That's why we need a flat tax. 10%. no exceptions, no write-offs,no deductions, and no tax havens. No fortune 500's paying no taxes and no well-fare cases paying none. Fair is Fair, and this is coming from someone in the low-income bracket.
Originally Posted by Flying Dutchman
I'm not sure why people think a flat tax is a panacea, or that it's 'fair'. It's not; it's a poison, a fiscal trojan horse. If everyone pays the same percentage, the poor/middle class inherently suffer more, because:
#1: They shoulder _significantly_ more tax burden assuming revenue was to remain the same unless you're perhaps unjustifiably confident that gains from loophole destruction will permit a lower average flat rate to all vis a vis what the lowest brackets currently pay, because we're essentially moving from a progressive code to an averaging of tax burden. Going by the effective federal tax rates on Wikipedia (2007 data), featuring all those nasty loopholes, where the top 20% has an effective burden of 20% vs the 2-16% tax burden of those in the bottom 80%, I find it pretty much impossible that we could charge everyone an effective 10% (the average of the lowest quintiles) without decreasing revenues.
Let's do a preliminary estimate. The current effective federal tax rate for each quintile:
Lowest $18,400 *.02% = 368
Second $42,500 * .091% = 3867.5
Middle $64,500 * .127% = 8191.5
Fourth $94,100 * .157% = 14773.7
Highest $264,700 * .201% = 53204.7
vs our theoretical 10% for everyone:
Lowest $18,400 * .1 = 1840
Second $42,500 * .1 = 4250
Middle $64,500 * .1 = 6450
Fourth $94,100 * .1 = 9410
Highest $264,700 * .1 = 26470
As you can see, not only do we have a _huge_ deficit vis a vis the above progressive number, but the poorest quintiles pay substantially more tax. Say we use the average of all rates in an effort to avoid said deficit, including that of the highest quintile (14.9%):
Lowest $18,400 * .149 = 2741.6
Second $42,500 * .149 = 6332.5
Middle $64,500 * .149 = 9610.5
Fourth $94,100 * .149 = 14020.9
Highest $264,700 * .149 = 39440.3
Still have a $8259.6 per taxpayer deficit vis a vis example 1 as expected given the greater (and now less taxed) incomes of the highest quintiles. Obviously we need to increase our flat tax rate even more; a rate just higher than 16.6% to bridge the gap. The impact on the amount the poor pay is equally apparent. The poorest quintile pay more than 8.3 times as much as they did before under this system. The second? Nearly double. The third? About a third more. By contrast, the wealthiest quintile sees an almost 20% reduction to their effective rate. In otherwords, the quintiles that need the most tax relief are actually _heavily_ penalized under a flat tax plan; no wonder the libertarian rich, and the PACs they fund absolutely love the idea of a flat tax! The poor and middle class get totally hosed while they save!
More contemporary information that factors in the impact of state taxation (which is regressive on average) as well:
According to these, America is already pretty close to a state of flat taxation in net.
#2: They pay out much more money as a % of their income for the basic necessities of life (food, shelter, clothing, medicine/health care, and transport), thus suffering a larger adverse material impact to its quality. This compounds the impact of #1. Each % of tax on the lower/middle class is more detrimental to quality of life than on the upper classes for this reason.
#3: They are victimized by wealth consolidation which is absolutely guaranteed by design as above. Progressive taxation with regards to income and estate taxes is pretty much the only hope the present system has of preventing massive and accelerating upward wealth consolidation which is a clear and present danger to democracy and capitalism. Yes there are loopholes which can be exploited; the solution is clearly to fix the loopholes and fortify the tax code, not assure disaster with a flat tax.
In addition to the above problems, you effectively eliminate tax credits/discounts as a policy tool for encouraging socially responsible, and good long term behaviours that are otherwise un or under-rewarded by the marketplace.