flat tax/fair tax, yea right

F

flaja

New member
Is there any legitimacy to the flat tax/fair tax hype? Could it be that the people who advocate the flat/fair tax are just looking for a tax that would be easier to evade?

I mean there are other more important issues than tax policy.
Government spending is through the roof (while spending is a function of fiscal policy not tax policy in that government will spend everything it gets and then want to spend more). The economy is a shambles due to consumer debt, the likes of Wal-Mart and imports from Red China. We are no longer a sovereign nation because of our open border policy. And, the country’s rampant immorality is sending it to Hell in a hand basket.

But for thousands upon thousands of people the biggest issue is tax policy? Are these people really concerned about the country, or are they just tax cheats who are using noble sentiment to mask self-serving motives?
 
flaja said:
Is there any legitimacy to the flat tax/fair tax hype? Could it be that the people who advocate the flat/fair tax are just looking for a tax that would be easier to evade?

I mean there are other more important issues than tax policy.
Government spending is through the roof (while spending is a function of fiscal policy not tax policy in that government will spend everything it gets and then want to spend more). The economy is a shambles due to consumer debt, the likes of Wal-Mart and imports from Red China. We are no longer a sovereign nation because of our open border policy. And, the country’s rampant immorality is sending it to Hell in a hand basket.

But for thousands upon thousands of people the biggest issue is tax policy? Are these people really concerned about the country, or are they just tax cheats who are using noble sentiment to mask self-serving motives?
Click to expand...

A flat tax would be much much harder to evade... because of its simplicity.

No deductions, other than the standard, no loopholes, no thousands of pages of tax code to be manipulated etc....

My thoughts on the flat tax....


Flat Tax with standard deduction
It is time for this country to become fiscally responsible. The national debt has increased every fiscal year since 1960. What has happened to the responsibility of the two parties? Both like to point the blame at the other, but in reality neither have been responsible fiscally. It is time for a change. Let’s begin with our tax code. It should be simple enough that the average person can understand it. It should not be filled with thousands of loopholes and deductions. Let us push for the flat tax with a standard deduction and nothing more.

Start with a standard deduction of $30k (adjusted for inflation annually) for each adult and then tax every dollar over that $30k at 20%. This is simple, easy to understand, fair and progressive. It protects the low-income individuals and couples from paying federal income taxes. It provides the middle-income families a lower effective tax rate than the wealthy. This plan would encompass ALL income, including earned income, capital gains and dividend income.

A person making $30k pays an effective rate of 0%.

A person making $50k pays an effective rate of 8%.

A person making $100k pays an effective rate of 14%.

A person making $200k pays en effective rate of 17%.

A person making $1mm pays an effective rate of 19.4%

Everyone has the same deduction and takes it. Which causes the effective tax rate to increase the more you make.

To reduce the national debt I would propose we add an additional temporary bracket to the flat tax. Every dollar over $1 million (again adjusted for inflation annually) would be taxed at 30% rather than 20%. The additional 10% would be mandated to pay down the debt.

It is our responsibility to pay our own way and not dump trillions of dollars of debt on future generations. We need to begin electing leaders that are fiscally responsible. The future of our nation depends upon it. We are our own worst enemy. It will be our ever-increasing debt that leads to our demise. We must act now.
 
A progressive tax without deductions and loopholes would have little more complexity than a flat tax. No, the simplicity argument really doesn't win you much.

Also, I doubt the congress would take away all deductions and loopholes, so you'd basically still just have a complicated tax, except this time more unfair to the middle class.
 
Superfreak said:
A flat tax would be much much harder to evade... because of its simplicity.
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My understanding is that all flat/fair tax proposals in current circulation center around a federal sales tax. Such a tax would be easier to evade than income taxes are because it takes only one dishonest entity to make evasion possible.

A seller could sell something without having the government’s authorization to collect the tax and thus fail to collect the tax and deliver it to the government.

A legitimate seller could fail to add the cost of the tax to the customer’s price and thus not collect the tax or deliver it to the government.

A legitimate seller could charge the customer the tax and then fail to report the sale to the government and then pocket the tax that was collected.

For the most part there are multiple paper trails for the current federal income tax and thus multiple means of accountability. People who dispense income (employers, banks, investment account managers etcetera) have to report what was paid out and people who receive income must report what they receive. That way the government has multiple ways to document when somebody had income and thus owes taxes. The simpler the paperwork the easier the evasion.

As for a flat-rate income tax with no deductions: I would favor this over what we have now. It may be simpler, but I don’t know if it would be “fair”. I would prefer to totally revise the tax system at the federal, state and local levels. I wouldn’t tax income, but I would tax wages and salaries (with large personal deductions, i.e., tax ball player, entertainers and actors, but not teachers, firemen and factory workers). I would also tax personal and corporate debt (with first mortgage exemptions) as well as things that we need to use less of (“garbage”, fossil fuel, junk food, imports etcetera).
 
Watermark said:
A progressive tax without deductions and loopholes would have little more complexity than a flat tax. No, the simplicity argument really doesn't win you much.

Also, I doubt the congress would take away all deductions and loopholes, so you'd basically still just have a complicated tax, except this time more unfair to the middle class.
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Look again Waterboy... the above flat tax system I outlined IS a progressive tax. It is also a fair tax. It also is simple, to the point that even YOU can understand it. In its simplicity it leaves very little room for fraud.

As for congress changing it, I agree, they are not likely to go to the system I outlined because it would reduce the bribe money (I mean lobbying) from those who seek special deductions and loopholes for the tax code.
 
Superfreak said:
To reduce the national debt I would propose we add an additional temporary bracket to the flat tax. Every dollar over $1 million (again adjusted for inflation annually) would be taxed at 30% rather than 20%. The additional 10% would be mandated to pay down the debt.
Click to expand...

Do we have enough million dollar incomes in this country to ever pay off the national debt? I would prefer to tax private debt and use the revenue to pay the public debt. The U.S. government still has good credit so I worry more about private debt than I do public debt. Taxing private debt to pay off the public debt would kill two birds with one stone. I realize that taxing debt would reduce credit and thus cause the economy to shrink, but when you trillions in debt a smaller economy based on what people need rather than what they want wouldn’t be a bad thing.
 
flaja said:
Do we have enough million dollar incomes in this country to ever pay off the national debt? I would prefer to tax private debt and use the revenue to pay the public debt. The U.S. government still has good credit so I worry more about private debt than I do public debt. Taxing private debt to pay off the public debt would kill two birds with one stone. I realize that taxing debt would reduce credit and thus cause the economy to shrink, but when you trillions in debt a smaller economy based on what people need rather than what they want wouldn’t be a bad thing.
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Yes, we do have enough to pay down the debt.... IN TIME. This is assuming that the current idiocy of deficit spending in good times and in bad no longer continues. I do not mind deficit spending in a recession, but we CANNOT continue doing so when the economy is strong. Those are the years debt paydown must be a focus.

If you could, walk me through an example of what you mean when you say tax private debt to pay down public. Not sure I understand your position. Thanks.
 
or we could try something really inventive, like removing some regulations that put people back to work and get back those 2 million + jobs. that many more people paying taxes would certainly help.
 
Superfreak said:
Yes, we do have enough to pay down the debt.... IN TIME. This is assuming that the current idiocy of deficit spending in good times and in bad no longer continues. I do not mind deficit spending in a recession, but we CANNOT continue doing so when the economy is strong. Those are the years debt paydown must be a focus.

If you could, walk me through an example of what you mean when you say tax private debt to pay down public. Not sure I understand your position. Thanks.
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No, we don't have enough. That's a myth.
 
instead of higher taxes....how about cutting spending, especially pet projects and welfare where you can just keep getting money and not working, you know, the system obama rolled back from clinton doing a decent job of fixing the horrible welfare system
 
Superfreak said:
Yes, we do have enough to pay down the debt.... IN TIME. This is assuming that the current idiocy of deficit spending in good times and in bad no longer continues. I do not mind deficit spending in a recession, but we CANNOT continue doing so when the economy is strong. Those are the years debt paydown must be a focus.

If you could, walk me through an example of what you mean when you say tax private debt to pay down public. Not sure I understand your position. Thanks.
Click to expand...

I would tax all privately held debt, both corporate and individual, with an exemption for first mortgages on primary residences. I would use the money raised to redeem federal bonds and whatever other debt instruments there are.

Up-to-date and accurate figures are hard to come by on the net, but as near as I can tell the federal debt right now is something like 10 trillion dollars and private debt is around 12 trillion. For the sake of argument I would assume that corporations and individuals would pay off 10% of their debt every year (that is 10% of what is left owed at the end of each year, not 10% of the total amount owed when the tax is implemented the first year). I would assume a tax rate of 10% on outstanding debt. The debt tax would be reduced when the federal debt is paid off- I wouldn’t abolish the debt tax altogether because I want to discourage debt.

I don’t know right off how long a 10% debt tax would take to pay off the federal debt; it is sad commentary that I cannot write a Quick BASIC program to calculate the payoff time because my computer cannot deal with numbers in the trillions. But I did some rough calculations myself a moth or so ago showing that it would take something like 10 or 20 years to pay off the federal debt.

I don’t know who keeps track of corporate debt, but consumer debt is already recorded with credit bureaus so lenders can do credit checks. The tax could be based on the data the existing credit unions have, or all debts could be reported to the federal government which could then be the credit bureau of record and by performing regular credit bureau services tax collection could pay for itself.
 
flaja said:
I would tax all privately held debt, both corporate and individual, with an exemption for first mortgages on primary residences. I would use the money raised to redeem federal bonds and whatever other debt instruments there are.

Up-to-date and accurate figures are hard to come by on the net, but as near as I can tell the federal debt right now is something like 10 trillion dollars and private debt is around 12 trillion. For the sake of argument I would assume that corporations and individuals would pay off 10% of their debt every year (that is 10% of what is left owed at the end of each year, not 10% of the total amount owed when the tax is implemented the first year). I would assume a tax rate of 10% on outstanding debt. The debt tax would be reduced when the federal debt is paid off- I wouldn’t abolish the debt tax altogether because I want to discourage debt.

I don’t know right off how long a 10% debt tax would take to pay off the federal debt; it is sad commentary that I cannot write a Quick BASIC program to calculate the payoff time because my computer cannot deal with numbers in the trillions. But I did some rough calculations myself a moth or so ago showing that it would take something like 10 or 20 years to pay off the federal debt.

I don’t know who keeps track of corporate debt, but consumer debt is already recorded with credit bureaus so lenders can do credit checks. The tax could be based on the data the existing credit unions have, or all debts could be reported to the federal government which could then be the credit bureau of record and by performing regular credit bureau services tax collection could pay for itself.
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you would tax private debt to pay off public debt???
 
flaja said:
I would tax all privately held debt, both corporate and individual, with an exemption for first mortgages on primary residences. I would use the money raised to redeem federal bonds and whatever other debt instruments there are.

Up-to-date and accurate figures are hard to come by on the net, but as near as I can tell the federal debt right now is something like 10 trillion dollars and private debt is around 12 trillion. For the sake of argument I would assume that corporations and individuals would pay off 10% of their debt every year (that is 10% of what is left owed at the end of each year, not 10% of the total amount owed when the tax is implemented the first year). I would assume a tax rate of 10% on outstanding debt. The debt tax would be reduced when the federal debt is paid off- I wouldn’t abolish the debt tax altogether because I want to discourage debt.

I don’t know right off how long a 10% debt tax would take to pay off the federal debt; it is sad commentary that I cannot write a Quick BASIC program to calculate the payoff time because my computer cannot deal with numbers in the trillions. But I did some rough calculations myself a moth or so ago showing that it would take something like 10 or 20 years to pay off the federal debt.

I don’t know who keeps track of corporate debt, but consumer debt is already recorded with credit bureaus so lenders can do credit checks. The tax could be based on the data the existing credit unions have, or all debts could be reported to the federal government which could then be the credit bureau of record and by performing regular credit bureau services tax collection could pay for itself.
Click to expand...

Even if the wealthy are taxed to the hilt, it still wouldn't cover it all, so it would fall to the middle class to pay the rest.
 
flaja said:
Is there any legitimacy to the flat tax/fair tax hype? Could it be that the people who advocate the flat/fair tax are just looking for a tax that would be easier to evade?

I mean there are other more important issues than tax policy.
Government spending is through the roof (while spending is a function of fiscal policy not tax policy in that government will spend everything it gets and then want to spend more). The economy is a shambles due to consumer debt, the likes of Wal-Mart and imports from Red China. We are no longer a sovereign nation because of our open border policy. And, the country’s rampant immorality is sending it to Hell in a hand basket.

But for thousands upon thousands of people the biggest issue is tax policy? Are these people really concerned about the country, or are they just tax cheats who are using noble sentiment to mask self-serving motives?
Click to expand...

The only way to avoid the Fair Tax is to either earn under a certain amount or not buy anything. *shrug*

Its a good system and would make the US more competitive in foreign markets.
 
Yurt said:
you would tax private debt to pay off public debt???
Click to expand...

Yes.

Private debt can be good for the economy in that people and companies borrow money so they can buy goods and services. Debt creates demand that wouldn’t otherwise exist and this creates economic activity.

Few Americans and few American companies can go very long without being in debt. But there is a point where private debt cannot be anything but bad for the economy. People that are perpetually and excessively in debt demand goods and services that exceed what their labor and investment can contribute to the economy’s productive capacity. This invariably creates a bubble that will invariably burst.

I have mentioned in another thread that I am currently making an in depth study of the Great Depression. No single cause of the Depression will ever be identified, but more and more I am thinking that the main cause was a debt-based economic bubble that burst. The economy of the 1920s had a productive capacity based on false demand that was made possible by credit. Industrial output expanded to meet consumer demand while factory owners were being paid only a fraction of the price of their products because they weren’t paying their labor/consumers adequate wages to insure high profits and labor/consumers were buying so much on credit. The same thing happened in the stock market with stock being bought on margin and when the stock market bubble burst bookkeeping money vanished taking easy consumer credit along with it. When credit dried up the economy shrank to its natural size, i.e., what could be supplied and demanded without excessive debt. The elimination of excess industrial capacity lead to high unemployment which shrank demand even more and thus a credit crunch evolved into a worldwide Great Depression.
 
Southern Man said:
The only way to avoid the Fair Tax is to either earn under a certain amount or not buy anything. *shrug*

Its a good system and would make the US more competitive in foreign markets.
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It's a bullshit system. It's regressive, unfair to working people and the middle class and it's easy to evade. You know why? How will you enforce it?

The only fair form of taxation is progressive taxation.
 
I mean Flaja's point is basically correct. Tax policy aint bad. It's probably the closest we've ever had in our history of being truely progressive. Those who control most of the wealth are paying most the taxes on pretty close to a proportinal basis (i.e. those who control 75% of the wealth are paying around 75% of the taxes (+ or - 10%).

Tax policy is not the problem. Fiscal policy is. The best cure for fiscal policy, once the economy has recovered is to re-institute PayGo.
 
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