Flat Tax...

[Geowitz]

Flat tax, no deductions, lets here it...

[hybrid]

Sign me up...........just make sure that there is no way to "cash" loophole out of it.

People should be taxed on how they spend not by classification. Why do the rich get crazy tax breaks? They dont need it

[Exhiliration]

BS, I have investments and expenses from my business that I should be allowed to deduct.

[Geowitz]

Well, the whole point is that deductions are a result of taxes going up. Politicians raise taxes, but due to corporate pressure they create loopholes(a.k.a. deductions) which ends up negating the tax hike with respect to some corps or individuals. A flat tax would be lower than what you pay now, but without deductions the average person would basically come out even in the end. Obviously this couldn't happen overnite though.

Instead of paying 40 - 50% of your money in taxes with deductions you would pay 25% or less without any deductions.

[jim schmidt]

Without an actual plan, its just a theory.

[Geowitz]

Yeah, so lets here some plans.

[Chauncey]

Didn't Greenspan say something about this "flat tax" being a negative thing for the lower- to middle-income families? Something about upper-class folks spending less money on less things or something like that? That this flat tax deal would end up placing a majority of the tax load on folks with less gross worth?

[HUTSCBR]

Sorry to kill it so soon by incorperating the facts, but...
www.straightdope.com/classics/a5_139.html

[segue00]

No matter how you cut it, the middle class and the poor will certainly feel the effects of any kind of taxation a lot worse than the rich!

[BusaDave]

Originally Posted by HUTSCBR

Sorry to kill it so soon by incorperating the facts, but...
www.straightdope.com/classics/a5_139.html

Got to love "facts" like these:

The top 7 percent of those filing returns, those reporting adjusted gross income of $75,000 or more, paid 51 percent of total U.S. income taxes.

The top 3 percent of filers, those making $100,000-plus, paid 40 percent of the taxes.

The top four-fifths of 1 percent of filers, who make $200,000 or more, paid 26 percent of the taxes.

The top one-twentieth of 1 percent of filers, those making $1 million or more--and Tom Wolfe's little demonstration in Bonfire of the Vanities notwithstanding, nobody's going to tell me those guys aren't rich--paid 10 percent of the taxes. That's a mere 67,000 households, who on average paid income tax of $707,000 apiece.

These "facts" tell you absolutely nothing (while sounding quite dramatic) without expressing the income of these people in the same units, namely percentage of their income compared to the total reported income.

[Geowitz]

Ok, so the top 7% pay 51% of the total taxes. That means that 93% of the people pay 49% of the taxes. That tells you nothing? Yes, they make a lot more and the same percentage of their salary is going to be immensly greater than that of a poor person, but the brackets still increase in percentage. The more you make, the higher your percentage is. Now I don't really have a problem with this, but this is the reason so many corporations use tax loopholes. They specifically design their business plan around tax law to maximize deductions. Get rid of the deductions and use a graduating tax bracket system and it would be much simpler. A flat tax won't neccessarily lower your overall tax liability, just your amount of deductions. It would depend on the percentage being used as well. Again, I don't mind if the bracket percentages increase as they do now, but atleast make it simpler.

And they aren't "facts". They are facts.

Edit - With regard to your graphs. This would make your gross and taxable income the same.

[BusaDave]

Originally Posted by Geowitz

And they aren't "facts". They are facts.

They are deliberately skewed statistics that misrepresent the burden of taxes on the wealthy.

Edit - With regard to your graphs. This would make your gross and taxable income the same.

Care to explain that comment?

The graphs were taken from IRS tax data. The income ranges on the x axis were arbitrarily chosen by me for no particlar reason and seem adequate to show the trend while simplifying the graphs.

The difficulty with eliminating deductions, is also eliminating the associated incentives for certain kinds of spending (e.g. creating jobs, home ownership, etc.).

I don't have a particular problem with simplifying the tax system and associate reduction in administration expenses. How about proposing a plan to discuss instead of a generic "flat tax" argument? Doing a little math to prove the concept would be nice too.

[Geowitz]

How are those skewed? They are the statistics. They are exactly what the IRS puts out. All it says is that 51% of money gathered by the IRS in income tax comes from 7% of those liable for income tax. Plain and simple to me.

What I meant with my edit comment was that in a flat tax system without deductions there would be no gross adjusted taxable figure. It wouldn't exist because you are just taxed on what you make and there would be no adjustment because of no deductions.

My original intention was to create a discussion about it. I'm not exactly sure how to get the whole thing going and never claimed to know. That's what this thread is about.

In our current system deductions provide a lot of motivation, but they don't benefit the middle class much at all. Only the big corps. They can create jobs which is good. Deduction for home ownership is overblown. Your paying thousands of dollars of interest on a home so you can deduct it and save a few hundred dollars in taxes. Not much savings to me. All so you can hope for an appreciation on your house, buy a bigger one and continue the cycle.

So then how could you simplify the system and still promote job creation and other usual incentives? I'm not sure, but deregulation could be a part of it. I'm here to discuss.

Edit - I guess I should clarify. I know flat tax has typically meant everyone paying the same percentage, but why not morphing that with our current system and having a graduated tax bracket system like we already have with lower tax rates, but with less and less deductions as it progressed over time to eventually no deductions at all.

[BusaDave]

Originally Posted by Geowitz

How are those skewed? They are the statistics. They are exactly what the IRS puts out. All it says is that 51% of money gathered by the IRS in income tax comes from 7% of those liable for income tax. Plain and simple to me.

It is skewed when these numbers are used to conclude that 7% of the taxable population paying 51% of all the money is unfair to the 7% without taking into account what percentage of the total income they make. Didn't I say that once already?

Personally, I think a graduated tax system is fine and simplifying the tax code to reduce administrative costs would be a good thing. I have no problem whatsoever with those who benefit most from society also contribute the most.

Ultimately you are going to have problems with ANY tax change that requires people to pay more taxes by redistributing the tax burden, particularly by those who contribute large amounts to political parties.

I seriously doubt that most homeowners would share your view of the home interest deduction.

[Fargin_Bastige]

I'm for the graduated tax with less loopholes. You make more, you pay more. As it should be.