The craze for flat taxes

  1. Nice article in 'The Economist' on how Republican candidates are competing to race to the lowest point: http://www.economist.com/node/21534799


    With a candidate Romney/Cain/Perry and all their lunatic tax reform proposals, I can not possibly imagine how the Republicans will beat Obama next year.

    There are 311 million Americans and the Republicans come up with Romney/Cain/Perry as the possible candidate for the highest office in their country. And then their one and only answer to all problems and everything is: cutting taxes.


    EDIT: I doubt that these plans will make one of Republican candidates the next president of the United States.

    Do you think these plans (as described in article) will have great appeal to the voters?
     
    Last edited: Oct 27, 2011
  2. jcsd
  3. You do understand that a 9% sales tax on everything that was not food, rent(or mortgage on primary residence), Utillities (Gas,electric,water NOT cable/internet or cell phone) and clothing would only apply to purchases with discretional income. Hence NO tax at all to the poor who can "hardly afford" to pay the bills.

    In essence it would be a 9% tax on all non essential purchases. Who does that sound targetted at? $0.09 on top of every dollar Paris hilton spends gee sounds like a lot to me.

    Or How about a 20% flat tax with no deductions other then primary residence mortagage payments all interest payments and dependants and not kicking in until you hit 50k. Hmm sounds like the middle class will get to write off nearly every penny (I consider middle class 50-100K for indivduals and 80-200 for Married couples).

    Again looks like a rise in the effective rate at the top end and decrease at the low end with no change for the upper middle class.

    The key is to use the deductions and exemptions to make them progressive instead of making the rate itself progressive.

    Our current structure is actually more flat due to the number of shelters available.

    Nobody can avoid a sales tax on disposable income spending. Unless you never spend a penny, but money is worthless until you spend it.
     
    Last edited: Oct 27, 2011
  4. Can you please clarify the specific topic of this thread?
     
  5. Sure. I think the tax plans of the Republican candidates are nuts. People are already scared by them, even before Obama has thrown on his 1 billion election campaign machine to point out to the people that these plans are nuts.

    I doubt that these plans will make one of these candidates the next president of the United States.

    Do you think these plans (as described in article) will have great appeal to the voters?
     
  6. Who spends more of their income, rich people or poor people?
     
  7. No, imo.
     
  8. Good, ponderable, points, imo.
     
  9. Poor people, generally. But then I know people who have incomes exceeding 200K per year who spend all of it on their lifestyles. Of course, when you get into the very rich category, then these people are generally spending a relatively small percentage of their incomes/net worth while saving/investing the bulk of it.

    I lost track of the point.
     
  10. "As described in the article" may be the greatest problem with the plans.:rolleyes: The basic idea of a flat tax is to simplify the tax code.

    As for President Obama's tax plan - to raise taxes on people earning over $1 million (apparently after Chuck Schumer realized $250K wasn't a measure of "rich" in NY?) - it won't solve the problem of deficits - will it?
     
  11. Is that even possible ... given the status quo. I don't think so.

    The very rich run the country, fapp, and they, apparently, have no problem with running it into the ground, burning it out, so to speak.

    Is this assessment incorrect? If so, then why?
     
  12. It's your opinion - it doesn't need to be correct.
     
  13. Sure but I'd like to get some feedback from more knowledgeable people.

    Lets consider the flat tax idea first. Is this even possible?
     
  14. 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
     
  15. The government has grown way too much and the spending has gone crazy. I personally know a database programmer who works in the police dept. in Albany. The dept has seven employees - five managers and two programmers.

    The problem here is different-- imho the income tax should be progressive as all other taxes are strictly regressive -- if the fed government lowered the taxes to 1/2 of the current rate, no one would complain.

    To your point-- the flat tax has been enacted in other countries (the czech republic, e.g.) but no economical miracle has ever happened. But what I like about the 9-9-9 is that it is easy and would wipe out the current system and its additional cost to us (like the IRS whose employees all of us pay).

    It really comes to me that each government just adds tax code but does not remove it. This is a vicious spiral. It's like clogging your Windows with new a new software. At some point it will break. This is why Cain's goal is innovative and aspiring.
     
  16. I think the 'flat tax craze' is really just a way to express the desire for a simplified tax code.

    It's not being sold as a 'cure all', but it's something that many Americans seem to want - an end to exemptions. Afterall, that's the big perception, right? Rich get tons of tax breaks while the poor pay out the nose (when reality is much different). The single-proportional taxes which are proposed (in my mind a 'flat tax' would be an absolute dollar amount per person) would solve many of those issues. It doesn't really give any leg for the class warfare whiners to stand on, and provides a sense of equality to those who feel they are being overtaxed (in addition to having the extra benefit of potentially reducing government overhead via reduction of the IRS).

    What is lunatic about the idea of a single proportional tax?
     
  17. Why complicate it? Once you open the door to any complication, you open the door to ever-increasing complications. In another 50 years, it'd be right back to looking like it does today.

    Every objection I've heard against Cain's 9-9-9 plan has included words to the effect they don't understand it's inclusions and exclusions. It's not complicated: https://www.supporthermancain.com/999/999_plan/src/929webAD21

    I have my own objections to it, but spreading misinformation about it isn't a proper response.
     
  18. What percent of their income do the poor spend on items that are not food ,clothing ,utilities ,rent, medication and interest?

    How bout the rich?

    Lets remember that eating out is a service you are paying for not the food.

    If none of those expenses count then obviously the rich
     
  19. We all know the 9-9-9 would not be set in stone.
     
  20. If a poor family spends $16,000 of Government benefits (food stamps $5k, Section 8 $2k, Medicaid $5k, EITC $3k, Make Work Pay$1k) their $6,000 in wages are paid out 100% for the other things.
     
  21. D H

    Staff: Mentor

    Exactly. So why throw the baby out with the bath water? Fix the existing tax code. These proposals that have zero chance of making it through the sausage making machine known as Congress intact, and are (IMO) pandering to an overly idealistic and ill-informed public.

    Besides, suppose by some miracle a piece of sausage could be squeezed out of this machine that in some minor way resembles these radical proposals. I would not be at all surprised if the 2012 elections result in a 50-50 Senate and a Democratic House. Obama is currently complaining about a do-nothing Congress. This is nothing compared to what a radical right President would see in 2012. If by miracle Congress does pass a completely revamped tax code, the result will look quite different from the overly simplistic ideas being pitched to Republicans.

    Further down the road, what's to stop this revamped tax code from looking just like the one we have now? Congress loves to diddle with the tax code, and both proposals give lots of diddlin' room. These proposals will not fix the basic problem.

    That is exactly what both Cain's and Perry's proposals are being sold as. They are snake oil.

    1. It's not fair.
      Different people have radically different ideas of what it means for a tax system to be "fair." In the minds of many, these proposals are not fair.
    2. It's not realistic.
      I already outlined that argument above.
    3. It could kill the middle class.
      The biggest beneficiaries of both Cain's and Perry's proposals are the very wealthy. They are the one group who do not need much help. The middle class has been getting squeezed by economic changes that started in the 1990s. Both proposals will hit the middle class hard. The unintended consequences of this to the stability of society may be immense.
    4. It does not solve the underlying problems.
      The biggest underlying problem is the huge disparity between federal incomes and outlays. I don't see how making the disparity any bigger solves the problem. Another problem is the huge number of the exemptions and deductions in the current tax law. It is naive to think these proposals will emerge from Congress without congressional diddling.
    5. It hides the fact that they are pitching a massive cut in the size of the federal government.
      If you want to cut the size of the federal government, be forthright and say so.

    So far Congress and the administration have focused cuts on the tiny non-security discretionary spending sliver of the budget. This will not solve the nation's budget woes. A new tax code will not fix the nation's budget woes either. What will fix the nation's budget woes is to increase taxes to some extent and to cut spending where it counts. The lions share of the federal budget comprises social programs, which Democrats view as sacrosanct, and security, which Republicans view as sacrosanct.
     
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