Posted on 11/15/2011 10:04:56 AM PST by SeekAndFind
You don’t have to be Aristotle, who began around 330 BC to popularize the theory that the earth was spherical instead of flat, to discover that tax plans, including (perhaps especially) Rick Perry’s plan, that are called “flat tax” plans are anything but flat. No matter how you hold them up to the light, assuming you actually attempt to hold them to the light, they cannot be made to appear flat.
You can call them flat, and you can also call Al Gore a historically prominent purveyor of peace, but that doesn’t make it so.
Let’s go through some steps to hold Mr. Perry’s flat tax plan up to the light and see how flat it is.
Perry would keep deductions in place for mortgage interest, charitable gifts, and state and local taxes (for households earning less than $500,000). He would then exempt $12,500 per taxpayer and dependent claimed on the form. The rest of your Adjusted Gross Income (AGI) would be taxed at the same 20 percent rate.
Now, let’s examine the returns of three taxpayers, each earning the same $100,000, and all living in Tennessee (to make my state and local tax deduction calculations easier).
· * Mary is widowed, living in an apartment, and does volunteer work through Hands on Nashville several days a month. She donates no money to charity. She is slightly over the middle-age hump, and her husband died unexpectedly with minimal life insurance, so she’s trying to maximize her retirement savings. She deducts $1,433 for state and local taxes (the 2011 deduction for a single person earning $100,000) and takes a $12,500 exemption. Mary’s taxable income is $86,067.
· * Bob and Marsha are married (second time for each), with two children (one his, one hers). They give no money to charity, and spend a lot of their weekends (and money) at the race track (not that there’s anything wrong with that). They pay $15,000 interest on their mortgage, deduct $2,039 for sales tax and get to exempt $50,000 (four exemptions) of their income. Their taxable income is $32,961.
· * George is divorced, living in a house with a $200,000 mortgage. He gives $5,000 to church, where he hopes he can meet his next wife, and doesn’t always limit his search to the single women. He deducts $12,934 interest on his mortgage. He has a teenage son living with him, so he has two exemptions ($25,000) and deducts $1,705 for sales tax, making his taxable income $55,361.
On her $100,000 income, Mary, the widowed volunteer, pays $17,213 in federal income taxes. Bob and Marsha, the blended family of four racing fans, pay less than half that - $6,592 - and George, the divorced dad, pays $11,072. Even in Texas, I’m betting that’s not flat. And I can’t even imagine a plausible “fairness” argument.
A tax plan that someone calls “flat,” but taxes the same income at vastly different real tax rates is not only not flat, but it doesn’t accomplish any of the goals of tax reform. It leaves in place the crippling government influence on individual financial transactions.
Perry leaves in place three of the largest “loopholes” in the individual tax code, which unnecessarily drains the pool of taxable income and thus forces up rates. Those higher rates misdirect potentially productive capital into valueless tax avoidance outlays, further crippling the economy. And, the deductions produce huge differences in real tax rates all along the income plane, making the progressive incline (from a zero real tax rate to a 20 percent real rate) look like the jagged edge of a tree saw. Not only is the plane not flat, the edge of the plane is as not flat – and it has approximately the same effect on wealth production as the tree saw has on the tree.
Don’t let presidential candidates get away with placing false, poll-tested, labels on important economic reform. We can and should argue about whether it’s better to tax income or consumption, or whether tax reform should also be a tax cut, revenue neutral, or a tax increase, and how high the top rate should be. But can we first agree that a “clean tax,” one with no deductions, exemptions or credits should be the foundation of any true tax reform plan?
We are missing the point. What we need is a tax system that can be defined in less than 80 million pages of tax law and that takes less than 25% of the GDP to comply with.
Just an FYI, as I'm pretty sure it's the same dude.
So if a married couple with no children earns $500K and has $100K of deductions plus $12,500 for each person, the tax is $75K. If that married couple earns $500,001 and has the same deductions, will they lose the $100K in deductions and owe $95K?
There seems to be increasing confusion on what a “flat tax” is.
I always thought it meant a flat rate across the board on all levels of income.
I know a guy who thinks a flat tax means no deductions and an increasing rate on higher levels of income is still a flat tax.
Personally, I’m not in favor of a flat rate. I think progressive rates are fine, because those that earn the most use the most from the system. As long as no rate becomes so high as to be an incentive to not work.
You are missing the point of the article. A “flat tax” will soon morph into another form of what we have now. Do you wish to hire a new gang of legislators to decide that Grandma deserves just a tiny break for her glaucoma? Well, we have now. Even Cain’s idea is headed right back here.
The actual number of pages applicable to you now is only about 75. The rest of the so-called “80 million pages” is to stop Honda America from transferring all profit back to Japan. And unless you want no revenue from these corps., you WANT the rest of the 80 million pages to stop them. The number and complexity of today’s potential transactions make the code necessarily involved...otherwise the corporate attorneys and accountants will beat the system more than now.
How can any of them propose a ‘flat tax’ when so many pay no federal taxes and their rule is to not raise taxes on anyone, not even those not paying taxes ?
If they proposed a real flat tax the 'compassionate conservatives' would be boo-hoo-hooing because its not -progressive.
I really matters not what you call a tax the truth is that all tax increases are borne by Joe Public. Industry increases
are made up by increases in consumer goods and who consumes?
Joe public. And when Joe publics’ taxes go up who absorbs them? Joe public. Taxes are absorbed by you and me no matter
how they are disguised.
No. You are making one point, a good point - an easy to understand tax code and federal revenue taking less than 25% of GDP.
The author is simply making a different point; which is essentially that while your point is a good point, it is not the only point, it should not be the only point and on its own it may achieve the two particular goals you mentioned, but THAT is not enough.
Why?
The income tax code is what supplies the entry point for all the Liberal/Progressive/Marxist social engineering, which along the way has made some compromises that satisfied crony-capitalist interests as well.
Together, those interests have helped raise a stumbling economy driven by the tax code - how to gain from it - as much as or more than market interests.
The mechanisms for all that Liberal/Progressive/Marxist/Crony-capitalist economic micro-management, economic interference, is not in the tax rates as much as it is in the labyrinth of exceptions, deductions, allowances and credits, not the primary rates.
To keep any of it, to admit any of it, simply opens the door (admits the appropriateness of it in a general way) for the slow bastardization of any new code, which will slowly result in the inability to hold to the new rates, and new revenue standards, just to satisfy changes to the exceptions, deductions, allowances and credits.
We need a simple flat tax of 10% with no deductions (another form of welfare/subsidy) for both individuals and businesses. Make sure the size in terms of bureaucracy and the spending are reduced to the bare bones to fit that 10%.
I’d love to have Chainsaw Al or someone like him just come in and clear cut the amount of wasteful spending we have at the federal level.
Then allow another 10% to go to cities, towns, and municipalities. The total tax burden for any individual or business should not exceed 20%. If it does make it a law to start cutting the pay of all government employee with absolutely no exemptions.
The government gets rewarded with pay increases when more revenue is brought in because of increased business transactions. This puts the government in a more servant-oriented position and really motivates government to not be bureaucratic sticks in the mud.
First, I get your hatred of the American family. Poor Mary, through no fault of her own, is all alone (what a sad and lovable lady). The couple are party people who like to get hooked up and gamble. The other guy is a party loving bachelor who couldn’t stay married.
Those are your caricatures, but not reality. Most families are like mine: Wife, husband, kids - never been divorced, struggling to pay for food, gas and shelter.
The point of having a deduction for individuals is it takes a certain amount of your income to buy food and shelter. That means Mary isn’t buying 3 gallons of milk PER DAY, driving kids all over town and living in a larger house in a more expensive area so her kids can go to a good school.
You think the government has the RIGHT to EVERYTHING. At least with an individual deduction, someone has recognized that each individual needs to use some of the income to eat.
So let’s look your numbers using costs from the USDA, etc. Mary loves to eat expensive food and is fat, so let’s just let her have the “liberal” plan and compare her cost of high living to a family of 4 who eat to survive.
Mary pays $17,213 in taxes and $3,030 in chow. Mary also has one car, which she needs to go shopping, visit the grandkids, eat out, recklessly gamble away at bingo, etc. She spends about $14,400 in gas per year. Now she’s at $34,643. That leaves Mary with $65,357 to buy housing (her dead husband was a union thug and she has free health care).
Now the family of 4, who buy the Low-Cost plan (no lobster for this bunch). They also have two cars because both parents have to work to make that $100k (as opposed to Mary, who does nothing for hers). That’s $28,800. Because both parents are working, they pay their local church $9,000 per year for childcare (average is $12k, but they shopped around). $6,592 + $8,415.60 + $28,800 + $9,000 = $52,807.60. That leaves this family of 4 $47k to pay for health insurance (which is more for a family), shelter (more), clothing (more) and other essentials.
YOU want to tax the family on income used to by food, shelter, clothing and tools required to ADD to the economy.
If Mary is so screwed, WTH doesn’t she jut adopt 10 kids and pay no tax at all? OH RIGHT, IT COSTS MONEY TO KEEP THEM ALIVE.
“If they proposed a real flat tax the ‘compassionate conservatives’ would be boo-hoo-hooing because its not -progressive. “
Stating that a portion of every American’s income is sacrosanct and not available for taxation because it is the amount required for the basic necessities of life is not “progressive.” It doesn’t change by income level, it changes by the number of mouths the income has to feed, and typically not by much.
Claiming that a family of six with a two-income household making $100k per year is even capable of absorbing the same tax burden as a single kid making $100k per year is ridiculous. All you will do is encourage abortion, poor behavior by single people and damage traditional middle class American families.
It is.
Can you be more specific? That is a very general statement.
Based on the same general usage of roads, public property, being defended, courts, etc. those that earn would take less from "the system" in that they don't receive government benefits as a poorer individual might.
Very nice. Very nice.
What does Newt crushing everyone in California tell you about Newt?
I think the best way to cut the cost of government bureaucracy would be to implement a dog-eat-dog bonus policy. Award government supervisors bonuses for cutting their staffs and their operating costs. If everyone who signs off on spending money in their department was offered a matching percentage bonus, you could sit back and watch just how small the staffs and other costs would get. This is exactly the opposite of the way things work now — people get more money depending on how many people they supervise and how big their budget is. Bureaucratic empire building is why government programs rarely disappear and generally get bigger and bigger.
Sounds like a great incentive program for small government but there also needs to be one for limited government, too!
” If they proposed a real flat tax the ‘compassionate conservatives’ would be boo-hoo-hooing because its not -progressive. “
SCREW em!
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