Posted on 10/14/2011 6:40:56 AM PDT by SeekAndFind
For a number of years now, people have asked me whether I prefer a “flat tax” or a “fair tax.” Both are problematic.
The “flat tax” is typically conceived as a replacement for the existing personal income tax. This is fine, but it ignores the payroll tax, which is really just another form of income tax. So, it is only half of an income tax reform. In practice, quite a few countries have gone this route, beginning especially with Russia in 2001, and the results have been very good. These countries have generally replaced their income tax systems, but have kept what amounts to relatively high payroll taxes.
I would like to see a top-to-bottom income tax reform, which includes payroll taxes. Or, I should say, which does not include payroll taxes: I would like to see the payroll tax system eliminated entirely and integrated into a single income tax system. Neither Hong Kong nor Singapore, which are models of what can be achieved with a flat tax system (or nearly so in Singapore), have a payroll tax. The result is that taxation on the lowest incomes is very low, and the overall system has a high degree of progressivity despite modest top rates.
Hong Kong’s flat tax system, with no payroll or sales/VAT taxes, generates about 13% of GDP in revenue per year, with a top tax rate of 16%. This is quite good, and shows excellent efficiency and high compliance. However, 13% of GDP is still rather short of the 18.5% of GDP that the U.S. Federal tax system has generated over the past several decades. So, we would have to decide either to reduce spending considerably — which might be nice, but is a separate discussion — or generate more revenue somehow.
(Excerpt) Read more at forbes.com ...
The point of failure of this plan for me is that it gives Congress another revenue stream (VAT/sales tax) without repealing the 16th amendment. Mark Levine (following my lead on this, IMHO) made comment on this last night.
Why does this article say the Fair Tax will be 30% tax rate? I thought it was more like 15%?
Sorry, but the government can raise ANY tax.
The same thing that would stop the government from raising any tax is the taxpayer.
I would argue there are actually more limits under 999:
- is transparent, so everyone will see what Congress is trying to do if they try to raise rates.
- because everyone is paying, there is no class warfare. If they try to raise the rates, there will be public outcry of raising taxes on the poor.
- Cain will ask Congress to put in 2/3 majority rules to keep from changing rates - if they will is another question.
Also this article fails to understand the prebate of the Fair Tax...where the poor (everyone for that matter) gets a check so that in effect all the stuff you buy for the essentials in a year aren’t taxed.
It’s actually 23%.
Explanation here: http://www.fairtax.org/site/News2?news_iv_ctrl=1541&page=NewsArticle&id=8248
RE: The worry I have with a flat tax that it would be easy just to raise the flat tax as OUR government tries to satiate its craving for more money in the future.
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First of all, if the base assumption is that no matter how great an idea might be, DC politicians will find a way to corrupt it… why is the flat tax singled out for special treatment? What makes anyone think that Romney’s 87-page PDF Economic Plan won’t also be instantly corrupted and changed? Or the FairTax that many people are gung-ho for, claiming that it is superior to the 999 plan.
Superior how, if the assumption is that Congresscritters will instantly transform it into a basket of giveaways and boondoggles? Or even a Flat Tax?
If the starting point of evaluating any policy proposal or plan is that Congress will get in there and mess it up, I honestly don’t see any reason to support any candidate on the basis of any issue. Because we’d have to assume that his/her great idea would just be transformed into a steaming pile of dung by Congress.
The larger point — one which I’ve raised — is that the only way that the flat tax (or any other plan on any other issue) is not transmogrified into some atrocity is the vigilance of the electorate.
There is simply no way to trust a politician — no matter whom, no matter what — to do the right thing time and again. Absolute the only way we as a nation can defend our rights, get the policies we want, and prevent corruption by politicians is to be vigilant against such things and to keep up the pressure on all of them to do the right thing.
Foolish argument since Congress can change the tax rate at any time. You cannot prevent that with ANY plan.
Your opposition gives support to the current, corrupt, inane tax code and IRS we have today.
Conservatives have supported a flat tax for decades.
With regard to giving the gov't another channel for taxes, that did not stop Obama from trying to madate you buy a product.
By changing our tax system from income to consumption, we make it transparent, fair and simple.
The flat tax will not stop some liberal in the future from trying to impose a VAT or a "fee" on something.
The only thing stopping liberals, now and in the future, is eternal vigilence.
Citizens have a responsibility.
23% is a bit too high...that will encourage gray and black markets to avoid paying the tax.
That’s why I like the 999 plan as it keeps each tax low enough to make it easier to just pay it vs. trying to find ways around it.
Far better would be the Fairtax which would collect revenue based on what one takes out of the economy in the form of consumption rater than what one puts into the economy in the form of work effort. That and the fact that the fairtax would not require the government to know even so much as anyone's name in order to collect their revenue makes it the hands down winner in my book! It's really ALL about FREEDOM!
Well, who’s responsibility is that? Is it Congress? No. It’s our responsibility. We elect them. Frankly, we’re to blame for the mess we’re in and all the hoopla and back-and-forth on Cain’s plan shows just how in disarray we are. We can’t even come together on a simple little plan. And that’s just what it is. If we hold our government accountable, and are successful in limiting its size and scope, then that should not be a problem.
Cain has already said it’s a start toward a fair/flat tax. It may not have all the elements of what we’d perhaps coalesce around, but it’s simple, fairly basic, and worth considering. If Art Laffer is behind it (which he is) I think it should be given strong consideration. Caveat: I’m not all that enamored over a national sales tax myself, but I believe the idea behind it is to get everyone on board in paying their share of our nation’s taxes. Many here have written about it being an imposition on those with small incomes. Well, here I am. And I’m willing to at least give it some consideration.
After all, we’re still early in the election cycle. There’s going to be a lot of discussion over this and other issues, and who knows where the candidates will stand come February, April or whenever. Who even knows who we’ll be backing at that time.? Right now, I’m impressed with Cain for some fairly simple reasons: 1) His being Black effectively takes the race card out of the election regardless of what the Black socialists say. They’re scared to death and rightly so. There are a large number of Black conservative voters, mainly in the South, who may well look positively at Cain instead of Obama. 2) Cain is the best spoken of the candidates, appears more a common man, is friendly and comes across well. He will do well in the debates. Do you see Perry beating Obama in a debate based on his record so far? 3) Cain’s lack of political experience is a plus, regardless what the establishment Republicans and Perry supporters say. If we fall for the idea that we have to have someone with political experience in the presidency we are conceding our conservative beliefs to the establishment and will lose all control over the Republican party. It will be a party of elites (even more so than now) and conservatives will either be a minor segment or voting 3rd party. And we don’t want to go there. 4) Cain will be able to surround himself with experienced people in his cabinet and administration. Just as any president is able to do. A presidency is not as strong as the president, it’s as strong as the team he assembles. Just look at the existing administration for an example of that.
Sorry for preaching, but there’s so much garbage being posted lately it has to be countered.
So if you have 3 kids and make $50,000, you will have to pay 9% or $4,500 in taxes. If you have one kid and make $50,000, yopu will pay $4,500 in taxes.
And you will also pay 9% on your purchases....say another $2000 in taxes. And God knows what will happen to SS.
Fair tax does away with 2 of the 9s, the corporate tax and income tax. That give total control over taxes to the taxpayer.
One benefit of both plans is what happens to embedded taxes. These hidden taxes comprises 22% on every item we buy - you do not see them but they are part of the cost of every prodct.
Under Fair Tax, the embedded tax goes away. Under 999, the embedded tax is greatly reduced.
All systems will have some element of evasion/fraud. Our current system is rife with it.
23% is not bad if you pay no income taxes and make the same money you make today.
under the fair tax scam you have the government deciding what is or is not a family,
under the fair tax scam all people must register with NuIRS.
under the fair tax scam you have a monthly NEW ENTITLEMENT CHECK called a prebate. it will be mere hours before demands for a “living prebate”, you WILL also have all of K street lining up to the capitol to demand a prebate “subsidy” via having their client’s product determined to be a necessity.
all confirmable in the direct language of the fair tax scam at http://www.thomas.gov no propaganda scam site needed.
Because the people who wrote the article are unwilling to compare their income tax rates to the Fairtax rate on a level playing field!
If you make $100,000.00 and pay $20.000.00 in taxes you would say that you payed a tax rate of 20%. When calculated the exact same way the fairtax rate is 23% and includes general revenue, social security and medicare. If I used the same method that they are using to calculate the fairtax rate in this article to calculate your income tax rate in the above example the rate would be 25% and that would be on top of your social security and medicare payroll taxes!
RE: The very same people who always have would STILL get to define just what is, or is not considered to be “income”.
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Yes, I agree with you there.
If I happen to find a $100.00 bill on the street and no one claimed it, would that be an income for me?
I live in NYC, a very cosmopolitan city with people from all over the world living and working here.
Let me tell you this, A LOT OF THEM are for the purposes of our tax code, practically CRIMINALS.
Why is that? Many of them came to the USA as immigrants but have property (which they rent out before coming here ) or bank accounts back home. Many of them have families who might even have willed their money to these immigrants should they die.
I know for a fact that almost everyone I know who meet the above conditions DON’T declare the rental income back home ( be it Korea, Taiwan or India ) or the interest on their bank account in say the Indian Bank of Bangalore.
But according to US law YOU HAVE TO DECLARE INCOME FROM ALL SOURCES.
Are we going to hire more IRS agents to go after hundreds of thousands of people’s bank accounts overseas because BY LAW, they should have declared their ‘income’?
Suffice it to say that because of our tax laws, we have hundreds of thousands of (in most case, law-abiding ) ‘criminals’ living among us now.
The answer is:
Limit the Federal government to 10% of our gross cumulative incomes. So if you add all of our gross incomes, and you come up with $100, the Feds could spend only $10.00. Of that $10.00, $3.33 would be raise through a national sales tax (so as not to hurt business and to collect money from people who do not declare income) and $6.67 through a flat income tax. So it is not one or the other, but both. And the only deduction there would be would be for charitable donations.
I think the solution to collecting the sales tax is simple.
Let the states collect it. Most already have the mechanism in place to do this.
Then, we move away from a national sales tax and let each state set the sales tax where they want.
The federal gov’t, limited by a balanced budget amendment, can only spend so much. That amount is divided by the number of citizens in the last census.
Each state is required to submit the amount to the federal gov’t based on the number of citizens in their state.
This will solve several issues:
1) It eliminates federal taxes completely.
2) It eliminates block grants and the federal “cut” taken by bureacracy before the money gets to the states.
3) It returns fiscal control to the states.
4) It takes away the incentive to count illegal immigrants as citizens. Counting them increases your tax bill.
5) It encourages states to stop being sanctuaries for illegals as more enforcement will be used to get them off programs that cost the states money.
6) Each state can be creative in their sales taxes and what is being taxed. Some might tax services, some might not. Each state can experiment with their taxes and tailor it to suit the types of industries they have in those states.
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