Flat tax vs. Progressive tax

Discussion in 'Budget & Taxes' started by Distraff, Apr 17, 2015.

  1. Distraff

    Distraff Well-Known Member

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    This thread is really about how we should change our tax system. Should we have a flat tax? Should we lower income taxes for the rich more than the middle class, should we lower income taxes about the same for all groups, should tax-cuts be concentrated for the middle class and poor? Should taxes for the rich go up? Should taxes on the middle class and poor also be raised?

    Here is a link to an image showing effective tax rates on different income groups.
    http://cdn.americanprogress.org/wp-content/uploads/issues/2011/02/img/te07chart2.jpg

    The poor pay about 7% in federal taxes, the middle class pay about 16%, the moderately wealthy pay about 20% and the super-rich pay about 17%.

    What would your ideal tax rates by?

    Mine would be 5% for poor, 10% for middle class, 20% for moderately wealthy, and 35% for the super-wealthy.
     
  2. Pandrea

    Pandrea Member

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    In Italy we cannot have a pure flat tax because it would be unconstitutional! :D
     
  3. Telekat

    Telekat Member Past Donor

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    If we're talking about our ideal tax system, not what is politically viable, I propose scrapping the income tax entirely and replacing it with a land value tax. You see, my theory is three-fronged. First of all, it's common sense that people with more land will tend to be richer. Poorer people will not be owning a whole lot of land. This makes the tax progressive in nature. Second, you cannot shove your land in some overseas bank account and dodge the taxes like the rich do now with the income and corporate taxes. Third, it's a pretty realistic fact that taxes tend to discourage whatever is being taxed. Instead of discouraging consumption, achievement, and so, we can apply this in a positive way to solve a growing problem, that is: land hoarding. The LVT would put more barriers in place to prevent the super rich from buying up massive amounts of land. Ten vacation homes suddenly seem a little less viable ;)
     
  4. ARDY

    ARDY Well-Known Member Past Donor

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    fwiw
    tax on your first x dollars of income is the same whether rich or poor
    incremental tax rates only apply to income more than that base level
    so anyone can have a lower tax rate simply by diminishing their income as required

    low net tax rates for the wealthy reflect their ability to influence the tax code to their advantage
     
  5. Deckel

    Deckel Well-Known Member Past Donor

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    Mine would be whatever got us to a balanced budget.
     
  6. Pandrea

    Pandrea Member

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    So a farmer is richer than an industrialist?
     
  7. Telekat

    Telekat Member Past Donor

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    They can be. Not a whole lot of family farms around these days, mostly big corporate farms.
     
  8. Pandrea

    Pandrea Member

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    Chiquita Brands International year revenue: 3.07 billion
    Apple Inc. year revenue: 182.795 billion

    Which company is richest? Which company has more land?
     
  9. Nebraskan

    Nebraskan New Member

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    My ideal tax system would have 3 core tenets:
    - A progressive consumption tax. You can read about it here :http://www.slate.com/articles/business/moneybox/2011/12/the_progressive_consumption_tax_a_win_win_solution_for_reducing_american_economic_inequality_.html. Basically, what it boils down to is taxing the difference between income minus savings. This tax system would reward savings. There would be a standard deduction, and rates would start low and rise steeply.
    - A strong estate tax. This would help reduce inequality.
    - No more corporate taxes, payroll, or income taxes. All three of these taxes, tax useful behaviors. Taxes discourage behavior they are taxing, and I think all of those taxes are counterproductive. The corporate tax and payroll tax discourage job creation. Income is a good thing, no need to discourage that. Basically, the consumption tax would replace all of these.

    I'll throw a few other ideas out there. Taxing carbon emissions and pollution. We want to discourage those behaviors. Capping the mortgage interest deductions. No need to subsidize the rich.
     
  10. LiveUninhibited

    LiveUninhibited Well-Known Member

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    If there's an income tax, it has to be progressive because the poor need to spend a larger proportion of their money on essentials. And why have the IRS go chasing after pennies anyway from all the disorganized poor people who won't and can't pay.

    I'd probably institute a relatively complicated but automated system of taxing luxury and harmful items. I'd legalize all drugs, and tax them, dedicate those funds towards treatment programs. Soda would definitely have a tax to subsidize healthcare, as would gasoline especially where public transportation is available. Lower the subsidy on corn and subsidize vegetables.

    I'd probably de-localize property taxes so that some schools don't get more money than they need while others scrape by.
     
  11. ChrisL

    ChrisL Well-Known Member

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    Soda and gas are already taxed.

    If an income tax is going to be progressive, that means poor people are going to have pay more and more too.

    We need to reel in big government spending, wasteful programs, etc. That's the first part to lowering taxes, IMO.
     
  12. LiveUninhibited

    LiveUninhibited Well-Known Member

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    Gas does have quite a bit of tax on it already, but not sure what you're referring to with soda. Where there are excise taxes on food/goods in general, is that what you mean? I mean a special excise tax on soda, and in principle this could be extended to anything that provides calories without satisfying hunger - thereby contributing to obesity. I don't want to outlaw obesity, but I also want to put pressure against it in the form of a tax, and use the money from that tax to help educate people against it. Similar approach to alcohol and other recreational drugs.

    I don't see how progressive taxation per se makes the poor pay more compared to a flat tax. In a direct sense, it's clearly the opposite. Are you trying to say that progressive taxation encourages wasteful spending?

    I'd agree that wasteful spending is a primary problem, but not enough people agree on which programs are expendable. I am certain that the world would be a better place without the DEA, aside from the jobs lost in the short term. I am certain that locking up non-violent drug offenders (including dealers) is counterproductive as well. Ask the DEA, and they'll tell you that America would implode without them. I also don't think America needs to spend as much on the military as the rest of the world combined. That seems wasteful. I'd rather not see aid given to countries for the purpose of manipulating them. But these things I mention are the kind of big spending that many "conservatives" won't give up. While liberals would scream and kick just as much to cut medicare, welfare, etc.
     
  13. CourtJester

    CourtJester Well-Known Member

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    I would favor a wealth tax which would be the best way to tax based on the benefits accrued from living in our society. The bigger the percentage of the wealth of America you posess the greater should be your taxes. So have a flat tax but base it on total wealth.
     
  14. CourtJester

    CourtJester Well-Known Member

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    The problem is getting to agree what are wasteful programs. Is it entitlements, welfare, Medicaid, defense, the war on drugs, homeland security. You will l be hard pressed to find any Congress that has actually reduced spending overall.
     
  15. ChrisL

    ChrisL Well-Known Member

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    Because taxes would go up for everyone, no? I'm not talking about those who don't pay taxes. I'm talking about those who work and pay taxes but are not making a lot of income. And when is it enough? How much more of our money do we have to keep paying out to the government so that they can waste it? They are the ones who need to tighten their belts and stop with all the spending.

    There are plenty of wasteful and redundant governmental programs/offices/administrations. Check it out.

    http://www.forbes.com/sites/anthonynitti/2014/10/22/how-did-the-government-waste-your-money-in-2014-separating-fact-from-fiction/
     
  16. Steady Pie

    Steady Pie Well-Known Member Past Donor

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    Mine would be 0% for poor, 0% for middle class, 0% for moderately wealthy, and 0% for the super-wealthy.
     
  17. Taxpayer

    Taxpayer Well-Known Member Past Donor

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    ... it seems to follow that we want to discourage income. You're both right, but seeing the two statements together reinforces for me the disconnect in our tax system between what we want it to be and what circumstances require it to be.

    It's not realistic considering how much we spend, but my ideal tax would be an equal fee per citizen for equal citizenship. Incentivizing or incentivizing behavior should be in the realm of grants and fines, not taxes.




     
  18. ARDY

    ARDY Well-Known Member Past Donor

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    well there was a time when we were importing increasing amounts of oil
    some people have even suggested that both gulf wars were about securing a strategic resource..... oil

    so, arguably people who wasted oil were mak the country less secure and creating a situation that required us to fight two wars.

    so if this were true, what would be wrong with dis incentivising behavior that was making us less secure... and using the tax code to do so

    and if one thinks that carbon emission is something we need to reduce
    again what is the problem in using the tax code to help do this
    rather than dis incentivising income by taxing it?

    fwiw
    my post was simply to clarify the nature of the progressive income tax
    which allows every one to take advantage of the low tax rates for low income
     
  19. Taxpayer

    Taxpayer Well-Known Member Past Donor

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    Arguably, but not demonstrably. And I don't think it's reasonable to penalize someone for something you can't demonstrate. That being said, there is a better argument — most pollution can be demonstrated to harm your neighbors. I don't have a problem with fining people for demonstrable harm.

    I'm not against incentives either, I just don't think they should be accomplished via taxation. There should be a clear distinction between a necessary duty (paying our bills) and whatever social engineering or charity we decide to implement. That lack of clarity (I believe) is part of the reason we have such a convoluted, poorly respected, and poorly understood tax system.

    We have people claiming "I paid my share" when they paid nothing. But that's not clear to them, or anyone else, because all they see is a final number — a product of government costs, charity, fines, and incentives that keeps them from even understanding what the policies they voted for actually cost. Which also undermines the effectiveness of those incentives/penalties, and the appreciation for the substantial charity we have built into our system.





     
  20. ARDY

    ARDY Well-Known Member Past Donor

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    i agree about the convoluted tax system
    it has incrementally evolved that through years of lobbying by special interests
    both for spending and taxing
    and really the main interest not represented in all that is the ordinary tax payer
     
  21. reallybigjohnson

    reallybigjohnson Banned

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    First choice: National sales and excise taxes.

    Second Choice: Flat tax. Most flat tax proposals aren't entirely flat tax though as they exempt the first $20,000 or so. I think everyone should have some skin in the game. Even if you only make a dollar you should still pay the 10% or 15% flat tax. No more of this pitting rich against poor. Everyone pays the same so everyone who wants higher taxes also has to pay them.
     
  22. CourtJester

    CourtJester Well-Known Member

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    If the farms are owned by corporations the farmers are the shareholders.
     
  23. FreshAir

    FreshAir Well-Known Member Past Donor

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    a flat tax where everyone pays the same % for every dollar they earn over the poverty line is the only fair system

    all income needs to be treated as income, no caps, everyone pays the same 35% across the board for every dollar earned over the poverty line
     
  24. hudson1955

    hudson1955 Well-Known Member Past Donor

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    an interesting bit of information regarding the creation of the IRS and form 1040: " 1914-1915 In 1914, the BIR unveiled its form for the new income tax. Four pages long, it was dubbed Form 1040 as part of the agency’s normal sequential numbering process. No money was collected during the first year. Instead, taxpayers returned just a completed form, which was then checked by field agents for accuracy.
    in 1915, several congressmen complained that income tax forms are too complicated

    The fight over income tax, progressive tax rates and the constitutionality of income taxation has been going on since the 1800's.

    Interestingly is these comments by members of the Supreme Court, 1872: "As Representative Justin Morrill of Vermont observed, “in this country we neither create nor tolerate any distinction of rank, race, or color, and should not tolerate anything else than entire equality in our taxes.” And......
    When Congress passed another income tax in 1894—one that only hit the top 2 percent of wealth holders—the Supreme Court declared it unconstitutional. Stephen Field, a veteran of 30 years on the Court, was outraged that Congress would pass a bill to tax a small voting block and exempt the larger group of voters. At age 77, Field not only repudiated Congress’s actions, he also penned a prophecy. A small progressive tax, he predicted, “will be but the stepping stone to others, larger and more sweeping, till our political contests will become a war of the poor against the rich.”
    Well it seems his prediction has come true. Hasn't it.

    So, IMO, a flat tax is fair and our current form of Progressive taxation unfair and basically unconstitutional. All citizens of the Country should pay an equal percentage of tax on their "earned" income. Income earned from investments is a different story and IMO is where Progressive Tax should be applied.
     
  25. Ndividual

    Ndividual Well-Known Member

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    I would prefer to eliminate the Federal government from taxing individuals or corporations completely, returning to the States as the only authority allowed to tax their citizens and businesses directly. The Federal spending budget should be apportioned as defined in our Constitution, and any redistribution of wealth should be funded by and kept within each of the States as their citizens consent to allow. States could then look at the methods used by others and determine what works best for them. With fifty separate bubbles it would be much less likely for all of them to burst or deflate at once, and a competitive nature among the States would more likely result in the citizens of each State taking a more active part in achieving the best results in their States. Progress is more rapidly achieved when stimulated by open competition allowing others to copy and modify what works in ways to be made even better and more efficient.
     

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