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Whats interesting about the flat taxes is that it makes it hard to avoid at the highest levels, where complex tax structures end up having a very variant level

Whats interesting about the flat taxes is that it makes it hard to avoid at the highest levels, where complex tax structures end up having a very variant level of taxation. Much like corporate taxation is 35%, but google or facebook pay only 11%. Milton Friedman used to say that a flat tax of 15% would be enough to replace the entire scheme of income tax. There is also one major boon: lots of capital is spent on taxes, from accountants to lawyers to gubernamental organizations, etc etc. An effective 15% rate without exemptions would fly very well with the right (simple flat taxes) an the left (no exemptions) but as MF said, the political stances on this topic dont trust each other and they are both right: even if we moved to such a system, the right would still advocate for exemptions and the left for increases in taxation. Its a noticeable deadlock. I also want to mention that flat taxes are not regressive by definition. The progressiveness or regressiveness in that case requires to see where the taxes are spent.

monocasa 9y ago
First off, the difference between regressive and progressive says nothing about how the taxes are spent. A flat tax is regressive by definition. Secondly, I'm not a big fan of how you (and quite a few economists) conflate personal and corporate income taxes. It really muddies the water as even questions like "what even is income" is different between the two. Additionally, flat tax doesn't go well with the left. On the corporate end, exemptions in a lot of ways are the carrot to the sticks of fines and penalties that we use to regulate business (encouraging positive behavior). On the personal end, you greatly increase the tax burden on those least able to bear it, with an increase in benefits being totally orthogonal (most flat tax proposals intend to be revenue neutral). Someone making $25k nearly doubles their tax burden with a 15% flat tax.
- RightMillennial 9y ago
  Technically, a flat tax by definition is neither regressive nor progressive, it is proportional. Federal income taxes and I presume corporate taxes are currently progressive (with a million and one deductions). Moving to a flat tax for either of those would be a move in the regressive direction, but it's still not technically regressive. Personally, I'm fine with taxes having progressive rates but not the countless deductions.
  - bitwize 9y ago
    Flat taxes are regressive. Period. The reason why is because a bigger proportion of the income of the poor must be spent on necessities, so a flat tax rate is going to impact their ability to pay for necessities much more than the same tax rate paid by a rich person.
    - conanbatt 9y ago
      You are confusing flat taxes to sales taxes. A flat income tax would not have that effect.
  - monocasa 9y ago
    Technically it is regressive. The flat amount comes out of rent and food on the low end of your tax base, and luxury on the high end.
    - conanbatt 9y ago
      Thats sales taxes, but flat income taxes would not be like that.
      - monocasa 9y ago
        Uhhh, yes it's exactly like that, regardless of what is getting taxed. Let's say today I make $24,900/yr. That puts me at the edge of the 20th percentile for 2017. The average effective tax rate for people of my income was -4.7% (or a tax of -$1170)[0]. You're suggesting increasing my taxes to 15%, taking $4905 out of my pocket as compared to today. Now, since I make next to nothing, pretty much everything I make is going to rent, food, and just generally getting by, and I have nearly $5k less real money (or ~20% of my income!!!) in my bank account to make that happen. [0] - http://www.taxpolicycenter.org/model-estimates/baseline-average-effective-tax-rates-march-2017/t17-0042-average-effective-federal http://www.taxpolicycenter.org/model-estimates/baseline-aver...
        conanbatt 9y ago
- conanbatt 9y ago
  > Secondly, I'm not a big fan of how you (and quite a few economists) conflate personal and corporate income taxes. It really muddies the water as even questions like "what even is income" is different between the two. It was an example of how nominal tax rate is not the same as effective tax rate. For example, mortgage interest deductions are a regressive benefit which lowers the effective tax rate. Unfortunatenly, we cannot make good date on what the effective tax rate is because it is protected information. > On the personal end, you greatly increase the tax burden on those least able to bear it, with an increase in benefits being totally orthogonal (most flat tax proposals intend to be revenue neutral) That depends on what you cut. And thats why i say that you need to look at the revenue and the expenditures to know if taxes are regressive or not. For example, Federal income tax is nominally progressive, but california has plenty of regressive taxes: sales taxes and property taxes that favor older tenants. In general state and city taxes are regressive, because those are the easiest to levy.
  - monocasa 9y ago
    Once again, progressive vs regressive has nothing to do with how much you get back in services. That's literally not a component of the definition. You might be confused because deductions are a component of how regressive a tax is.
    - conanbatt 9y ago
      It is not economics to just look at how a tax is levied, and not how it is spent. The combination is a must to actually make a meaningful argument about how taxes should be.
      - monocasa 9y ago
        It is absolutely a component of economics, just not the only piece needed for a comprehensive tax policy. You're literally arguing against the accepted definition of a term.
WorldMaker 9y ago
Regressive doesn't refer to how the taxes are spent. Regressive refers to the fact that 15 cents out of every dollar matters a whole lot more to someone on minimum wage and living paycheck to paycheck. Regressive refers to the fact that a true "no exemptions" hits the poor more than the rich. So the left has to set aside exemptions for the poor, and that leaves room open for lobbyists to drive trucks full of money into adding more and more exemptions.
- conanbatt 9y ago
  A 5% tax levied on everywhere to a lamborghini subsidy policy is regressive. It is important to look at both sides of the equation to make a conclusion. Thats why you can have a flat tax, and a progressive government by spending for the poorer and levying flat. In fact, a flat tax is probably progressive simply because the rich dont use a multitude of public services the average poor does, like schooling, or healthcare or whatever.
  - WorldMaker 9y ago
    Regressive is not the opposite of Progressive in tax politics. You may be confusing "conservative" here? The commonly accepted denotation: > (of a tax) taking a proportionally greater amount from those on lower incomes Has absolutely nothing to do with spending, but on how much proportionally you are taking.
    - conanbatt 9y ago
      Again, it is not economics to not look at how it is spent, because the spending can be progressive or regressive. You can have super progressive taxation and a wealth distribution from the poor to the rich, and a super regressive taxation that distributes from the rich to the poor.

monocasa 9y ago

First off, the difference between regressive and progressive says nothing about how the taxes are spent. A flat tax is regressive by definition. Secondly, I'm not a big fan of how you (and quite a few economists) conflate personal and corporate income taxes. It really muddies the water as even questions like "what even is income" is different between the two. Additionally, flat tax doesn't go well with the left. On the corporate end, exemptions in a lot of ways are the carrot to the sticks of fines and penalties that we use to regulate business (encouraging positive behavior). On the personal end, you greatly increase the tax burden on those least able to bear it, with an increase in benefits being totally orthogonal (most flat tax proposals intend to be revenue neutral). Someone making $25k nearly doubles their tax burden with a 15% flat tax.

RightMillennial 9y ago
Technically, a flat tax by definition is neither regressive nor progressive, it is proportional. Federal income taxes and I presume corporate taxes are currently progressive (with a million and one deductions). Moving to a flat tax for either of those would be a move in the regressive direction, but it's still not technically regressive. Personally, I'm fine with taxes having progressive rates but not the countless deductions.
- bitwize 9y ago
  Flat taxes are regressive. Period. The reason why is because a bigger proportion of the income of the poor must be spent on necessities, so a flat tax rate is going to impact their ability to pay for necessities much more than the same tax rate paid by a rich person.
  - conanbatt 9y ago
    You are confusing flat taxes to sales taxes. A flat income tax would not have that effect.
- monocasa 9y ago
  Technically it is regressive. The flat amount comes out of rent and food on the low end of your tax base, and luxury on the high end.
  - conanbatt 9y ago
    Thats sales taxes, but flat income taxes would not be like that.
    - monocasa 9y ago
      Uhhh, yes it's exactly like that, regardless of what is getting taxed. Let's say today I make $24,900/yr. That puts me at the edge of the 20th percentile for 2017. The average effective tax rate for people of my income was -4.7% (or a tax of -$1170)[0]. You're suggesting increasing my taxes to 15%, taking $4905 out of my pocket as compared to today. Now, since I make next to nothing, pretty much everything I make is going to rent, food, and just generally getting by, and I have nearly $5k less real money (or ~20% of my income!!!) in my bank account to make that happen. [0] - http://www.taxpolicycenter.org/model-estimates/baseline-average-effective-tax-rates-march-2017/t17-0042-average-effective-federal http://www.taxpolicycenter.org/model-estimates/baseline-aver...
      - conanbatt 9y ago
conanbatt 9y ago
> Secondly, I'm not a big fan of how you (and quite a few economists) conflate personal and corporate income taxes. It really muddies the water as even questions like "what even is income" is different between the two. It was an example of how nominal tax rate is not the same as effective tax rate. For example, mortgage interest deductions are a regressive benefit which lowers the effective tax rate. Unfortunatenly, we cannot make good date on what the effective tax rate is because it is protected information. > On the personal end, you greatly increase the tax burden on those least able to bear it, with an increase in benefits being totally orthogonal (most flat tax proposals intend to be revenue neutral) That depends on what you cut. And thats why i say that you need to look at the revenue and the expenditures to know if taxes are regressive or not. For example, Federal income tax is nominally progressive, but california has plenty of regressive taxes: sales taxes and property taxes that favor older tenants. In general state and city taxes are regressive, because those are the easiest to levy.
- monocasa 9y ago
  Once again, progressive vs regressive has nothing to do with how much you get back in services. That's literally not a component of the definition. You might be confused because deductions are a component of how regressive a tax is.
  - conanbatt 9y ago
    It is not economics to just look at how a tax is levied, and not how it is spent. The combination is a must to actually make a meaningful argument about how taxes should be.
    - monocasa 9y ago
      It is absolutely a component of economics, just not the only piece needed for a comprehensive tax policy. You're literally arguing against the accepted definition of a term.

WorldMaker 9y ago

Regressive doesn't refer to how the taxes are spent. Regressive refers to the fact that 15 cents out of every dollar matters a whole lot more to someone on minimum wage and living paycheck to paycheck. Regressive refers to the fact that a true "no exemptions" hits the poor more than the rich. So the left has to set aside exemptions for the poor, and that leaves room open for lobbyists to drive trucks full of money into adding more and more exemptions.

conanbatt 9y ago
A 5% tax levied on everywhere to a lamborghini subsidy policy is regressive. It is important to look at both sides of the equation to make a conclusion. Thats why you can have a flat tax, and a progressive government by spending for the poorer and levying flat. In fact, a flat tax is probably progressive simply because the rich dont use a multitude of public services the average poor does, like schooling, or healthcare or whatever.
- WorldMaker 9y ago
  Regressive is not the opposite of Progressive in tax politics. You may be confusing "conservative" here? The commonly accepted denotation: > (of a tax) taking a proportionally greater amount from those on lower incomes Has absolutely nothing to do with spending, but on how much proportionally you are taking.
  - conanbatt 9y ago
    Again, it is not economics to not look at how it is spent, because the spending can be progressive or regressive. You can have super progressive taxation and a wealth distribution from the poor to the rich, and a super regressive taxation that distributes from the rich to the poor.