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[theweaselking]

James Nicoll explains his plans for the true Flat Tax.

You know, I'm not a guy with a crazy tax plan, but I have yet to have anyone explain to me why the plan of "Exempt the first X income from taxes, tax the rest at a Y flat rate" is unworkable.

And, honestly, I think I really must be missing something, here, because nobody *does* it.

Define your poverty-plus-a-bit level - pulling a number completely out of my ass, say $25,000/yr.
Define your tax rate - from a similar location, let's say 20%.

The first $25,000 you make in a year, from any source, is tax-free.
The rest, no matter how little or how much it is, is taxed at the flat rate.

Calculate exemptions however you want, but simply make all exemptions count as additional money you can claim tax-free over your initial $25,000. If you want education to be subsidised, deduct tuition at accredited institutions from your total earned income. Want to encourage children and make things easier for families? Add $10,000 per dependent child to the allowed "no-tax" amount.

Obviously, I'm pulling these numbers out of my ass. That's not the point. The point is, in PRINCIPLE, what am I missing? Why does this not actually work?

Comments

[theweaselking.livejournal.com]

But you're not taxing them 10% of $1000. You're taxing them 0% of $1000, and 0% of $10,000, and 0% of $25,000.

At $50,000, you're taxing them $5000 - or 10%.
At $500,000, you're taxing them $45000 - or 19%.
At $5,000,000, you're taxing them $495,000 - or damn close to 20%.

You're not trying to tax the poor at the same rate as the wealthy.

Hell, set the minimum higher. Set the minimum to $50,000 and the tax rate to 40%. Do you still want to tell me that poor people are going to be screwed by that? 40% of the only 1000 that you have for spending money is more than 40% of the only million I have for spending money, in terms of remaining buying power, but you don't pay any taxes at all on the majority of your income.

And, pointedly, this hypothetical seems to me to decrease the taxes that the poor and middle class pay compared to the current system, and increases the taxes the wealthy pay compared to the current system. I honestly *don't understand* where the argument comes from that this would crush the middle class and enrich the wealthy. It clearly *could* do so - just set the minimum to zero - but it doesn't seem that it *must* do so.

[publius1.livejournal.com]

On what planet is $45,000 19% of $500,000? That's 9%.

Look, if you keep raising the bar so that the poor and middle class don't have to pay taxes, then you're going to make a lot of people very happy and have no money to show for it, and a very unhappy upper class that will simply move somwhere where they can be rich and not have to watch the poor and middle classes pay nothing at all.

and I am just utterly baffled at your math above. On no planet that I am aware of is $500,000 19% of 45,000...

But as Koz has constantly pointed out to me, the United States' current taxation system currently IS a flat tax. The first $50,000 for example, you pay 28%. Then the next 10,000 of income, you pay 32%. And so on and so forth. That's why we end up with tax tables.

[theweaselking.livejournal.com]

The planet of me not doing the math right?

$500,000 - $25,000 * .2 = 95,000 = 19%
$5,000,000 - $25,000 *.2 = 995,000 = 19.9%

Look, if you keep raising the bar so that the poor and middle class don't have to pay taxes, then you're going to make a lot of people very happy and have no money to show for it, and a very unhappy upper class that will simply move somwhere where they can be rich and not have to watch the poor and middle classes pay nothing at all.

See, *that* is an argument that makes sense for why to not do this: because rich people can afford to move to a country that *doesn't* do this, where they can avoid paying taxes totally the way they do in the USA, now.

Of course, this can be fixed by taxing the money based on where it's earned - if Wal-mart moves their official headquarters to Geneva, they would sitll need to pay taxes on profits made in the USA, for example - but it leads to all kinds of other headaches.

(And that's not a flat tax, because the taxation rate changes. On any give section of income, the tax rate is flat, but the rate *does* change.)