Allowing District of Columbia residents to voluntarily use a flat federal income tax system, as Sen. Sam Brownback, R-Kan., is proposing, seems administratively impractical. But Brownback deserves credit for seeking to simplify our Byzantine tax system. Brownback chaired a hearing last week of the Senate Appropriations Subcommittee on the District of Columbia. He floated the idea of testing a flat tax — which would apply the same tax rate to all taxpayers and would eliminate nearly all itemized deductions — on D.C. residents, and predicted that the new system would result in more economic growth, new jobs and lower taxes. “Our system should be fair, simple and easy to understand,” Brownback said.
So much money is spent on compliance and enforcement of our tax system that simplifying this likely would be an economic boost. However, there are concerns that a flat tax would mostly benefit the wealthy, because it would eliminate our progressive tax structure and wouldn’t tax investment income. As a result, billionaire Warren Buffett, who makes most of his money on investments, would pay very little in income taxes.
Posted by Phillip Brownlee
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26 Comments
A flat tax isn’t going anywhere. It would put too many accountants, tax specialists, and lobbyists in welfare lines. And considering Corporate America owns this country, I don’t see them giving up their tax breaks.
Flat tax……..Everbody pays the same.
Sounds fair.
OF course the CEO or the Board member or the share holder in a corporation that makes bread is taxed equally with the farmer who grows the wheat for that bread….or the legal US worker that pays taxes while he harvests the wheat for the bread…..or the illegal worker who pays no taxes.
All still pay the same price for the loaf of bread.Kinda favors the folks on the high end!
Taxes are assessed to fund society at large and make said society as good and beneficial as possible to all memebers of the society. A “flat” or “fair” tax thus would assume that all members of society enjoy all benefitsequally.
Very clearly this is not the case. It follows that a flat or fair tax is not flat or fair. Such attempts at tax “reform” only reinforce the dichotomy between those who have and those who have less and would serve to keep it ever so and working to increase that dichotomy.
Put simply…..given no intervention for society at large, money and the power tend to flow uphill.
You are correct, sir. Flat taxes work great in a European country like Estonia where incomes are much closer to the median.
They suck in an economy like ours. Paris Hilton should not pay the same rate a blue-collar Catholic family with eight kids. She should pay more, because she has benefitted more.
Right now, she’s probably paying LESS than a lot of blue-collar workers, thanks to GW Bush.
The US income tax code started as a flat tax on only the super-rich. Now look what it has become. A flat income tax is not the answer. If you leave Congress with the power to tax they will use it in a politically favorable way. Only through a repeal of the 16th Amendment can we limit the power to tax and secure our freedoms.
The Fair Tax (http://www.fairtax.org) is the only viable alternative on the table.
In my previous message the link doesn’t work. Try this one:
http://www.fairtax.org
The Fairtax is the only way we are going to get a better tax system.
We had a Flat Tax of sorts before. Back in 87 I believe, when they only had two tier tax system. Didn’t take long before members of Congress started to manipulate the tax code to their lobby interest and soon we got into more tiers and the tax code became complicated again.
I’m with OneShot. The Fair Tax is the only way, because the rich pay more into the system.
Testing anything in DC is problem regardless of what the test is.
No dice guys. I am well familiar with the current Boortz/Linder take on a flat tax. A base FLAT tax of 23% on all consumables could hardly be considered “fair” Now to folks like Boortz and Linder that 23% tax on a loaf of bread aint gonna hurt much. In fact it will be totally washed away by the flood of money they will get to keep from their astronomical incomes and capital gains. But 23 cents on the dollar is gonna hurt alot of people not so fortunate.
“Testing anything in DC is [a] problem regardless of what the test is” . . . because? . . .
JR,
If you actually knew what Bortz was talking about, which you don’t, then you would know he has already taken into consideration consumables and things required to survive and has a plan of credits in place for those types of items.
I an well aware of his “plan” of a monthly check sent to offset the tax on consumables. I also have no doubt that if they ever managed to get this bad thing passed, (they won’t for lots of reasons) that would be the part of the deal left on the cutting room floor and that is exactly as they would wish.
One Shot / Joe W–
If you tax the Pierre Du Ponts, Paris Hiltons, the Koch bros, and Dick Cheneys at a flat tax rate, say 15 percent, they WILL STILL PAY A HUGE AMOUNT relative to their percentage.
I don’t have the figures right now and I don’t want to google them–but let’s say the top one percent of income earners pay 40 percent of all income taxes collected now.
What percentage will they pay under a flat tax? It will be very close to 40, because they make 40 percent of all the income earned in the country.
DUH.
You guys missed the whole point.. this is a flat tax on “earned” income — notice that the WE board did state that it would eliminate almost all taxes on investment income…
which means that Paris Hilton won’t be paying a dime under this “flat tax”…
wake up people, this is only a ruse for the rich to quit paying taxes altogether — and when the accounting comes in, that 15% will woefully inadequate…. even Warren Buffet stated that this would be a bad tax…
Good point, Mike!
*****
The more you think about that idea that “the rich pay too much in taxes because they pay such a higher percentage of the taxes collected,” the more ridiculous it becomes.
It’s like having a gas tax that affects anyone who buys gas. The guy who has a Prius uses 1,000 worth of gas a year and pays let’s say 120 in taxes. The idiot driving a Hummer spend 5,000 a year on gas driving the same miles and pays 600 dollars a year in taxes.
Joe Williams comes along and says, “it’s unfair that the Hummer owner has to pay 5 times as much in taxes as the Prius owner.”
But, Joe, he used 5 times the gas.
Likewise, when Bill Gates makes his yearly salary plus investments etc., he pays a helluva lot in taxes?
Why?
Because he made a helluva lot of money.
The PERCENTAGE of tax revenue collected from the rich is wholly irrelevant to a discussion of fair tax rates . . .
If they really thought that tax rates were too unfair, they’d simply stop making so much money.
Or more to the point, they’d trade places with the poor . . .
Each of you should read both the WE blog above and the version printed in today’s newspaper…
At least here, they posted some of the concerns, etc… but in the paper, they seemed to be gung-ho supporters and left off some of the benefits to the rich… wonder why???
by the way “earned” means one had to “work” for a paycheck… not lolly-gag around the world with ones jet-set friends and live off their investments or inheritances, or their stock options, etc……
ALL income, however derived or earned, should be taxed at a flat rate. The only exceptions should be people earning under a set level per family member. No deductions. No “tax shelters”. You earn it, you pay the tax.
Why do you hate the rich, Mike?
Hehehe . . . that’s what the right-wingers say whenever one points out that working stiffs (like us) are getting stiffed and the rich are making out like the bandits they are.
It’s not jealousy. It’s not envy. It’s fairness.
People who make more should pay more, just like I should and do pay more than people who make less than me . . .
First I have seen Mike. Welcome Mike and good post.
Pity the poor overtaxed rich! They carry SO MUCH burden. This little percentage pays this big percentage of the taxes. Rush Limbaugh can give you some figures on that. Then again I think his last contract was for something like 250 million dollars so I aint sure I trust his numbers.
More disquieting numbers are available. They concern the very very small number of people who control a very large percentage of this nations wealth. And no small number of these folks are not even Americans and thus pay no taxes at all! Of the Americans, there are endless strategies of tax shelters, off shoring, and other methods whereby THEY avoid paying taxes.
Proud lib has better access to info than I and I bet he can find those numbers.
“Tax cuts” or “the flat tax” or the “fair tax” are yet more distraction to fool folks in the middle and working class into not knowing that THEY are carrying the weight of the super rich getting even richer and even actively advocating that it contine.
Ever hear of “the alternative minimum tax”? Check that one out.
Why is it that we have a graduated income tax, where the more you earn the higher percentage you are supposed to pay? Could it be that somewhere in the past congress realized that the lower income folks worked with their hands and brought home money to their family, while the higher income people made their money off the labor of many, thus owing a greater debt to society?Why is it that “earned” income, even though it comes from skill and sweat and aching muscles of a working man who clocks in every day, is taxed at a much higher rate than “investment” income made by the man who calls his broker, places his bets, then drives off to the golf course? Why is it that one of the first things George Bush did when he became president was to propose the elimination of taxes on stock dividends because it was “double taxation”?Could it be that the wealthier members of society are trying to dodge their responsibility to the society that has made them rich? They have skimmed their riches off of the people of this country and we should enforce a tax law that requires everyone to pay his share.
Oh, and the flat tax isn’t it. A flat tax puts an extraordinarily large burden on the poor. In this case, where it doesn’t tax investment income, it gives the rich pretty much a free ride. For instance, the average CEO job for a large company pays just over $637,000 in salary. That sounds like the guy would pay a lot of taxes. However, the lion’s share of his compensation comes in the MILLIONS of dollars in perks and stock options that wouldn’t be taxed under this flat tax plan.Does this sound fair to you?
Well said Rusty.
Elimination of the capital gains tax was bad enough. Those who have money using it to make more money exempted.
But then bush went further. The elimination of the estate tax. (Called eroneously the DEATH TAX) If you have money and make money by having money; you get to pass that money down so that your family can keep doing more of the same!
To answer your question Rusty, our forefathers saw the value of work and industry to a growing nation. This is clearly not appreciated today when workers are “human resources” and CEOS get paid for the short term gain as opposed to the survival of the enterprise.
One must wonder as to this. Are we as Americans to be mindful and work toward the future of the nation at large? Or….are we to be concerned only with our individual accumulation of wealth?
Last I checked, a career in defending this nation was not particularly lucrative. It is currently voluntary. One wonders how many will continue to volunteer.
I’m confused as to why everyone thinks the rich should subsidize the middle to lower wage earners?
I generally work 14 hours a day and some on the weekends. But I’m expected to subsidize the guy that comes home at 5pm and spends the evening watching TV.
The rich generally send their kids to private school but still pay taxes that support public schools.
The rich also provide huge donations to public museums, parks, music venues, civic activities and events that are enjoyed by all.
But we’re painted as the over-priveledged and the jet-set who aren’t paying enough into the pie.
I don’t have a jet and I haven’t dined with Paris Hilton in months. The reason the FairTax might pass is that here in America even those that are dirt-poor today have the opportunity to be among the wealthy tomorrow.
All those tax breaks for the rich so it will trickle down to the poor – - where’s the trickle?In place of trickling down they invest it in stocks and bonds in place of investing it in property and equipment that will creat jobs.
JR — the real reason the incremental tax was first established (and is as important today) is that most of the working stiff’s income is used to live off of (for themselves and their families) — the rich are paying out of their surplus…
I make very good money and do enjoy having an excess income, and although I’m not wealthy, I’d initially walk away paying 8 to 10% less in Fed Income Taxes — but I agree with Warren Buffet, THIS IS A BAD TAX….
50% of adults in the United States pay no tax or have no tax liability and they are all in the lower end of the income scale.
The reason why the tax code is the way it is, because government uses it to social engineer the society.
If they want people to buy houses, the give them tax breaks, if they want people to have more children, they would extend the EIC to more than two kids.
If they want people to stop eating twinkies, then they just tax it to all hell. If they want people to eat twinkies, then they give a tax break.
The tax system is not fair, regradless if you think it is unjustly to the rich or poor, the tax system is design for social engineering. That is the biggest obstical to the fair tax.
The leftist posting on this topic have no idea about the fair tax and are so wrong on everything else.
Flat tax is a bad idea and punishable taxes to the producers of our country is a bad idea too.
Fair tax all the way baby.
No dice Joe. We already did this upthread. The “fair tax” is a flat sales tax. ANd since you did nothing to refute that upthread, or to demonstrate that “the leftists posting on this topic have no idea about the fair tax” ( I do) your arguement is pretty weak. The “are so wrong on everything else” kills it completely. You don’t win a debate by not refuting the other side and calling them dishonest, stupid or “wrong on everything else”.