What Happened to the Flat Tax Proposal?

[Dancing David]

Is it still being tauted, I thought it was agood idea, and there seemed to be a lot of support for it. A flat tax upon all income, including the 501c, churches and capital gains. You make money , you pay taxes. No more exemptions, hopefully. Although the Earned Income Credit , and all sorts of other favorite exemptions, like the mortage exemption would be contested.

It would also apply to the estate tax, no more $600,000 exclusion, or whatever it is. It would not be regressive in terms of higher wages, but equal for all.

Who is still suggesting it politicaly?

 

[Beerina]

I don't know if it would pass for churches -- Congress shall make no law, and all that silly stuff.

And it would lower tax rates on most people, but make up the difference by closing loopholes. But the loopholes would creep back in slowly in the long run anyway, as would more layers of progressive taxation.

 

[Crossbow]

The last person I heard seriously talking about it was former Governor Brown of California when he was running for president in 1992.

Even then, he eventually had to work in all kinds of deductions for things like interest on a home, dependents, charity, and other such things in order to make the idea appealing to more people.

In the end, a flat-tax did not seem to be all that much improved over the current system.

 

[Meadmaker]

A flat tax upon all income, including the 501c, churches and capital gains.

There is no income tax exemption for churches, or 501c employees.

 

[fuelair]

I suspect it is still flat.

 

[Ladewig]

Is it still being tauted, I thought it was agood idea, and there seemed to be a lot of support for it. A flat tax upon all income, including the 501c, churches and capital gains. You make money , you pay taxes. No more exemptions, hopefully. Although the Earned Income Credit , and all sorts of other favorite exemptions, like the mortage exemption would be contested.

It would also apply to the estate tax, no more $600,000 exclusion, or whatever it is. It would not be regressive in terms of higher wages, but equal for all.

Who is still suggesting it politicaly?

I really don't trust my memory at my age, but I thought the flat tax proposal went away when someone actually say down and determined what the flat percentage had to be if the government expected to collect the same amount of money that it collects now.

 

[zakur]

Ohio gubernatorial candidate (and current Secretary of State) Ken Blackwell has a flat income tax as part of his platform. Flat tax or no, it looks like Blackwell is going to get trounced next month.

Last year, millionaire Steve Forbes published his book Flat Tax Revolution: Using a Postcard to Abolish the IRS. The flat tax also was a major part of his 1996 and 2000 presidential primary campaigns.

 

[BPSCG]

Seems to me all a flat tax proposal will do is simplify your returns. Congress is not going to pass any law that reduces the total take it gets on April 15.

Frankly, I think a flat tax has less chance of passage than of Sylvia Browne winning the JREF million. It would mean a tax cut for the wealthy, who now have the highest tax rate and pay the most taxes, and a tax increase for the poor. If someone were to introduce it to Congress tomorrow, the Dems would demagogue it to death before the ink was dry on the bill.

 

[Garrette]

Around here the national sales tax is being misrepresented to bash an incumbent Congressman.

The opponent's ads say "Mike Sodrel wants a 23% tax on everything you buy! That means 23% more on milk!"

They conveniently forget to mention that foodstuffs were to be exempted and that concurrent with the sales tax would be an elimination of the income tax.

Doesn't really bother me, though, as both the incumbent and his opponent are waffling weasels.

 

[Random]

There are a whole bunch of issues with the flat tax that rich conservative economists hope you don’t notice.

Does it apply to payroll taxes (Medicare, Social Security) or just income taxes? A lot of Americans pay more in payroll taxes than they pay in income taxes. The thing to remember is that payroll taxes are regressive, with the rich paying an ever smaller portion of their income on it while they gain more and more money. Combine that with progressive income taxes, and you find that we already have a surprisingly flat tax rate as is. But couple our currently existing payroll taxes with a flat tax, and suddenly the rich are paying less as a percentage of income than the poor and middle class. That’s a tough pill to swallow politically. Conservative economists get around this by avoiding all talk of payroll taxes, even if they have to twist themselves into knots doing it.

Is it revenue neutral? A flat tax that remains revenue neutral will, by its very nature, have to raise taxes for people currently paying less than the flat rate, while reducing taxes on those paying more than the flat rate. Since there are a lot more people who would not benefit from a flat tax, it’s a bit of a non-starter in a functioning democracy.

If it’s not revenue neutral, where is the extra money going to come from? If people are paying less in taxes, there are going to be cuts in services.

What is the rate anyway? Conservatives who push this line are always trying telling us how great everything would be with a flat tax. “Fits on a postcard”, “saves time”, “better for environment” and all that. But when you try to get them to reveal what the rate they want is, they run away screaming. They either come up with a number that is way too small to be revenue neutral, or they have a number that screws over a majority of Americans. Either way, not something people with future political aspirations will want to support.

The flat tax goes down with term limits, school vouchers, and free trade. Simplistic, cookie cutter answers to extremely complex questions.

 

[drkitten]

Seems to me all a flat tax proposal will do is simplify your returns. Congress is not going to pass any law that reduces the total take it gets on April 15.

It's also an opportunity for significant social engineering, which may or may not be a good thing (depending upon your political views).

It would mean a tax cut for the wealthy, who now have the highest tax rate and pay the most taxes, and a tax increase for the poor.

This isn't clear, depending upon just which "flat tax" proposal you read.

Although the wealthy have a higher marginal tax rate, they also have a number of ways to re-structure their wealth to avoid paying taxes on the money they recieve. Just as a quick for-instance, I believe that under US law, bond income is generally taxable unless it comes from local, state, or federally-issued bonds. This means that money one gets from T-bonds is treated differently from money one gets from Dupont Chemicals, taxwise -- and I can reduce the money I owe in taxes by buying T-bonds. There's a huge industry in "tax shelters," basically ways for the wealthy to protect their assets from being taxed, while the poor often have no such recourse. Dividend income is taxed at a different rate than salary, for example. If I own and run my own corporation, I can decide to "pay" myself only a dollar a year as salary, while paying myself an obscene amount as dividends. Long-term capital gains are treated differently from salary, which in turn is treated differently from consultancy income, which in turn is treated differently from patent royalties. There's a huge industry in "tax shelters," basically ways for the wealthy to protect their assets from being taxed, while the poor often have no such recourse.

In this sense, a flat-tax proposal is fairer because it treats all sources of income equivalently, so someone wealthy can't reduce his tax burden by shifting piles of money around.

 

[Ziggurat]

The main benefit of flat taxes is simplification of the tax code. I like that idea. Congress, however, doesn't, and never will. Why? Because complicating the tax code is their JOB: By giving various tax incentives to different activities (educational expenses, moving allowances, mortgage interest, etc.), they can be seen to be doing something for their constituents. Its also one of the biggest tools that the government has for directing the behavior of the citizenry. Now, why on earth would Congress give that up? Why would they decide, "hey, let's make ourselves vastly less important to the lives of our voters?" Not going to happen.

 

[Random]

In this sense, a flat-tax proposal is fairer because it treats all sources of income equivalently, so someone wealthy can't reduce his tax burden by shifting piles of money around.

But are all sources of income treated the same by the flat-tax proposal? Forbes left out payroll taxes and dividends from his 17% income-tax scheme. Payroll taxes (which the poor mostly pay)would stay unchanged, while dividend and captial gain taxes (which the rich mostly pay) would be abolished.

But the tax form would be simple, and that's the important thing.

 

[Snide]

Seems to me all a flat tax proposal will do is simplify your returns. Congress is not going to pass any law that reduces the total take it gets on April 15.

Frankly, I think a flat tax has less chance of passage than of Sylvia Browne winning the JREF million. It would mean a tax cut for the wealthy, who now have the highest tax rate and pay the most taxes, and a tax increase for the poor. If someone were to introduce it to Congress tomorrow, the Dems would demagogue it to death before the ink was dry on the bill.

You're probably right of course, but just imagine for a momment if the Dems did not do as you suggest. I suspect the "poor" who voted Republican in the past on other issues would suddenly find those issues not so compelling anymore. IOW, it wouldn't fly with either the Repubs (as a whole) or Dems, without some exemptions (like the first $20,000 of income is tax free).

 

[drkitten]

But are all sources of income treated the same by the flat-tax proposal?

Which flat tax proposal?

That's part of the problem. There's no single "flat tax" proposal, but dozens if not thousands of them, and they all differ in detail.

Even just a flat "income tax" -- as the proposals are usually written -- would plug some loopholes. For example, I can deduct expenses from my consultancy income but not from my salary; I can deduct mortgage interest but not credit card interest, and I can't deduct anything from apartment rental. This is obviously biased towards property owners and the self-employed, a loophole that I shamefully try to take advantage of but that would be plugged by Forbes' proposal.

 

[corplinx]

I like the flat tax. I just think it has a snowballs chance in hell of passing. Remember the Bush welfa- errr taxcut? It resulted in low income working families being able to get more in refund than they _payed_ in taxes. When the GOP tried to amend the tax cut bill before it passed to fix this, the Dems said they were trying to screw the poor and the GOP ran away from the amendment.

Given the kind of honesty and courage displayed there, do you think a fair tax system would ever have a shot?

 

[Major Billy]

Congress is not going to pass any law that reduces the total take it gets on April 15.

They just did:

President Bush signed $70 billion in renewed tax cuts yesterday, calling the legislation the centerpiece of an economic expansion that Republicans hope to ride to re-election in November. The bill Mr. Bush signed yesterday extends the dividend and capital gains tax cuts that Congress first enacted in 2003, which set the maximum rate for both at 15 percent.

 

[Major Billy]

Is it still being tauted, I thought it was a good idea... Who is still suggesting it politicaly?

Actually 2,720 Americans have fought and died to impose a flat tax on Irag:

U.S. Administrator Imposes Flat Tax System on Iraq

When I read the headline in The Washington Post that said, "Bremer imposes flat tax on Iraq," I thought how dare the administrator of the Coalition Provisional Authority "impose" a fair, simple, low tax rate on those poor Iraqi entrepreneurs and small shop owners that will promote economic growth and prosperity and give them a chance to get rich without being crushed by taxes. What audacity Bremer demonstrated, to achieve in Iraq something we have yet to accomplish in the United States - fundamental tax reform and simplification that is working for Russia under President Vladimir Putin, who cut the top rate to 13 percent.

 

[Crossbow]

Seems to me all a flat tax proposal will do is simplify your returns. Congress is not going to pass any law that reduces the total take it gets on April 15.

Frankly, I think a flat tax has less chance of passage than of Sylvia Browne winning the JREF million. It would mean a tax cut for the wealthy, who now have the highest tax rate and pay the most taxes, and a tax increase for the poor. If someone were to introduce it to Congress tomorrow, the Dems would demagogue it to death before the ink was dry on the bill.

Well then, I guess you failed to notice the numerous news accounts of the Bush Tax Cut that was passed in May, 2003.

 

[fishbob]

Seems to me all a flat tax proposal will do is simplify your returns. Congress is not going to pass any law that reduces the total take it gets on April 15.

Frankly, I think a flat tax has less chance of passage than of Sylvia Browne winning the JREF million. It would mean a tax cut for the wealthy, who now have the highest tax rate and pay the most taxes, and a tax increase for the poor. If someone were to introduce it to Congress tomorrow, the Dems would demagogue it to death before the ink was dry on the bill.

You mean the Congress would not be stupid enough to pass a tax proposal that takes in less than they spend?

When there is no poll, Planet X is not an option.