Let's talk about a flat tax, pros, cons.

[graygables]

So, simplified IRS code:
Line A: Income: $XX,XXX
Line B: multiply line A by .15
Line C: amount you owe
Make check payable to Internal Revenue Service.

No deductions, no exclusions, you make money, you are taxed on it at the same rate as everyone else. No cuts for big business or for being clever in where you hide your money.

Why would it work? Why wouldn't it work?

 

[allison443]

I misunderstood the question...sorry!

 

[dvcgirl]

It won't work because from what I've read, the number would have to be too high of a percentage to pull in enough tax revenue, and that would really hurt the middle class. The number would need to be higher than 15% as Forbes originally proposed it.

Also, it's a lot tougher to pay say 20-25% if you're making say 20K to 50K a year than if you're making 250K a year. I'm not saying that this is *fair*, but that's the way it is. It would hit the middle class really hard.

 

[CowboyCO]

So, simplified IRS code:
Line A: Income: $XX,XXX
Line B: multiply line A by .15
Line C: amount you owe
Make check payable to Internal Revenue Service.

No deductions, no exclusions, you make money, you are taxed on it at the same rate as everyone else. No cuts for big business or for being clever in where you hide your money.

Why would it work? Why wouldn't it work?

That is absolutely ridiculous!!! Where's the bureaucracy in that?

I have always supported a flat tax, with deductions for each dependent, scaled to the poverty line, with those under the poverty line paying no tax. But that would put tens of thousands of accountants and tens of thousands of IRS employees on the unemployment line. Doing what is fair and right doesn't always equal getting re-elected.

 

[chicagodisneyfan]

I like a tax on purchases.

This hits everyone - drug dealers, tax cheats, people who work for cash.

You are not taxed until you spend.

Food is exempt, prescription drugs, education expenses, maybe clothing allowance.

But everything else - tax. Cars, furs, books, shoes.

Eliminate the IRS (at least on the personal side).

 

[dejr_8]

I also think there should no with-holding of taxes. Everyone, every month has to write a check to the IRS (like self employed people have to do every quarter) for the taxes they owe. This would quickly change people's opinion of "fair" tax policy and "helping" their fellow American.

 

[blu3d3vil]

http://www.fairtax.org/site/PageServer

 

[Chicago526]

It won't work because from what I've read, the number would have to be too high of a percentage to pull in enough tax revenue, and that would really hurt the middle class. The number would need to be higher than 15% as Forbes originally proposed it.

Also, it's a lot tougher to pay say 20-25% if you're making say 20K to 50K a year than if you're making 250K a year. I'm not saying that this is *fair*, but that's the way it is. It would hit the middle class really hard.

Ditto!

What I've always liked is just keeping the progresive tax but eliminating deductions, exemptions, loopholes, etc. Keep the brackets, lower the tax in each bracket, and eliminate itemizing. You get the simplicity of flat tax but it's still progressive. Best of both worlds, IMO.

 

[Golf4food]

Ditto!

What I've always liked is just keeping the progresive tax but eliminating deductions, exemptions, loopholes, etc. Keep the brackets, lower the tax in each bracket, and eliminate itemizing. You get the simplicity of flat tax but it's still progressive. Best of both worlds, IMO.

I could go for that.

If we go to a sales tax instead of an income tax, which would be infinitely more fair, we can always exclude clothing under a certain dollar amount, food/groceries under a certain dollar amount, household cleaners and other such supplies under a certain dollar amount, etc. Tax everything else a flat 10% or whatever. Want to buy a million dollar boat? Pay 10% tax. Don't want to pay that much in tax? Buy the $500,000 boat instead. Of course, in today's internet world people might just buy from overseas and ship or go pick up in person rather than pay the taxes, so a flat sales tax might not work in practice no matter how good it might sound on paper.

 

[AndyLL]

Ditto!

What I've always liked is just keeping the progresive tax but eliminating deductions, exemptions, loopholes, etc. Keep the brackets, lower the tax in each bracket, and eliminate itemizing. You get the simplicity of flat tax but it's still progressive. Best of both worlds, IMO.

I'm all for that. Even lower the top brackets quite a bit if CapGains/Divs are taxed at the same rate.

A flat tax or VAT of ~20% which it what it would have to be is a huge tax increase on the majority of taxpayers.

 

[nataliesdaddy]

So, simplified IRS code:
Line A: Income: $XX,XXX
Line B: multiply line A by .15
Line C: amount you owe
Make check payable to Internal Revenue Service.

No deductions, no exclusions, you make money, you are taxed on it at the same rate as everyone else. No cuts for big business or for being clever in where you hide your money.

Why would it work? Why wouldn't it work?

better collections

better efficiency

less money spent collecting taxes

Less power in the hands of special interests

Less corruption

Just one caveat - you need to provide a tax credit back to the poor - otherwise it's punitive to those on the lower end of the socio economic scale


personally, I'd like to see a tax program that doesn't tax income at all.

 

[Hoodie]

Ditto!

What I've always liked is just keeping the progresive tax but eliminating deductions, exemptions, loopholes, etc. Keep the brackets, lower the tax in each bracket, and eliminate itemizing. You get the simplicity of flat tax but it's still progressive. Best of both worlds, IMO.

My biggest problem with the progressive tax is that it's strictly income based, with no account for cost of living. Even the Fed gov't acknowledges cost of living differences in their regional employees. $100k is a GREAT salary in the mid-west, but is smack middle class in NY, NJ, DC corridor. Basically, a couple making $65k in Ohio would have to make $93+k in the DC area to compare. And would see their tax rate go from 15% to 25%.

So, if a progressive tax remains, perhaps it should follow the COL differences. Either a group would be REALLY happy to see their comparable tax rate go down dramatically, or there would be a lot of annoyed people in the center of the country who would see huge increases.

 

[Colleen27]

Ditto!

What I've always liked is just keeping the progresive tax but eliminating deductions, exemptions, loopholes, etc. Keep the brackets, lower the tax in each bracket, and eliminate itemizing. You get the simplicity of flat tax but it's still progressive. Best of both worlds, IMO.

I agree. A truly flat tax won't work because it would hit the working and middle classes very hard. Most people living on 40-50-60K/year can't make ends meet on 20% less.

Another option that I like but that is not politically appealing is replacing the income tax with a national sales tax. Exempt groceries and medical care/medication, and create a fixed amount per-person rebate to offset tax paid on a basic amount of clothing and toiletries. That would be the most fair approach to taxation because we all choose how much of our income we spend; the wealthy could no longer complain about being targeted for higher taxes because if they chose to live a middle class lifestyle, they'd pay middle class taxes. It would also bring in money from sources that don't currently pay into the system - foreign visitors, under the table workers, etc. - and it would discourage illegal immigration because undocumented residents wouldn't get the annual rebate to offset their basic spending.

 

[Chicago526]

My biggest problem with the progressive tax is that it's strictly income based, with no account for cost of living. Even the Fed gov't acknowledges cost of living differences in their regional employees. $100k is a GREAT salary in the mid-west, but is smack middle class in NY, NJ, DC corridor. Basically, a couple making $65k in Ohio would have to make $93+k in the DC area to compare. And would see their tax rate go from 15% to 25%.

So, if a progressive tax remains, perhaps it should follow the COL differences. Either a group would be REALLY happy to see their comparable tax rate go down dramatically, or there would be a lot of annoyed people in the center of the country who would see huge increases.

I see your point, but that would get very complicated. You'd have people claiming to live in a high COL area just to get the lower tax (lots of people would now live in a PO box), you'd also have to determine what areas qualify as high COL and those that don't, and then be able to adjust for inflation (or deflation, if an area begins to go down in cost). It's not that it's a bad idea, it just seems almost impossible to put in place and administer.

 

[Hoodie]

I see your point, but that would get very complicated. You'd have people claiming to live in a high COL area just to get the lower tax (lots of people would now live in a PO box), you'd also have to determine what areas qualify as high COL and those that don't, and then be able to adjust for inflation (or deflation, if an area begins to go down in cost). It's not that it's a bad idea, it just seems almost impossible to put in place and administer.

That's why I think it would be much more fair to have a flat tax or a fair tax (nat. sales tax). It would be a huge mess (although the Fed. gov't already had the COL areas defined, so that part is moot) to try to implement a progessive income tax that actually was fair to everyone.

I also think that payroll deduction should be eliminated. The majority of tax payers send over a quarter of their income to the federal gov't and most aren't even aware of it. Start having to write a check for $10-$20 grand a year, a people would be more concerned about where their money is going. Most people don't realize that their biggest monthly expense is their income tax - bigger than their mortgage in many cases.

Of course, payroll deduction is the ultimate power for politicians. People see "net pay" and don't even think about the rest that is leaving their pocket.

 

[DrCavin]

I also think there should no with-holding of taxes. Everyone, every month has to write a check to the IRS (like self employed people have to do every quarter) for the taxes they owe. This would quickly change people's opinion of "fair" tax policy and "helping" their fellow American.

I have said for years that there would be another Boston Tea Party if this were ever implemented!!

I would go for a National Sales Tax, only thing non-taxed would be food & home purchases.

 

[shelemm]

The example in the OP is unworkable. It doesn't take into account expenses. If I buy stock at $20 per share in 2008, and it goes down to $15 in 2009 and I sell, that's a loss. My income from the sale might be large, but I lost money. Are you suggesting I pay taxes on that loss?