[linskyjack]

I'm going to finally give Mulder and Gbrumb(or anyone else for that matter) a chance to comment on something they actually might know something about---the flat tax. Here is a hypothetical. No one pays any income taxes on their first 50,000 earned. From that number on, you pay a straight 17% on the amount above 50,000. There are absolutely no deductions for anything. Now here are the questions:

1. In terms of revenue, would the government collect more or less or is there no way of knowing.
2. How would such a flat tax effect people investing in business.
3. Could a plan like this ever make it through considering the fact that the special interest groups (accountants etc.) would go absolutely nuts.


Now the numbers above, are not mine--I heard some experts on the radio give them. So pipe in and tell me what you think.

[bassetman]

Well, I'm not a Mulder, but the problem I see with a "Flat tax" is there are still going to be fights over "deductions".

For example, a contractor had to but tools to earn the money over $50,000, what tools etc are deductable to bring the total income down to or closer to the 50K? Where does it end?

I just think we'd be back to a new set of complicated IRS rules!

[MacFromOK]

I can't see this system working for business at all, and here's a simple example:

Suppose a business manufactures and sells 500,000 of products annually.
Suppose their raw materials cost 100,000.
Suppose they pay 6 employees 50,000 each (300,000 total).


You have a business paying tax on 450,000 (450k x 17% = 76,000) when there is only 100,000 profit, leaving 24,000 for the owner. Then there is building/property purchase and upkeep (or rent), utilities, insurance, etc. which is likely far more than that.

Small example, but ya can see the point.

Cheers, Mac

[CouchMaster]

10% of my $10,000/yr leaves me $9,000 to live on - 10% of your 10 million leaves you with 9 million to live on -BULL ***** Zero for me - and 90% for you, now that's fair.

[Ciberblade]

Well, lets see. In the current system, top 5% pay what? 50% or more of the taxes.

According to the Bureau of Labor Statistics, the national median hourly wage is $13.65 or $28,392. So we would know that at the very least the lower 50% of workers will never pay income tax. But they would spend the additional money -- causing an increase in total tax revenue for that wage bracket.

I do not have the numbers for workers earning more than $50,000/yr at my fingertips -- but will search for those later.

[bassetman]

Originally Posted by MacFromOK

I can't see this system working for business at all, and here's a simple example:

Suppose a business manufactures and sells 500,000 of products annually.
Suppose their raw materials cost 100,000.
Suppose they pay 6 employees 50,000 each (300,000 total).


You have a business paying tax on 450,000 (450k x 17% = 76,000) when there is only 100,000 profit, leaving 24,000 for the owner. Then there is building/property purchase and upkeep (or rent), utilities, insurance, etc. which is likely far more than that.

Small example, but ya can see the point.

Cheers, Mac

That's the kinda thing I am talking about!

[MacFromOK]

Lol, you apparently posted while I was writing that Bassetman - wasn't trying to outdo ya on it.

Cheers, Mac

[Mulderator]

basset and Mac are correct--flat tax doesn't simplify the tax system. The only thing that will is a national sales tax--much easier to administer and much harder to cheat.

[Gibble]

Originally Posted by Mulder

basset and Mac are correct--flat tax doesn't simplify the tax system. The only thing that will is a national sales tax--much easier to administer and much harder to cheat.

I just see more smuggling and black market...of course, the IT industry would have a nice new bubble as all the POS apps that don't handle sales tax, and many websites, etc, etc would need modification. Just like the y2k bubble

[bassetman]

Originally Posted by Mulder

basset and Mac are correct--flat tax doesn't simplify the tax system. The only thing that will is a national sales tax--much easier to administer and much harder to cheat.

[MacFromOK]

Originally Posted by Mulder

basset and Mac are correct--flat tax doesn't simplify the tax system. The only thing that will is a national sales tax--much easier to administer and much harder to cheat.

As frightening as it is to agree with ya - I think that is the closest thing to a fair solution that I know of, especially if food and used items are not taxed.

It's a given that rich folks usually buy more expensive items (cars, houses, clothing, etc.) and therefore would pay more taxes. I'm sure this won't please everyone though - usually nothing does.

Cheers, Mac

[LANMaster]

Originally Posted by Mulder

basset and Mac are correct--flat tax doesn't simplify the tax system. The only thing that will is a national sales tax--much easier to administer and much harder to cheat.

I posted in the fair tax thread that I supported the flat tax more than the fair tax (which I am assuming is tantamount to the national sales tax) but I am starting to reshape my position on this issue.

I am now less inclined to go for the flat tax and have decided to cozy up more to the fair tax option, though I still think that any time you let lawmakers muck with the tax code, everyone inevitably ends up paying more than they were before, and the overall economy suffers for that.

[bassetman]

Originally Posted by MacFromOK

Lol, you apparently posted while I was writing that Bassetman - wasn't trying to outdo ya on it.

Cheers, Mac

I just considered it confirmation!

Hope all is well with you!

[Mulderator]

Originally Posted by MacFromOK

It's a given that rich folks usually buy more expensive items (cars, houses, clothing, etc.) and therefore would pay more taxes. I'm sure this won't please everyone though - usually nothing does.

Cheers, Mac

I always look at things practically. As an accountant, trying to track "income" is very difficult for self-employed people. The tax code is also biased against self-employed people, which is ridiculous when you think of it--they must pay tax for themselves as an employee and as their own employer--how ridiculous is that! So inevitably they cheat out of frustration (you can't really blame them). 15% comes right off the top before they can even make a dime. With a federal sales tax, you don't need the IRS--you don't need a lot of complicated tax preparation.

Also, as pointed out, the rich will still end up paying the lion's share of the taxes because necessities will carry very little tax and luxury items taxes heavily.

However, the single biggest advantage is that is does not act as a discouragement to making more money and working harder! Our current tax code penalizes people like my wife and I--we take 4 steps forward and 3 steps backward--i.e., it just doesn't seem worth it for us to make more money because so much of it gets taxed. In a National Sales Tax System, no one is penalized for working harder. Most rich people will still buy luxury items and most that can't afford them now will still buy them. But people who don't need luxuries and fancy life styles will be rewarded.

It really is a win-win for everyone except tax accountants, the IRS, and repo companies!

[AKA Arizona]

If you buy something is the only time you should have to pay taxes, the current system has us paying taxes when we buy something and when we make money. I would like to keep ALL my money and only pay the taxes when I buy something. Consumable goods such as food should be tax free.