4 ms·

> I've heard a number of arguments over the years against a flat tax. One is that a flat tax is regressive meaning that it penalizes lower income earners by tax

by llambda 15y ago

> I've heard a number of arguments over the years against a flat tax. One is that a flat tax is regressive meaning that it penalizes lower income earners by taxing them at the same rate as higher earners. But I think we are all coming to realize that the current system may be even more regressive since most wealthy people find ways to pay lower tax rates. Let me preface this by saying, I don't necessarily disagree with the ideas presented in this article, however that quoted bit is a very weak argument. Essentially the author is arguing that because the current system is regressive that justifies moving to a flat tax rate. However this does not actually provide an argument for why a flat tax rate is less regressive, rather he only asserts that the current system is not ideal. If you're going to sell people on the idea, you've definitely got to come up with some strong arguments for your proposal and not just arguments against the current implementation. I think such arguments exist, but this isn't a great presentation of them.

deleted 15y ago
[deleted]
jasonkester 15y ago
Wouldn't a flat tax with a nice high threshold be as non-regressive as you could get? Say X% of everything you make over $30k? Poor people pay roughly zero. Rich people like us pay almost exactly X%. Sorted. Extra points if the government looks at everybody's W-2s & 1099s, decides how much it needs and calculates an X accordingly for that year. Then sends me a bill.
- comicjk 15y ago
  That's a nice way to carve out the middle class. Why not just have a graduated tax system with a clean base? It's not the tax brackets that make it complicated, it's the byzantine process of calculating "taxable income."
  - bunderbunder 15y ago
    Realistically, the two are identical. Each is a bracketed, progressive income taxation system. The only thing that distinguishes them is the number of tax brackets. What's often presented as a "flat tax" actually has two brackets. The first, which starts at $0, has a 0% tax. The second, which starts at $X, has a Y% tax.
    - caw 15y ago
      There's also the "fair tax" approach. Everyone pays the same tax, but everyone also gets a check from the govt on the amount of tax they're expected to spend up to the poverty level. The "fair tax" is pitched on the basis of a sales tax. I don't see a reason why this couldn't be off income tax as well.
      - bunderbunder 15y ago
        Hmm. That version sounds worse to me. Doesn't it just take the 2-bracket plan, and add a federal mandate that poor people all have to give the federal government an interest-free loan every year?
        caw 15y ago
        My idea may be flawed. The real "fair tax" is a pre-bate each month for the sales tax you'll pay in the month. Which in that way is an interest free loan to you.
drblast 15y ago
I can attempt that one. "Regressive" is bad only in the sense where it's disproportionately affecting the quality of life of lower-income people. So if I have a flat tax that only affects incomes over a certain income level, and that income level is set high enough so that a reasonable person's food, shelter, and clothing needs are met, it's a lot harder to argue that the tax is unfairly regressive, especially when you consider the flat tax above a certain income level is actually the same progressive tax we have now but with a single rung on the ladder. The flat tax proposals, being simple and loophole free, make it more difficult (and more financially burdensome) to game, whereas the current system seems to be designed to allow people to gain by paying accountants to find loopholes. The benefits of a simplified version of the current progressive tax we have seem self-evident. The idea is to reduce or eliminate the incentive to cheat. Fairness really doesn't factor into it much, although it could be seen as a nice side benefit. End of argument. Personally, I'd posit that the only truly fair tax is a fixed rate, like "everyone pays $2000 annually." Everyone is entitled to the same protection under the law, and therefore should owe the same amount. Laws which don't meet the criteria that they apply to all people equally should therefore be stricken. The next closest "fair" thing to me is a retail sales tax, provided that everyone is provided a stipend to cover the tax paid on basic living expenses. That prevents the negative effects of the regressive nature of the tax.
- cluda01 15y ago
  My personal problem with regressive policies is not that it effects peoples quality of life, rather that it affects the lives of their children. People that did not have a choice about which family they are born into. Consider my own personal story. I come from an upper-middle class family. During high school I wasn't particularly motivated to excel academically and as a consequence didn't get particularly good grades in courses that I should have if I had invested the appropriate time and effort into studying. My parents response to this situation was to hire a tutor and force me to sit down with said tutor and study several hours a week. As a consequence I ended up getting better grades than I should have simply because my parents had the disposable income to spend on tutors. People from disadvantaged backgrounds do not get this same benefit. As a consequence I go on to university and end up getting a higher position on the totem pole because of my parents wealth. The kid who comes from a disadvantaged background and is in the same academic position as me does not get that kind of second chance. >The next closest "fair" thing to me is a retail sales tax, provided that everyone is provided a stipend to cover the tax paid on basic living expenses. Consumption taxes are regressive because they penalize the spenders. Bill Gates doesn't spend nearly as much money as he earns and as such pays a lower effective tax rate than someone who makes $30,000 a year and spends it all to support their family.

by llambda 15y ago

deleted 15y ago

[deleted]

jasonkester 15y ago

Wouldn't a flat tax with a nice high threshold be as non-regressive as you could get? Say X% of everything you make over $30k? Poor people pay roughly zero. Rich people like us pay almost exactly X%. Sorted. Extra points if the government looks at everybody's W-2s & 1099s, decides how much it needs and calculates an X accordingly for that year. Then sends me a bill.

comicjk 15y ago
That's a nice way to carve out the middle class. Why not just have a graduated tax system with a clean base? It's not the tax brackets that make it complicated, it's the byzantine process of calculating "taxable income."
- bunderbunder 15y ago
  Realistically, the two are identical. Each is a bracketed, progressive income taxation system. The only thing that distinguishes them is the number of tax brackets. What's often presented as a "flat tax" actually has two brackets. The first, which starts at $0, has a 0% tax. The second, which starts at $X, has a Y% tax.
  - caw 15y ago
    There's also the "fair tax" approach. Everyone pays the same tax, but everyone also gets a check from the govt on the amount of tax they're expected to spend up to the poverty level. The "fair tax" is pitched on the basis of a sales tax. I don't see a reason why this couldn't be off income tax as well.
    - bunderbunder 15y ago
      Hmm. That version sounds worse to me. Doesn't it just take the 2-bracket plan, and add a federal mandate that poor people all have to give the federal government an interest-free loan every year?
      - caw 15y ago
        My idea may be flawed. The real "fair tax" is a pre-bate each month for the sales tax you'll pay in the month. Which in that way is an interest free loan to you.

drblast 15y ago

I can attempt that one. "Regressive" is bad only in the sense where it's disproportionately affecting the quality of life of lower-income people. So if I have a flat tax that only affects incomes over a certain income level, and that income level is set high enough so that a reasonable person's food, shelter, and clothing needs are met, it's a lot harder to argue that the tax is unfairly regressive, especially when you consider the flat tax above a certain income level is actually the same progressive tax we have now but with a single rung on the ladder. The flat tax proposals, being simple and loophole free, make it more difficult (and more financially burdensome) to game, whereas the current system seems to be designed to allow people to gain by paying accountants to find loopholes. The benefits of a simplified version of the current progressive tax we have seem self-evident. The idea is to reduce or eliminate the incentive to cheat. Fairness really doesn't factor into it much, although it could be seen as a nice side benefit. End of argument. Personally, I'd posit that the only truly fair tax is a fixed rate, like "everyone pays $2000 annually." Everyone is entitled to the same protection under the law, and therefore should owe the same amount. Laws which don't meet the criteria that they apply to all people equally should therefore be stricken. The next closest "fair" thing to me is a retail sales tax, provided that everyone is provided a stipend to cover the tax paid on basic living expenses. That prevents the negative effects of the regressive nature of the tax.

cluda01 15y ago
My personal problem with regressive policies is not that it effects peoples quality of life, rather that it affects the lives of their children. People that did not have a choice about which family they are born into. Consider my own personal story. I come from an upper-middle class family. During high school I wasn't particularly motivated to excel academically and as a consequence didn't get particularly good grades in courses that I should have if I had invested the appropriate time and effort into studying. My parents response to this situation was to hire a tutor and force me to sit down with said tutor and study several hours a week. As a consequence I ended up getting better grades than I should have simply because my parents had the disposable income to spend on tutors. People from disadvantaged backgrounds do not get this same benefit. As a consequence I go on to university and end up getting a higher position on the totem pole because of my parents wealth. The kid who comes from a disadvantaged background and is in the same academic position as me does not get that kind of second chance. >The next closest "fair" thing to me is a retail sales tax, provided that everyone is provided a stipend to cover the tax paid on basic living expenses. Consumption taxes are regressive because they penalize the spenders. Bill Gates doesn't spend nearly as much money as he earns and as such pays a lower effective tax rate than someone who makes $30,000 a year and spends it all to support their family.