Pro: Time to replace tax code with a fair flat tax
NEW YORK — EDITOR’S NOTE: The writer is addressing the question, “Should the U.S. adopt a flat tax?
The tax code of the United States is a disgrace. Everyone complains about it. No one understands it. And even if you try very hard, your chance of being wrong is high. And to make it worse, Congress continues to treat the tax code like a candy store for its most favored donors.
In February 2013, you can celebrate the 100th birthday of the personal income tax. The income tax started out as a simple flat tax that could be filled out on a postcard.
The tax code now comprises 73,608 pages and counting. In the last 10 years, it has grown more than 10,000 pages—most certainly not to the taxpayer’s advantage.
It is time to go back to the beginning and reinstitute the flat tax that is reasonable and understandable.
The first flat income tax was progressive. After a very generous exemption of the first $3,000 of income—$65,000 today—being exempt from any tax, there were six income categories upon which a tax of from 1 percent to 6 percent was imposed. All income was taxed with little distinction of its source. And deductions were limited to the production of that income.
We can debate how many rate structures and what is a reasonable threshold for the income exemption, but the reinstitution of a flat tax would eliminate the debate about wealthy people paying lower tax rates than others. All income would be treated equally and deductions would be eliminated for the favored few.
Of course there is the political reality of the lobbyists for real estate, municipal bonds, charities, and on and on. But the more fundamental goals—fairness and simplicity—would be achieved by a flat tax.
With the fiscal cliff in sight by January, does it take extraordinary leadership to embrace what for most people is common sense?
Reform of the tax system would stimulate the economy in a way that no fiscal stimulus could ever do. It would allow individuals and businesses to plan for the future knowing that the rules of the game would not change or that the favored few will not reap all the rewards.
Any change in the system should also come with a requirement for a super majority in Congress to make changes in the future so some well-connected group won’t get a tax credit for red-feathered ostrich farming.
The advantages of a flat tax are numerous and well documented: It would create one tax rate for all income regardless of source thus eliminating the endless discussions of who paid what tax rate on what income.
It would end the argument about the rich paying their “fair” share because they would no longer be able to hide behind exemptions. The ordinary American would understand the fairness of the system hoping one day to be able to pay at the highest tax rate. The current Alternative Minimum Tax that applies to a certain part of taxpayers is basically a flat tax system.
The issue of business taxation is equally complicated but should be addressed with the same simple flat tax approach. Lowering the corporate rate to be competitive with the world rates as well as recognizing the multinational nature of today’s business would bring a saner discussion to keeping companies American.
Democracy is a difficult process, but change can and will occur when individual voices cut through the prepackaged political messages and ask the right questions.
With the multiple information channels now available through the Internet, there is no reason that the general public cannot be engaged in the process.
It is time for bold leadership to address the many issues this country faces. But making our tax system simpler and fairer would go a long way to energize the dream of generations to get rich in America.
Peter Rush is the author of “Class Tax Mass Tax.” Readers may write him at Kellen Co., 355 Lexington Ave., New York, N.Y. 10017.
Sep 16, 2012 at 3:33 p.m.
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joker, that's just as regressive as a flat tax. If someone pays 15% of their income to the IRS or 15% of what they buy what is the difference?
Someone who makes 20K a year is going to spend almost all their income and save little. They will pay 3,000 in taxes under your plan, and nothing under relaitybites' plan.
A wealthy person who makes 200k a year and spends only 100K would pay 15,000 under your plan and 26,250 under rb's plan. Lower revenues for the gov't (already deep in debt) and more tax burden shifted to the middle and lower classes.
Sep 16, 2012 at 2:04 p.m.
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Sorry for the double post
Sep 16, 2012 at 2:03 p.m.
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Baratheon_Prince: Of course, if someone makes more money they are going to pay more in taxes. That's obvious. What people are complaining about is the fact that alot of the rich want their burden of the taxes shifted to the middle class. And even thought you and I and many others would like to see that flat tax so EVERYONE will be paying their fair share of taxes, it won't happen because the rich will do everything in their power to stop that from happening.
Sep 16, 2012 at 2:03 p.m.
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Baratheon_Prince: Of course, if someone makes more money they are going to pay more in taxes. That's obvious. What people are complaining about is the fact that alot of the rich want their burden of the taxes shifted to the middle class. And even thought you and I and many others would like to see that flat tax so EVERYONE will be paying their fair share of taxes, it won't happen because the rich will do everything in their power to stop that from happening.
Sep 16, 2012 at 12:17 p.m.
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Get rid of income tax completely replace it with higher sales tax. Everyone would pay their fair share that way. If the wealthy buy a Mercedes instead of a Chevy they would be paying more just because of the difference in price. Also look at the savings by eliminating that monstrosity they call the IRS
Sep 16, 2012 at 12:08 p.m.
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so janesvillean: if the flat tax included all forms of income and no deductions would you still consider it "yet another scam that sounds reasonable on its face but is basically wealth redistribution in disguise"
Sep 16, 2012 at 11:42 a.m.
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The super rich love things like the flat tax because they have the resources to define how they receive their income (see: Diane Hendricks). The poor schlubs, i.e. the rest of us, usually have to take our income in salary or something else easily defined and captured. The failure of this system is obvious, as the share of income and wealth since Reagan-era tax "reform" has been an ever more stark skewing of income and wealth toward the top, the people who already have plenty, while those in lower income levels have been faced with an increased aggregate tax burden and squeezed from the other side by flat wages -- even as our GDP has soared ever higher. Clearly, the manipulation of the tax code in the name of "fairness" to the wealthy has already done much to turn the United States into a country with income disparity rivaling many third world nations. This "flat tax" is yet another scam that sounds reasonable on its face but is basically wealth redistribution in disguise. Yes, redistributing the wealth UPWARD. Because they think that's where it should be.
Sep 16, 2012 at 11:06 a.m.
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It's irrelevant because it will never happen.
Sep 16, 2012 at 10:34 a.m.
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Lets look at a proposed federal flat tax of 15% with a $25k exemption.
1. Somebody making $25k or less would pay ZERO federal taxes (That is 0%; nothing; nada; zippo)
2. Somebody making $40k would pay $2250 or an effective 5.625% of their income
3. Somebody making $75k would pay $7500 or an effective 10% of their income
4. Somebody making $1M would pay $146,250 or an effective 14.625% of their income
5. Those super rich would effectively pay the full 15% since the 25K exemption would be such a drop in the bucket compared to the rest of the money they make
Perhaps those of you posting that feel this would be so unfair can explain WHY !
Sep 16, 2012 at 8:22 a.m.
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RAF: I totally agree with you for once.
Sep 13, 2012 at 11:11 p.m.
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Long over due. The largest problem will be lawmakers giving up "power" to write tax laws based on demands from special friends.
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