5 ms·

> Despite all the different changes in the income tax rate/other progressive taxes. This supports an overhaul to the tax code to a more simple, flat tax system.

by rqebmm 9y ago

> Despite all the different changes in the income tax rate/other progressive taxes. This supports an overhaul to the tax code to a more simple, flat tax system. From another data source outside this report, I'd have to find it, but historically, no matter the top bracket tax rate, the Federal government collects about 15-17 % income tax. Including when the top rate was 90%+. Even assuming that is true, it wouldn't change the regressive nature of a flat tax.

Joeri 9y ago
In practice a 20% flat tax on all people and corporations without exceptions and deductions would be more progressive than the current system. The wealthy pay very little taxes.
- danielvf 9y ago
  In 2015, the top 20% paid 84% of collected income tax. That would hardly qualify as little taxes.
  - vkou 9y ago
    They also own 88% of the country's wealth. And collect 65% of the country's income. (More if you include investment gains.) Pardon me if I don't shed too many tears. [1] Increasing taxes on them would hardly qualify as hardship. The utility of a dollar is much lower when you have ~$300,000 in savings (80th percentile), then when you have ~$300 in savings (20th percentile). Related anecdote: With an annual income of ~$250-300,000, my net tax rate, including untaxable benefits and investment income is the same as that of my partner - who makes ~$30-40,000. If I had an income of $2,500,000, it would be substantially lower. [1] https://en.wikipedia.org/wiki/Wealth_inequality_in_the_United_States https://en.wikipedia.org/wiki/Wealth_inequality_in_the_Unite...
- xienze 9y ago
  A couple things... The parent is talking about "progressive" as in "the tax gets progressively higher as you make more money", not in the "social justice" sense. The flat tax being regressive means that the poor would have to actually pay more in taxes than they do now, which is very little. That's seen as a bad thing. Obviously there are solutions to that in flat tax proposals. Second, "the wealthy pay very little taxes" is a meme. I mean, look at what we've got here: http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/ http://www.pewresearch.org/fact-tank/2016/04/13/high-income-... Those making $250K and up are responsible for 51.6% of all income tax revenue. How much more should they be expected to contribute? Remember: the truly wealthy can live anywhere in the world. There's a balancing act that needs to be established between "you're not paying your fair share" and "soak the rich."
  - tertius 9y ago
    Just one simple example would be that there is an untaxed amount, let's say $25k (or whatever the poverty level is) and everything above is 20%.
    - weaksauce 9y ago
      That is still regressive. A truly progressive tax system would be similar to what we have now but with much fewer deductions that the affluent can use to lower their effective tax rate. (Oft cited that warren buffet has a lower effective tax rate than his secretary because of all the deductions and loopholes.) Not to mention that there is a huge misunderstanding of how progressive tax rates work. A very affluent businessman was on tv saying they would essentially have no motivation to work if the marginal tax rate increased for him when Obama was campaigning. His idea was that the tax bracket above 250k per year would somehow affect his entire income if he earned more than that figure so he would only want to work until he had 249,999 dollars and then stop making money to avoid "making less money". Of course the marginal tax rate is the rate that your money is taxed above that threshold. In this case the tax rate would go from say 15% to 20% on the money earned after 250k. Let's say you made 260k that year. Your extra tax burden because of the marginal rate increasing would be 20-15= 5% on the 10k dollars. You don't get taxed an extra 5% on all your money made like that fellow thought. Flat tax is regressive and sales tax is regressive.
      - Cshelton 9y ago
        The point that the businessman was trying to make is not that he misunderstands how marginal tax rates work, but for the next dollar I'm going to earn, I now get to keep less. My incentive to earn the NEXT dollar is therefore less. This is exactly why we don't have a tax rate on the top bracket of 90% like in the Eisenhower era. It's not about being taxed on all your money when you make over that amount, it is, where is the incentive to grow my self or my company if I only get to keep $0.10 of the next dollar I make. Most people who pay multiple tax rates across brackets understand how it works.
        9y ago
- dlp211 9y ago
  This is such a ridiculous argument because you will never replace all taxes with a simple 20% tax since states, counties, localities, and ports all have the ability and incentive to tax and impose fees. Due to this, I will focus on what it means to replace the income tax system with a flat 20%. A family of 4 (2 kids under 18) making $50,000 per year pays about $200 in federal income taxes if they do nothing but file their taxes and take the standard deduction, personal deduction, EITC, and Child Tax Credit. A family of 4 making 70k pays something like $2000. A family of 4 making $150k last year contributing to 401k, HSA, IRA's, 2 kids under 18, have an effective tax rate of like 8%. In every single one of these cases, the families would be worst off (some significantly) if they were required to pay a 20% flat tax.
Cshelton 9y ago
Please explain how flat tax rate across any income level, while removing the current tax code, would be considered regressive? I have not heard that argument before. The proportion of tax paid is the same at any income level. Anything that would counteract any "regressive" tax system would have to happen on the personal income side. Which means better education, opportunities, etc., to increase income levels. I'd support a rule though that said if you make less than the poverty line (around 32k I believe?), you pay no income tax at the federal level.
- kbenson 9y ago
  > Please explain how flat tax rate across any income level, while removing the current tax code, would be considered regressive? I have not heard that argument before. It's regressive in that it causes the poor to pay more than they do now. With regard to taxes, progressive and regressive have specific meaning. > The proportion of tax paid is the same at any income level. I don't believe this is true. You'll have to back up a statement like that with references, rather than just repeating it continuously. What you are talking about is the effective tax rate. That said, you might find this table of effective tax rates by quintile[1] interesting, as it directly disproves that point. 1: http://www.taxpolicycenter.org/statistics/historical-average-federal-tax-rates-all-households http://www.taxpolicycenter.org/statistics/historical-average...
  - Cshelton 9y ago
    What I meant by the proportion of tax paid is the same at any income level is under a flat tax scenario, leaving out all tax rules today of exemptions/credits. If the rate is 10%, the proportion of tax is the same, whether you make $10 or $1 million, you are still paying 10% of your income. Yes, the effective tax rate collected. The reference you provided only supports my claim. It looks like the effective tax rate, which is the actual rate collected by the IRS is around 20% since 1979. I'd have to find it, but if you take the data all the way back to the New Deal, the effective tax rate is around 17%. Most likely due to it being easier to "hide" income back then. Regardless, the effective tax rate has stayed around 17-22% over almost the last century, despite the large differences in the tax rates at different brackets. Remember, the top rate during the Eisenhower administration was 90%. Yet the effective tax rate average was unchanged.

by rqebmm 9y ago

Joeri 9y ago

In practice a 20% flat tax on all people and corporations without exceptions and deductions would be more progressive than the current system. The wealthy pay very little taxes.

danielvf 9y ago
In 2015, the top 20% paid 84% of collected income tax. That would hardly qualify as little taxes.
- vkou 9y ago
  They also own 88% of the country's wealth. And collect 65% of the country's income. (More if you include investment gains.) Pardon me if I don't shed too many tears. [1] Increasing taxes on them would hardly qualify as hardship. The utility of a dollar is much lower when you have ~$300,000 in savings (80th percentile), then when you have ~$300 in savings (20th percentile). Related anecdote: With an annual income of ~$250-300,000, my net tax rate, including untaxable benefits and investment income is the same as that of my partner - who makes ~$30-40,000. If I had an income of $2,500,000, it would be substantially lower. [1] https://en.wikipedia.org/wiki/Wealth_inequality_in_the_United_States https://en.wikipedia.org/wiki/Wealth_inequality_in_the_Unite...
xienze 9y ago
A couple things... The parent is talking about "progressive" as in "the tax gets progressively higher as you make more money", not in the "social justice" sense. The flat tax being regressive means that the poor would have to actually pay more in taxes than they do now, which is very little. That's seen as a bad thing. Obviously there are solutions to that in flat tax proposals. Second, "the wealthy pay very little taxes" is a meme. I mean, look at what we've got here: http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/ http://www.pewresearch.org/fact-tank/2016/04/13/high-income-... Those making $250K and up are responsible for 51.6% of all income tax revenue. How much more should they be expected to contribute? Remember: the truly wealthy can live anywhere in the world. There's a balancing act that needs to be established between "you're not paying your fair share" and "soak the rich."
- tertius 9y ago
  Just one simple example would be that there is an untaxed amount, let's say $25k (or whatever the poverty level is) and everything above is 20%.
  - weaksauce 9y ago
    That is still regressive. A truly progressive tax system would be similar to what we have now but with much fewer deductions that the affluent can use to lower their effective tax rate. (Oft cited that warren buffet has a lower effective tax rate than his secretary because of all the deductions and loopholes.) Not to mention that there is a huge misunderstanding of how progressive tax rates work. A very affluent businessman was on tv saying they would essentially have no motivation to work if the marginal tax rate increased for him when Obama was campaigning. His idea was that the tax bracket above 250k per year would somehow affect his entire income if he earned more than that figure so he would only want to work until he had 249,999 dollars and then stop making money to avoid "making less money". Of course the marginal tax rate is the rate that your money is taxed above that threshold. In this case the tax rate would go from say 15% to 20% on the money earned after 250k. Let's say you made 260k that year. Your extra tax burden because of the marginal rate increasing would be 20-15= 5% on the 10k dollars. You don't get taxed an extra 5% on all your money made like that fellow thought. Flat tax is regressive and sales tax is regressive.
    - Cshelton 9y ago
      The point that the businessman was trying to make is not that he misunderstands how marginal tax rates work, but for the next dollar I'm going to earn, I now get to keep less. My incentive to earn the NEXT dollar is therefore less. This is exactly why we don't have a tax rate on the top bracket of 90% like in the Eisenhower era. It's not about being taxed on all your money when you make over that amount, it is, where is the incentive to grow my self or my company if I only get to keep $0.10 of the next dollar I make. Most people who pay multiple tax rates across brackets understand how it works.
      - 9y ago
dlp211 9y ago
This is such a ridiculous argument because you will never replace all taxes with a simple 20% tax since states, counties, localities, and ports all have the ability and incentive to tax and impose fees. Due to this, I will focus on what it means to replace the income tax system with a flat 20%. A family of 4 (2 kids under 18) making $50,000 per year pays about $200 in federal income taxes if they do nothing but file their taxes and take the standard deduction, personal deduction, EITC, and Child Tax Credit. A family of 4 making 70k pays something like $2000. A family of 4 making $150k last year contributing to 401k, HSA, IRA's, 2 kids under 18, have an effective tax rate of like 8%. In every single one of these cases, the families would be worst off (some significantly) if they were required to pay a 20% flat tax.

Cshelton 9y ago

Please explain how flat tax rate across any income level, while removing the current tax code, would be considered regressive? I have not heard that argument before. The proportion of tax paid is the same at any income level. Anything that would counteract any "regressive" tax system would have to happen on the personal income side. Which means better education, opportunities, etc., to increase income levels. I'd support a rule though that said if you make less than the poverty line (around 32k I believe?), you pay no income tax at the federal level.

kbenson 9y ago
> Please explain how flat tax rate across any income level, while removing the current tax code, would be considered regressive? I have not heard that argument before. It's regressive in that it causes the poor to pay more than they do now. With regard to taxes, progressive and regressive have specific meaning. > The proportion of tax paid is the same at any income level. I don't believe this is true. You'll have to back up a statement like that with references, rather than just repeating it continuously. What you are talking about is the effective tax rate. That said, you might find this table of effective tax rates by quintile[1] interesting, as it directly disproves that point. 1: http://www.taxpolicycenter.org/statistics/historical-average-federal-tax-rates-all-households http://www.taxpolicycenter.org/statistics/historical-average...
- Cshelton 9y ago
  What I meant by the proportion of tax paid is the same at any income level is under a flat tax scenario, leaving out all tax rules today of exemptions/credits. If the rate is 10%, the proportion of tax is the same, whether you make $10 or $1 million, you are still paying 10% of your income. Yes, the effective tax rate collected. The reference you provided only supports my claim. It looks like the effective tax rate, which is the actual rate collected by the IRS is around 20% since 1979. I'd have to find it, but if you take the data all the way back to the New Deal, the effective tax rate is around 17%. Most likely due to it being easier to "hide" income back then. Regardless, the effective tax rate has stayed around 17-22% over almost the last century, despite the large differences in the tax rates at different brackets. Remember, the top rate during the Eisenhower administration was 90%. Yet the effective tax rate average was unchanged.