Quote from Jayford:
Consumption tax? Yep gotta agree it would tax the poor, and create too many exceptions.
Flat tax?
I think this could fly. The first 25k or so is not taxed at all, so not unfair to the poor. Then you tax ALL income over that figure at a flat rate, ZERO exceptions. Business decisions and home purchases would be based on the economics involved, period. No figuring how the Gov would help the bottom line. The home deduction would have to be phased out very gradually though as too many people have made long term purchases based on this.
Traditionally, the US has taken in about 19% of gross income regardless of tax rates (people will find alternatives or cheat if rates go too high). So say a 20% rate over 25k. Period. The savings from the IRS, and private accounting should add into the picture nicely as well.
The main problem with this in my opinion is that the States will then tack on their share. I believe most people would pay 20% without much trouble, but not anything over a quarter of income total.
That said, many people are paying WAY more than that now (Fed, FICA, & state). Many are paying much less through deductions, etc.
Jay
I used to think the flat tax was a good idea to eliminate loopholes, but several years ago, using IRS data, I analyzed the consequences of a flat tax. Taking total tax revenue divided by adjusted gross income for all taxpayers, I came to the conclusion that there is NO WAY the government can implement a flat tax without taxes for the middle class going up. If you give exemption to the poor, then that would mean the middle class tax burden would have to go up even more to come up with the same revenue. This is because the rich pay a large portion of the total tax bill right now and a flat tax would give them another tax cut. SOMEBODY"S got to cough up the money and if it's not the rich, not the poor, only the middle class is left. If anybody doubts that, calculate your tax bill as a percentage of adjusted gross income and compare that percentage to the (undoubtedly optimistic) flat tax percentage proposed.
In addition to that, there would undoubtedly be a shortfall because any time you tinker with the tax code you create loopholes and it won't take long for the accountants to figure them out. The wealthy would have access to the same kind of vehicles they have now to move money around like a shell game to minimize their taxes--corporations, trusts, holding companies, etc., etc.
The consumption tax is not worthy of consideration because it is even more regressive than an income tax. As a percentage of income, the less you make the more you spend. Again more of the burden would be shifted to the working class.
The main proponents of the flat tax typically use emotional arguments that appeal to the masses, e.g. "fire the IRS," "close the loopholes for the rich," and the ever popular "it will create jobs." Sadly, most of the people in this country believe such nonsense.
To paraphrase George Carlin, this country was bought and paid for a long time ago and the idea that government operates with the interest of the people at heart is laughable. Regardless of what happens to the tax code, the IRS will end up collecting even more taxes from the working class.
