Why a flat tax is a bad idea

[myp]

Okay we have run into the flat tax in quite a few discussions lately, but always as a side-topic, not giving it the attention it deserves despite the disagreement. So let's have a discussion on it here.

My reasoning for why a flat tax is bad is because the value of money diminishes marginally and considering the value of money, it means the poor end up carrying a heavier burden of the tax share. This is why people call it regressive. And I think that is the last thing we would want to do- basically kick someone when they are down. Those who are pro flat tax often overlook this point in my experience. I am not sure why. So let's talk about it.

 

[chris7375]

Okay we have run into the flat tax in quite a few discussions lately, but always as a side-topic, not giving it the attention it deserves despite the disagreement. So let's have a discussion on it here.

My reasoning for why a flat tax is bad is because the value of money is marginal and considering the value of money, it means the poor end up carrying a heavier burden of the tax share. This is why people call it regressive. And I think that is the last thing we would want to do- basically kick someone when they are down. Those who are pro flat tax often overlook this point in my experience. I am not sure why. So let's talk about it.

Ok though I am told it is not a flat tax though to me it is what if you tiered different percentages on different income levels?

 

[myp]

Ok though I am told it is not a flat tax though to me it is what if you tiered different percentages on different income levels?

Not sure what you are saying, can you rephrase that?

 

[chris7375]

OK I explain it to Protectionist so I will again.

You have a flat rate tax that is tiered an example of this would be

18 - 30 thousand income a year would get a flat tax rate of say 2%

30,001 - 50 would get a flat tax rate of say 4%.

Obviously those are just examples but I think you can get the idea.

 

[myp]

OK I explain it to Protectionist so I will again.

You have a flat rate tax that is tiered an example of this would be

18 - 30 thousand income a year would get a flat tax rate of say 2%

30,001 - 50 would get a flat tax rate of say 4%.

Obviously those are just examples but I think you can get the idea.

That is a progressive tax system. I am for that (that isn't a flat tax)

 

[chris7375]

That is a progressive tax system. I am for that (that isn't a flat tax)

See I did not know that lol. That is how I would do it. That is how I state I would tax people. so ok I am on the same page as you .

 

[clax]

Poor will have a heavier burden no matter what tax policy you have. The only one that doesn't burden them is no tax on the poor.

you can't not collect taxes from the poor, they are the biggest group. I take it poor meaning the lowest tax bracket.

if you start at the lowest bracket, say people in thus bracket pay 15% drop it to 10 present and everybody pays ten percent. if that isn't enough money for the fed, perhaps they should spend wiser.

 

[myp]

See I did not know that lol. That is how I would do it. That is how I state I would tax people. so ok I am on the same page as you .

You know that's what we do right now, right?

 

[myp]

Poor will have a heavier burden no matter what tax policy you have.

That's not true. A progressive system corrects that.

 

[clax]

That's not true. A progressive system corrects that.

a progressive system isn't necessary, what ever percent is taken from the poor should be taken from from everybody else. Then the burden is not on anybody.

 

[myp]

a progressive system isn't necessary, what ever percent is taken from the poor should be taken from from everybody else. Then the burden is not on anybody.

That is a higher burden on the poor as I explained in the OP. 10% of income to a poor person is worth more to him/her than 10% of income to a rich person.

Put it this way. $50 to a rich guy he might waste, give away, doesn't matter. To a poor person that $50 might be the difference between eating or not eating for a few days.

 

[tecoyah]

Analogy Time:

I have a Potato

You have a bag of ten

10% of my potato will effect what I eat for dinner.

One less potato in your bag will not effect your dinner tonight.

 

[clax]

That is a higher burden on the poor as I explained in the OP. 10% of income to a poor person is worth more to him/her than 10% of income to a rich person.

Put it this way. $50 to a rich guy he might waste, give away, doesn't matter. To a poor person that $50 might be the difference between eating or not eating for a few days.

Drop it to 7%

 

[myp]

Drop it to 7%

First off, that is a tremendous blow to revenue (to have everyone pay only 7% [or even 10]). Second, that still doesn't change the fact that the burden would be greater on the poor...

 

[clax]

First off, that is a tremendous blow to revenue (to have everyone pay only 7% [or even 10]). Second, that still doesn't change the fact that the burden would be greater on the poor...

I don't see how.

7% is less than they pay now.

As for the blow to revenue, no really a huge concern to me, I disagree with the way that they spend the tax dollars. If that was adjusted there would be no need to burden the poor

 

[myp]

I don't see how.

7% is less than they pay now.

As for the blow to revenue, no really a huge concern to me, I disagree with the way that they spend the tax dollars. If that was adjusted there would be no need to burden the poor

I am saying the burden on the poor RELATIVE to the rich would be higher. Why would you want to place more burden on the poor? (by the way, given the EITC and other programs a lot of the poor don't pay much if any tax right now- a good thing in my opinion)

And as for the revenue, it doesn't matter that is isn't a concern to you- the spending is already on the books. Cut it first, then we'll talk, but good luck with cutting it as much as you want to.

 

[clax]

I am saying the burden on the poor RELATIVE to the rich would be higher. Why would you want to place more burden on the poor?

And as for the revenue, it doesn't matter that is isn't a concern to you- the spending is already on the books. Cut it first, then we'll talk, but good luck with cutting it as much as you want to.

I don't think the poor should pay taxes, but I believe we are going to differ on what the poor are.

But lower income paying a percentage, yes it is a slice from a smaller pie, but loo would support a smaller slice.

It doesn't matter what spending is on the books if they don't have enough money they are spending to much.

 

[Gottago]

I am very much for a flat tax. My proposal (kinks still to be considered, lol) is to exclude, for everybody, the first 25,000 in income. Income being wages, salaries, dividens, etc. Not including inheritance. The exclusion amount may be adjusted year to year based on inflation, etc.

The rest is taxed at a flat rate, say 20%. No deductions for charitible donations, medical, mortgages, etc. Yes, a return would still have to be filed, but the simplification would make it so just about anyone could file their own.

Not, this is not complete, but the basis is quite workable, IMO.

 

[myp]

I am very much for a flat tax. My proposal (kinks still to be considered, lol) is to exclude, for everybody, the first 25,000 in income. Income being wages, salaries, dividens, etc. Not including inheritance. The exclusion amount may be adjusted year to year based on inflation, etc.

The rest is taxed at a flat rate, say 20%. No deductions for charitible donations, medical, mortgages, etc. Yes, a return would still have to be filed, but the simplification would make it so just about anyone could file their own.

Not, this is not complete, but the basis is quite workable, IMO.

Then you are placing a greater tax burden on the middle class than the rich... The value of money like all things diminishes marginally.

 

[Gottago]

Then you are placing a greater tax burden on the middle class than the rich... The value of money like all things diminishes marginally.

How so, when the higher income earners aren't able to deduct anything, and everything is taxable after 25k?

a. Income after exclusion: 25,000 x 20%=5000
b. Income after exclusion: 500,000 X 20% = 100,000
or
c. Income after exclusion: 6000 x 20% = 1200

Dollar for dollar, the higher the income, the more that is paid in taxes, just as it is now. Except now they get to deduct enough to reduce the taxable income, so the effective rate is lower on the real gross income.

I don't fully understand your last statement, other than to think your saying a dollar's value diminishes when you have more of them. Is this correct?