(no subject)

[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]

And what if Canada eliminated personal income tax entirely while the USA stays the way it is. Doesn't *that* make it harder and unequal for Americans?

I'm not sure what your point is. Joe and you are still paying the same theoretical flat FEDERAL tax, and if you were in the same state you'd be paying the same the same theoretical flat state tax. Flat or not, if states don't have the same tax structure, then they're not going to be equally friendly for taxes, and making things a flat tax isn't going to change that Maryland might have more tax than Florida.

[publius1.livejournal.com]

If you want to ignore the concept of "discretionary funds" versus "subsistence funds", then that's fine, but you won't win many people over to your argument. Ignoring Joe's 4 kids just because you're single is ignoring a rather large reason why the insanely complicated income tax system works for the most part in this country.

[theweaselking.livejournal.com]

I'm not trying to be obtuse, here, Ken, I honestly *do not understand*.

If Florida and Maryland have different state tax structures *now*, how is it *more* unfair for them to have different state tax structues *in the future*? Flat or not, progressive or not, they're not the same tax structure at all, and arguing that it *would be* unfair under a flat system as an argument for why flat systems are bad ignores that it's transparently equally as unfair *now*.

I'd understand if the example was "Joe has 4 kids and makes 60K. I have no kids and make 60K. We pay the exact same taxes. How is that fair?" - because THAT is a question that makes sense, and leads into the discussions on how to define and incentivise desirable behaviour from a government perspective. And you're right when you point out that, at and near (within a multiple of) the tax cutoff line, it doesn't do you much good to get a $10,000 tax-free bonus per kid if you aren't making any of that 10K.... but you're already paying more tax, now, than you would be in my hypothetical, and we're changing nothing except how your income tax is calculated, so how can "you pay less tax, nothing else has changed" be *worse* for you than the current system?

[publius1.livejournal.com]

Isn't this the thing though? You've just started to describe a rudimentary progressive tax, the more you try to make your flat tax fair. "Ok -- flat percentage of 10%. That's unfair to the poor, though, and a boon to the rich, so we'll give an exemption for a set amount -- let's say, the first $45,000 of wealth. Hrm. Got kids? Well, we have to take that into account, so we'll set up deductions that they can take on the current system. That's just the stuff we're talking about in this very simplified debate of what tax codes are good and bad.

I think that my main point is: any tax system is onerous. There's no way to make it fair...you just have to make it as fair as possible while still pulling in revenue.


I am actually not a fan of the income tax system, period. I'm much more a fan of the consumption tax. And yes, I am aware that makes me a far-right-wing nutjob of the top order.

[theweaselking.livejournal.com]

Not a far right nutjob, just far more interested in punishing the poor than I ever was.

(And I *started* from the position of "exempt $X, charge y% of what you earn above that, exemptions should be few and all of the sort "$Z more are tax-free".)

[jirel.livejournal.com]

Well, currently Joe gets to deduct his state tax from his federal tax. That's a deduction I'm assuming would go away. (There's only about 4 or 5 states that are income tax free). And in most cases where you live (especially for those that don't make tons of money) is determined by your job. Ie - even though I make good money, I live in Florida because I work for a very, very good company and I'm not well, (Lupus) making it very hard for me to get work elsewhere. I HATE Florida. But I work for a great company and won't leave it.

If your job is in auto manufacturing, you don't have a choice about where you work, you have state income tax. Anyway, I was mostly curious about how you felt about the matter. I'm one of those apathetic Americans that don't argue because they think it's useless - and everytime I vote, the person I vote for loses.

[publius1.livejournal.com]

But if the poor can't afford it, with a consumption tax they pay nothing at all. And you can choose to tax some goods more than others (yachts vs. nursery cribs) or not at all.

My preferred tax has some major problems, though. Currently, welfare still exists in the form of the Earned Income Tax Credit and other incentives for the poor that can give them a bigger refund than the taxes they paid out. A consumption tax would make any attempts to actually give money to the poor have to be separate from our taxation system, which would maybe be more honest, but would be far less likely to exist. Not to mention, a consumption tax suffers the same problem as a pure "Flat" tax -- no way to get the public to do what you want through tax incentives.