youtube.com/watch?v=zPxMZ1WdINs&feature=player_embedded
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Learned Hand
Registered Senior Member
Yah, but don't forget the rich (actually, super rich) get hit on the back end with the death tax. Hoarding is always bad for a capitalistic economy, and the death tax (inheritance tax) ensures that wealth is redistributed into the economy. Whether by will or by trust, the death tax looms for the super wealthy. Then you also have the gift tax, used primarily where wealthy relatives give to other relatives. It's kind of like a tax on "old money."
Learned Hand
Registered Senior Member
Parenthetically, a flat tax is inherently doomed because any percentage you apply invariably favors those already rich or independently wealthy. It may also have some equal protection concerns.
Any tax on income favors those already rich, so a flat tax is hardly unique in that respect. And I think you're way off base with regard to equal protection. I can't see how that would apply at all.
Learned Hand
Registered Senior Member
Actually, I'm not that far off base. Taxing 30K income makers at 30%, the same as 250K income makers can create an "as applied" constitutional problem very similar in precedent to Yick Wo v. Hopkins. I don't care to write a legal memo on this issue, as we'll never go to a flat tax, but lower income makers, predominantly laborers, whether black, latino, high school educated only, drop outs, etc., could make an EP argument that the flat tax is basically aimed at keeping them poor, while the 250K person gets a great tax break for the remainder of his life. That someone who makes 30K must pay the same tax percentage as those who make 250K equates to a disproportionate appropriation of income to federal income tax policy and purpose. Of course, you can say 30% is 30% to all, but the effect on certain people or groups of people is what matters in an "as applied" analysis -- not the surface or plain reading of the legislation. Exceptions would have to be carved out all over the place, similar to the present tax code -- like not taxing people who make less than X $$ per year, or something to that effect. But then it wouldn't be a true flat tax, right? The easiest bet for a flat tax by the feds would be on sales and/or services. But since we're being taxed on income already, I'm not in favor of a fed sales tax. They kick us enough with excise taxes.
No, I am still pointing out that the numbers don't add up for a flat tax - the percentage the rich have to pay is disastrous for lower incomes.madanth said:
if you can't tax the rich, it doesn't matter what percentage you can't tax them at. If you can, you can set your tax levels at what is best for the community.madanth said:
There will always be non-industrial, lower-tax countries to hide income in. No taxation level high enough to support a modern industrial economy will attract the wealthy from poorer and less industrialized setups.
I do say 30% is 30%. I don't buy all the rest of the crap you wrote and I see no need to carve out any exemptions beyond not taxing the first 20k or so.
PS I wouldn't be so sure we won't see a flat tax. Russia has one, for Pete's sake. Why the hell can't we?
A person who makes $60k per year would end up with $40k in post-tax income: that's the difference between being able to buy a house and having to rent for your entire life, in many parts of the country - and that lack of equity will heavily impact that person's future financial position, as well as that of his descendents. His kids probably won't be going to college. The difference between $40k income and $60k income is huge, in terms of the lifestyle it will support.
The difference between an income of $600k and $400k, on the other hand, is much less. It's a less fancy house, one less fancy car or a few hundred k less in inheritence for the offspring. It doesn't demote that person to the middle class the way a flat tax demotes the formerly-middle-class to a subsistence lifestyle.
Are we supposed to envy the Russian economy or something? They have a per-capita GDP on par with Libya, you realize.
I'd pick a country that isn't viewed as a misgoverned basket case on its way into permanent demographic and economic decline, if I was going to propose emulating their policies.
Did you forget about the flat tax not starting until 20k? So your 60k a year guy will only be paying 8k in taxes. Whereas the other guy making 600k will end up paying 116k in taxes. Everyone is treated exactly the same (they get the same personal deduction of 20k and then pay 20%) yet the dude making 60k ends up paying only 13.3%, whereas the guy making 600k pays 19.3%. Seems more than fair to me.
The point was that they went from the communist evil empire to a tax system to the right of our own. Of course they have a long way to go, they're trying to rebuild after nearly a century wasted under communism.
What?
And beat their economy straight into the mud with it.madanth said:
So the rates are too low to support a modern industrial economy, and the the 60k guy can't buy a house or good schooling for his kids. The 600k guy cuts back on the free cable in the servant's quarters, or delays trading in the Mercedes an extra year.madanth said:
And the 60 million guy (more of them all the time, as the penalty for just taking the money rather than re-investing is reduced) doesn't even do that.
Welcome to Brazil, circa 1975.
I omitted it for simplicity. The argument ends essentially up the same even with the minor adjustments.
Why would anyone else care what "seems fair" to you? You've given no criteria for what fairness consists of.
And a corrupt kleptocracy to the right of our own, as well. You're talking about a country ruled by a cabal of intelligence agents, oil executives and organized crime, where reporters are openly assassinated and corruption runs rampant. They've also nationalized major portions of the economy.
What you have in Russia is closer to a fascism than libertarianism.
the whole thing is moderately laughable. I like the cries against income redistribution. they never seem to be able to explain how a rich person hoarding money and not spending it is better for the economy and the country than a poor person buying food and other essentials
? Why would they need to "explain" something that they agree doesn't hold? As Norsefire just pointed out, they'd rather harm the economy as a whole than prevent the rich guy from hoarding cash.