News Will Republican tax reform plans hurt their chances in the 2012 election?

[WhoWee]

Again, I feel like a flat tax is automatically more fair that a tiered system. The idea that the wealthy use more “resources” that the poor is automatically accounted for.

A wealthy person making $1,000,000 a year would pay $100,000 in taxes at a flat 10%.
A poorer person making $20,000 a year would pay $2,000 in taxes at a flat 10%.

The wealthy person paid $98,000 more in taxes than the poor person, yet they both paid the exact same rate (hence the “fair” part). The wealthy person paid in one year what the poor person would pay over 49 years.

Please consider what I posted earlier:

"I think a compromise is politically possible. Specifically a modified 3 tier flat federal income tax with a much higher cap to Social Security contributions with a reducing percentage - maybe 2% over $1 million and might look like this:

$20k* to $100K @ 15%

$101K to $500K @ 20%

$501K+ @ 25%

*re-distribution EITC and Making Work Pay addressed and all income and benefits included"

The first $20k would not be taxed and the higher income brackets would pay a higher percentage. Think of it this way - the real flat tax rate is 10% with the lower bracket paying 5% extra, middle 10%, and highest 15% "bonus" tax - to compensate for the current deficit and debt situation.

 

[D H]

I should have worded my statement more carefully, I meant to say " more far that a tiered system". But really you are correct, taking money from anyone by force is inherently wrong.

You are forgetting that while taxation is "wrong", it is also absolutely necessary. So like the person who has admitted to be willing perform some immoral/illegal act for an outlandish amount of money, society is just haggling over price.

A flat tax automatically taxes the rich more and the poor less.

A flat tax automatically taxes the rich more and the poor less.

A flat tax automatically spreads the pain, the poor pay less and the rich pay more.

You are sounding like a broken record. Did you read a word I wrote?

I can sound like a broken record, too: A flat tax is anything but fair.

This is just Republican candidates appeasing to their base. Republicans are smart enough to know that such a program can never be put in place, and they are smart enough to know not to try this except during primary season. If they do manage enact such a change, it will be gone faster than Obama's health care program and the Republicans will be out of power for a long, long time.

 

[D H]

Again, I feel like a flat tax is automatically more fair that a tiered system.

Why? Justify this statement.

 

[IMP]

Please consider what I posted earlier:

"I think a compromise is politically possible. Specifically a modified 3 tier flat federal income tax with a much higher cap to Social Security contributions with a reducing percentage - maybe 2% over $1 million and might look like this:

$20k* to $100K @ 15%

$101K to $500K @ 20%

$501K+ @ 25%

*re-distribution EITC and Making Work Pay addressed and all income and benefits included"

The first $20k would not be taxed and the higher income brackets would pay a higher percentage. Think of it this way - the real flat tax rate is 10% with the lower bracket paying 5% extra, middle 10%, and highest 15% "bonus" tax - to compensate for the current deficit and debt situation.

To me this removes the "fair" part of a flat tax, you are still punishing people who make more money by raising the rate at which they pay. The rate needs to remain the same for everyone, the rich will automatically pay more and the poor will automatically pay less, but both will pay the exact same rate.

 

[IMP]

Why? Justify this statement.

With a tiered system you punish those who earn more and reward those who earn less. With a flat tax system the rich automatically pay more and the poor automatically pay less, yet they both pay the exact same rate. The rate is the same. This is the "fair" part to me, each person automatically carries a portion of the load based on how much they make and they do so at the very same rate as everyone else. You pay according to your means at the same rate as everyone else does according to their means.


The benefits of a flat tax rate in my opinion:

Greatly simplified tax code, flat 10% for everyone.
High earners with expensive accountants and lawyers still pay a flat 10% like everyone else.
No IRS needed.
No charts to reference or tiered rates to consider.
No whining from high earners, they paid the same rate as everyone else.
No whining from low earners, they paid much less out of pocket than high earners.
Easy to calculate withholding, flat 10%.
No “you owe” or “your refund” each year; flat 10% withheld, flat 10% due.
Any rate change automatically applies across the board to everyone equally.
Everyone carries an equal share of the load in proportion to their means.

 

[WhoWee]

To me this removes the "fair" part of a flat tax, you are still punishing people who make more money by raising the rate at which they pay. The rate needs to remain the same for everyone, the rich will automatically pay more and the poor will automatically pay less, but both will pay the exact same rate.

IMO - this is the only structure the Dems would ever agree to - given the spending cuts/re-distributions that would accompany.

 

[D H]

With a tiered system you punish those who earn more and reward those who don't. With a flat tax system the rich automatically pay more and the poor automatically pay less, yet they both pay the exact same rate. The rate is the same. This is the "fair" part to me, each person automatically carries a portion of the load based on how much they make and they do so at the very same rate as everyone else. You pay according to your means at the same rate as everyone else does according to their means.

That isn't a justification. It is merely a statement of what a flat tax is. Why does having everyone pay the same rate make a tax "fair"?

If it's not obvious by now, I am of a different opinion. Given recent polls, I'm not alone. So is the majority of the electorate.

As a pure devil's advocate argument, I suggest that a flat tax on wealth is the only fair tax that can exist.

Is that a one time seizure of assets?

Since this is a DA argument, let's have fun. It's once a year, just like income taxes.

Think of what this would do for the hospitality industry.

 

[mheslep]

Absolutist, dismissive statements about a flat tax like "its not realistic" need a little context, i.e. as in compared to what? A tax code with tens of thousands of pages? A budget deficit, or borrowing rate, of four billion dollars a day? Before casting a flat tax as unrealistic or asserting without support that one would "destroy the middle class", is it not reasonable to see if a flat tax has been implemented elsewhere?

http://en.wikipedia.org/wiki/State_income_tax#U.S._States_with_a_flat_rate_individual_income_tax"
http://en.wikipedia.org/wiki/Flat_tax#Countries_that_have_flat_tax_systems"
http://en.wikipedia.org/wiki/Flat_tax#Countries_reputed_to_have_a_flat_tax"
http://en.wikipedia.org/wiki/Flat_tax#Countries_considering_a_flat_tax_system"

 

[D H]

Absolutist, dismissive statements about a flat tax like "its not realistic" need a little context, i.e. as in compared to what? A tax code with tens of thousands of pages?

If that is the problem (and it is a problem), fix that problem. Throwing the baby out with the bathwater isn't fixing the problem. What makes you think the problem won't resurrect itself when the old baby is tossed, only to be replaced by a new one?

A budget deficit, or borrowing rate, of four billion dollars a day?

If that is the problem (and this too is a problem), fix that problem. Cutting the income side will only exacerbate the problem. If I had a massive debt problem, getting a job that pays me 20% less than my current job would not fix the problem. Pounding the pavement for a job that pays 20% more than my current job would help.

Before casting a flat tax as unrealistic or asserting without support that one would "destroy the middle class", is it not reasonable to see if a flat tax has been implemented elsewhere?

I tried the excuse "well John's parents let him do that" on my parents when I was a kid. Never worked. My parents were smart. Just because Johnny was allowed to do something stupid, immoral, or illegal didn't mean I was allowed to do so.Now for your list.

http://en.wikipedia.org/wiki/State_income_tax#U.S._States_with_a_flat_rate_individual_income_tax"

That list is a bit illusory. Colorado, Michigan, and Massachusetts have a flat tax in name only. They allow so many deductions and exemptions that in the end their income tax rates are anything but flat. The list also ignores states such as Alabama that have a progressive tax in name only. 2/3 of Alabamians pay the top tax rate. In any case, the majority of the states do have a progressive tax rate.

http://en.wikipedia.org/wiki/Flat_tax#Countries_that_have_flat_tax_systems"

I don't think Iceland is a country we want to emulate. Were the US to undergo a collapse of the sort seen in Iceland the whole world would suffer. I don't think Russia is a country we want to emulate, either. That leaves a smattering of mostly corrupt, teetering economies. Do you really want to present that as a model? This list is an argument against a flat tax.

http://en.wikipedia.org/wiki/Flat_tax#Countries_reputed_to_have_a_flat_tax"

First off, the title of this section should use the term "Country", not "Countries". Secondly, Tthe article contradicts itself: " Alan Reynolds of the Cato Institute similarly notes that Hong Kong's "tax on salaries is not flat but steeply progressive." "

http://en.wikipedia.org/wiki/Flat_tax#Countries_considering_a_flat_tax_system"

This section lists politicians, not countries, that are advocating a flat tax. The section of the article would perhaps be better titled, as "fringe politicians that are touting a flat tax to appease to their fringy base."

 

[mege]

That isn't a justification. It is merely a statement of what a flat tax is. Why does having everyone pay the same rate make a tax "fair"?

If it's not obvious by now, I am of a different opinion. Given recent polls, I'm not alone. So is the majority of the electorate.

What polls indicate that our current tax system is fair? There are polls which indicate people prefer that the wealthy get taxed more, but that is not an indictment of 'fairness'.

In addition, there seems to be a gross misconception about what effective federal taxation actually is like in the US. The 'Warren Buffet' tax story has been debunked several times with IRS data from recent years.

 

[D H]

What polls indicate that our current tax system is fair?

None. I did not say that, so please do stop putting words in my mouth.

There are polls which indicate people prefer that the wealthy get taxed more, but that is not an indictment of 'fairness'.

It most certainly is an indictment of 'fairness'. Those polls indicate that that people do see the current system as unfair. The problem is that the general public's perception of how to make the system fairer is diametrically opposed to the direction espoused by some Republicans.

In addition, there seems to be a gross misconception about what effective federal taxation actually is like in the US. The 'Warren Buffet' tax story has been debunked several times with IRS data from recent years.

Oh, really? If one ignores all of the regressive taxes, yes. If you don't ignore those regressive taxes, no.

Piketty and Saez, How Progressive is the U.S. Federal Tax System? A Historical and International Perspective, Journal of Economic Perspectives, 21:1 (2007) (http://elsa.berkeley.edu/~saez/piketty-saezJEP07taxprog.pdf) looks at all taxes from 1960 to 2004. The US tax system has moved from being markedly progressive in the 1950s and 60s to being barely progressive now.

Wealth is becoming increasingly concentrated in the upper echelons of society, income equality is increasing, and social mobility is decreasing. These are not the hallmarks of a prosperous society, nor a stable one.

 

[arildno]

As I have said, capitation taxes are much easier to administer than other tax systems.

Of course, those who are dedicated to defend the country with arms, say the nobility, and those who pray for our souls, like the clergy, ought to be exempt from that.

Furthermore, in order to reduce public expenditure, we should introduce a tax farming system, where the highest private bidder gets the tax farming contract for a particular district.

Thus, the state only needs to provide soldiers who might help the tax farmers to get the taxes out of the recalcitrant population (expenses can be deducted from the tax farmers' own profits).

This system worked for centuries, proving its superiority.

 

[mheslep]

The reduced rate in a flat tax system is compensates for would be revenue loss in two ways (theoretically). First, the combination of the single rate and elimination of deductions expands the tax base, so that companies paying nothing now, like GE, would be returned to the tax rolls. Second, the elimination of deductions increases revenues directly.

Beyond the direct revenue increases, the elimination of the vast tax rule set and preparation business would improve productivity.

 

[mheslep]

...
I tried the excuse "well John's parents let him do that" on my parents when I was a kid. Never worked. My parents were smart. Just because Johnny was allowed to do something stupid, immoral, or illegal didn't mean I was allowed to do so. ...

Looking for other data/experience on an economic policy is stupid, immoral, or illegal? That entire post is loaded with ad hominem, strawman, poisoning the well and other fallacies, or just false assertions (http://www.oecd.org/document/16/0,3746,en_2649_201185_43946384_1_1_1_1,00.html" , not that the financial crisis has anything to do with taxes). I'll pass on any more direct response.

 

[mheslep]

With regard to income and payroll taxes, the US has collects the largest share of tax revenue from the top 10% of income earners compared to other OECD countries (i.e. Canada, France, UK, etc), at 45%.

http://www.taxfoundation.org/blog/show/27134.html

 

[mheslep]

With regards to what the US public thinks:

[PLAIN]http://sas-origin.onstreammedia.com/origin/gallupinc/GallupSpaces/Production/Cms/POLL/nhnrvip5s0ysl904sffkag.gif

 

[ParticleGrl]

With regard to income and payroll taxes, the US has collects the largest share of tax revenue from the top 10% of income earners compared to other OECD countries (i.e. Canada, France, UK, etc), at 45%.

Its because the us has a much more skew income distribution, the top 10% take home a much larger percentage of total income in the US. That's how marginal rates work

Its also not obvious what measure of tax he is including for US taxes. Does he include state taxes?

Why is income tax a better measure than total tax burden for such comparisons?

 

[Oltz]

Its because the us has a much more skew income distribution, the top 10% take home a much larger percentage of total income in the US. That's how marginal rates work

Its also not obvious what measure of tax he is including for US taxes. Does he include state taxes?

Why is income tax a better measure than total tax burden for such comparisons?

Because we are talking about INCOME Tax. Social Security and state taxes and all of the other Tax everyone likes to roll into totoal tax burden are either equally shared or lifestyle choice driven. Income tax is the what we are discussing including others is just trying to cloud the issue and bring in false arguments.

 

[russ_watters]

Why is income tax a better measure than total tax burden for such comparisons?

The biggest flaw in the preferred liberal metric is that it doesn't account for the fact that people's station in life changes over time and particularly for SS, the taxes and benefits at best cancel each other out over time.

The second biggest flaw is that it is nonsensical /disingenuous to refer to a redistribution as being "flat".

 

[mheslep]

Its because the us has a much more skew income distribution, the top 10% take home a much larger percentage of total income in the US...

Compared to other industrial countries? The second column in the https://www.physicsforums.com/showpost.php?p=3587636&postcount=45" shows the income share of the top 10%. In the US the top 10%'s share is 33.5% per this Tax Foundation report based on OECD data. Four other countries out of the 24 are also above a 30% share with Italy higher than the US. All 24 countries are above a 25% share except Iceland and Korea.

 

[Oltz]

This is a good read with some usefull Charts in it.

Take not of the chart involving percent of taxes actually paid with lines for the 90% 10 % and 1%
http://www.taxfoundation.org/news/show/27254.html"

Also note where and when this was presented.

Hearing before the U.S. Senate Committee on Finance



May 3, 2011

Also I found this quote of use in conjunction with the table previously noted from the mid 2000's

Indeed, the OECD finds that the U.S. has the most progressive income tax system of any industrialized country. What that means is that the top 10 percent of U.S. taxpayers pay a larger share of the income tax burden than do the wealthiest decile in any other industrialized country, including traditionally "high-tax" countries such as France, Italy, and Sweden.[13]

 

[mheslep]

The biggest flaw in the preferred liberal metric is that it doesn't account for the fact that people's station in life changes over time ...

Yes, I keep seeing posts claiming that social mobility over time is nil or decreasing in the US which contradicts numerous studies. I've posted on this before, hopefully this time I can put a stake through the notion of 'decreasing social mobility'.

From a http://www.dallasfed.org/fed/annual/1999p/ar95.pdf" :

Univ Michigan data 14 year window, 1979-1992, sample size 3725 tracked over time.

Of individuals who were in the lowest income quintile in 1975, 5.1 percent were
still there in 1991, 14.6 percent had moved up to the second quintile, 21 percent
to the middle quintile, 30.3 percent to the fourth quintile and 29 percent to the
highest quintile. Of those in the highest quintile in 1975, 62.5 percent were still
there in 1991, while 0.9 percent had fallen all the way to the bottom fifth.

US Treasury data, 1979-1992, sample size 14,351 households.

According to a study completed in 1992 by the Treasury, 85.8 percent of households in the lowest income quintile in 1979 moved up one or more quintiles by 1988. Only 14.2 percent of those in the bottom in 1979 were still there nine years later. Of households in the middle fifth, 47.3 percent moved up and 19.7 percent moved down, while in the highest fifth, 35.3 percent moved down.Over half (52.7 percent) of households in the top 1 percent in 1979 had lost that status by 1988.

2007 Treasury Study, 10 year window, 1996-2005:
"[URL Mobility in the U.S. from 1996 to 2005
Report of the DEPARTMENT OF THE TREASURY[/URL]

Key Findings:

• There was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005 period as over half of taxpayers moved to a different income quintile over this period.
• Roughly half of taxpayers who began in the bottom income quintile in 1996 moved up to a higher income group by 2005.
  
• Among those with the very highest incomes in 1996 – the top 1/100 of 1 percent – only 25 percent remained in this group in 2005. Moreover, the median real income of these taxpayers declined over this period.
  
• The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996).
  
• Economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation. The real incomes of two-thirds of all taxpayers increased over this period. In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups.

The data above differs from the commonly circulated statistics on income groups; here the studies track individuals over time. The studies show not only that large numbers of people move off of the bottom, but that it is also difficult to stay on top. The bottom 5th's income as a statistical group may be stagnant, but it is composed of a new group of people over time, perhaps undeterred and scrappy immigrants.

Edit: I see Vanadium addressed this topic generally yesterday
https://www.physicsforums.com/showthread.php?t=545541

 

[Oltz]

The bottom 5th's income as a statistical group may be stagnant, but it is composed of a new group of people over time, perhaps undeterred and scrappy immigrants.

The bottom also includes many Students both High School and College who only work during the summer.
Who can be anticipated to change groups as soon as they start working 12 months a year instead of 3-5 months.

 

[mheslep]

The bottom also includes many Students both High School and College who only work during the summer.
Who can be anticipated to change groups as soon as they start working 12 months a year instead of 3-5 months.

Perhaps, though at least one, if not all, of these studies tracks household income so dependent minors would not stand out.