Inspired by flat tax thread - how much is enough?

[BuckNaked]

Reading through the flat tax thread, I'm curious as to how much is enough for the higher wage earners in this country to pay? The top 5% of wage earners are already paying 53% of the bills, is that enough? Too much? Should the lower wage earners be pulling more of the load? Or are they already paying too much?

IMO, the burden should be spread out more evenly. I'm in favor of a flat tax set up such that families in at or below the poverty level pay nothing, with everyone else paying a flat % of their income in federal taxes.

 

[bicker]

That approach would be particularly regressive on the lowest-income folks who aren't below the poverty line. It would actually provide them incentive to work less, because once they drop below the poverty line they no longer pay taxes, and therefore could end up with more net income than if they were above the poverty line! Such structures are unequivocally unfair.

That's really why the only two choices are a flat tax that applies to everyone, both above and below the poverty line, OR a progressive tax, where folks making more income pay a greater percentage of that income in tax.

To answer your question: I think your question is irrelevant. There is no answer for it as it misses the point of the issue -- perhaps, it presupposes the answer you're perhaps aiming for, and therefore is invalid for that reason. The objective of a progressive isn't to punish the rich. Rather, it is to prevent the paradox I mentioned above, whereby some people with a higher gross end up with a lower net, i.e., the ultimate unfair scenario. So the "right" amount of progressiveness in the tax structure is the amount that provides the greatest incentive for the greatest contributions to society as a whole.

 

[Tina]

That approach would be particularly regressive on the lowest-income folks who aren't below the poverty line. It would actually provide them incentive to work less, because once they drop below the poverty line they no longer pay taxes, and therefore could end up with more net income than if they were above the poverty line! Such structures are unequivocally unfair.

I really can't see that happening. Most people who a living below the poverty line aren't even getting by. They are falling deeper into debt. Why on earth would they work less? I've lived below the poverty line growing up and my mom busted her hump to keep us as close to that line as possible. Even so, we always had to deal with shut-off notices from utilties and going without even the bare necessities. I honestly don't know if the flat tax is good or bad, but I know a little more money in the pockets of the poor can make a huge difference - especially to those with children.

 

[bicker]

I really can't see that happening. Most people who a living below the poverty line aren't even getting by. They are falling deeper into debt. Why on earth would they work less?

It is the nature of a step-function. Here's the OP's scenario:

IMO, the burden should be spread out more evenly. I'm in favor of a flat tax set up such that families in at or below the poverty level pay nothing, with everyone else paying a flat % of their income in federal taxes.

So: Let's say the flat tax rate is 10%, and the poverty line is $100. As the OP said, if you're under the poverty line, you don't pay tax. So if you make $97, you keep $97. If you work a little more and make $102, you keep only $92. Work more -- keep less. It's intrinsically unfair, and therefore impractical.

 

[swilphil]

I really can't see that happening. Most people who a living below the poverty line aren't even getting by. They are falling deeper into debt. Why on earth would they work less? I've lived below the poverty line growing up and my mom busted her hump to keep us as close to that line as possible. Even so, we always had to deal with shut-off notices from utilties and going without even the bare necessities. I honestly don't know if the flat tax is good or bad, but I know a little more money in the pockets of the poor can make a huge difference - especially to those with children.

What Bicker is saying is that those who are barely above the poverty line might work less so that they don't have to pay any taxes. With the progressive system those who are barely above the poverty line pay a lower rate. If we switch to a flat tax, their taxes will probably go up.

I agree with Bicker that we need to keep the progressive tax system. I wouldn't be bothered though if they play around with numbers a little bit. Instead of having the top 5 percent paying the highest rate, make it the top 3 percent.

 

[Charade]

It is the nature of a step-function. Here's the OP's scenario: So: Let's say the flat tax rate is 10%, and the poverty line is $100. As the OP said, if you're under the poverty line, you don't pay tax. So if you make $97, you keep $97. If you work a little more and make $102, you keep only $92. Work more -- keep less. It's intrinsically unfair, and therefore impractical.

Then you need to aspire to make more. Isn't THAT the American way? Why would anyone aspire to make less?

When you reach and surpass the poverty level, you are then required to pay into the system. Sounds fair to me.

 

[bicker]

I think that denies too many firmly-established realities. Expecting others to "aspire" given how they believe the cards are stacked against them (and here's yet-another way society is arrayed against them, at least in their eyes) is unreasonable. It doesn't matter whether we agree with their perceptions -- those are the perceptions of many of the folks in that situation, and so society has to make its choices based on that reality, specifically making the choices that are best for society as a whole.

 

[treesinger]

The progressive system is patently unfair. Myself, I got all of my tax money back last year. I don't know why. I didn't complain, but I can see how ludicrous it is that I paid nothing back.

I think maybe the consumption tax would be the best bet. Then, it doesn't matter how much you earn. Rather, it is how much you consume. With bare necessities, taxes would be waived. Business taxes fall by the wayside. Prices of products would fall because businesses wouldn't have to front the cost of taxes that they pass on to the consumer. The tax is inherently progressive but it is still fair because the rich are only taxed more if they spend more. If you avoid consumption and save your money, then you have more when you retire reducing the burden on social security.

I'm sure there are some cons to counter my pros, but it is an interesting idea.

 

[Charade]

I think that denies too many firmly-established realities. Expecting others to "aspire" given how they believe the cards are stacked against them (and here's yet-another way society is arrayed against them, at least in their eyes) is unreasonable. It doesn't matter whether we agree with their perceptions -- those are the perceptions of many of the folks in that situation, and so society has to make its choices based on that reality, specifically making the choices that are best for society as a whole.

Reality check!!! I *DO* except others to aspire to get themselves above the poverty level AND off of the welfare system if they are on it which in turn makes them a contributing member of society.

 

[treesinger]

You're making the assumption that the downtrodden WANTS to be successful. Or more to the point, believes they can be successful. If there is no belief that they can improve their lot in life, they will take whatever advantages are offered to them. So they don't strive for more and at the same time bleed money from the government. Talk about a double-whammy!

 

[treesinger]

Yes, but they are not required to meet out expectations. We can't force people to have ambition.

 

[bicker]

A progressive tax system has nothing to do with getting all tax withholding back.

A consumption tax isn't a bad idea, but it tends to depress an economy. Figure that you wouldn't tax necessities (which just makes sense -- otherwise the tax would be too onerous on the poor), so all you're taxing are luxuries. However, in order to prevent increasing the debt, you either have to eliminate most of government's current expenditures (which is a noble intention, but impractical in the first year of any such change) or apply such substantial taxes on luxury items as to depress the economy.

Perhaps a consumption tax can be considered after many years of successful government spending decreases, but not until then.

 

[Charade]

You're making the assumption that the downtrodden WANTS to be successful. Or more to the point, believes they can be successful. If there is no belief that they can improve their lot in life, they will take whatever advantages are offered to them. So they don't strive for more and at the same time bleed money from the government. Talk about a double-whammy!

Then with either system, it's set up to be taken advantage of by those that don't want to improve their lives and their only "aspiration" is to "scam" the system.

 

[Charade]

It is the nature of a step-function. Here's the OP's scenario: So: Let's say the flat tax rate is 10%, and the poverty line is $100. As the OP said, if you're under the poverty line, you don't pay tax. So if you make $97, you keep $97. If you work a little more and make $102, you keep only $92. Work more -- keep less. It's intrinsically unfair, and therefore impractical.

Just another thought on your example. The FT system could be set up with a stop gap point that until you bring home after taxes what you did BEFORE you crossed the threshold, you'd get tax credits to make your take home pay the same.

 

[Charade]

Yes, but they are not required to meet out expectations. We can't force people to have ambition.

Then too bad. Pay up like the rest of us.

 

[bicker]

Reality check!!! I *DO* except others to aspire to get themselves above the poverty level AND off of the welfare system if they are on it which in turn makes them a contributing member of society.

IMHO, that's a noble, but not reasonable expectation, in our society. You hope that they'd act that way; you cannot reasonably expect that they will. Given that standard, government would have to successfully complete a substantial amount of societal reconstruction (sounds way too liberal for my tastes) -- getting people to behave differently -- before applying your expectation to the governance of society. Legislators cannot make decisions for society based on what they hope. Legislators can only make decisions for society based on what they can reasonably expect.

To be clear, it isn't a matter of what's best for the poor folks -- the issue is what impact your decisions would have on their actions (not their financial situation), and the consequent impact their actions would have on society. While I could accept a legislator not caring if they're in the dumpster as a result of their sloth and irresponsibility, I cannot accept a legislator not caring about what impact that would have on society as a whole.

 

[treesinger]

Then with either system, it's set up to be taken advantage of by those that don't want to improve their lives and their only "aspiration" is to "scam" the system.

Not so. If it is a consumption tax, they can't take advantage of the system. Either they spend the money up front, or they SAVE the money for the future relieving SS. In the first scenario, the government gets paid. In the second, the government saves. Looks like a win-win. Feel free to poke holes.

 

[bicker]

Then with either system, it's set up to be taken advantage of by those that don't want to improve their lives and their only "aspiration" is to "scam" the system.

No: Not "taken advantage of" (or at least, that's not what matters). Rather, what matters is the impact current human tendancies have on the effectiveness of an approach. Again, I can accept not caring about the impact on "them" -- but cannot accept not caring about the impact their resulting actions have on everyone.

 

[Charade]

The government forces behavior modification on society all the time through laws,taxes and other regulations. Why should this be any different?

 

[treesinger]

Then too bad. Pay up like the rest of us.

I'll pay up when the tax code says to pay up. I doubt there are more than 5 people in the country that actually voluntarily send more taxes to the government to help the government!