Could a flat tax work if it was implemented with exceptions?
If a flat tax was implemented having exclusions like food, but a higher rate on luxury items would it work?
Those who can afford luxury are the rich, and the rich do not pay fair share of taxes now.
You have created a paradox. A flat tax can have no exceptions. A constant tax rate, can be applied to next income after all allowable deductions are taken. However, in the end, some people will be paying a tax on a larger portion of their income than others. So, while the rate may be constant, the tax is not a flat tax because of the changing variables resulting from deductions and how those deductions change over the years. A flat tax would also assume there would be no capital gains tax, since capital gains are a part of income.
The idea on the surface would seem fair, but the flat tax idea has been discussed for years, and the above stated reasons have always prevented it. For instance, I claim three deductions, myself, my wife and my son, who has handicaps and really cannot work. I pay his medical expenses over and above what insurance pays. So I will get to claim a medical deduction this year. If my son, who has only disability income, were to file his own claim, he would not be able to claim the medical deduction, because I am paying the medical expenses and I would not be able to claim them because he is filing his own return, where he would get to claim a deduction for being legally blind, which I cannot claim when I carry him as a dependent. No, it does not work out in the end.
The tax code is complicated--overly complicated, but some of those complicated are there for legitimate reasons.
I understand your explanation so I'm going to take it one step further. Eliminate each person filing taxes at all. Stick with flat tax, keeping essentials like food exempt. I know this is pie in the sky but thought it might be interesting.
Are you talking about a value added tax, like a sales tax? Rich people spend a smaller portion of income than poor. So the tax is a bigger burden for the poor.
I think the exceptions would be where we get into trouble. What exceptions, who defines them. Yes, I think with some tweaking that a flat tax could eventually work.
I don't think it's fair to tax necessities like food, but not much else. @Larry Wall, yes I was thinking along the lines of a sales tax where everything but the exceptions get taxed, that way everyone pays their fair share on everything.
I would add other sales taxes, medical expenses and gasoline. Gas tax in my state constitutionally. California will scream. In theory you have a good idea. Conflicts will stall it for years.
A Flat tax has in every instance produced the greatest return of tax revenue to the gov't in places where it has been used. The "fairness" argument is debateable based on opinion. However for those who think the "Rich" don't pay their fair share, be aware that the top 1/10th of 1% pay more than the bottom 80% of earners. That is already quite lopsided. The only reason you won't see a Flat tax is it does not provide the political class the ability to control behaviors while playing class warfare. The complexity of the tax code is designed to move your behaviors in the direction that the Gov't wants you to go.
The question in terms of what tax system makes sense should be based on what is practical to implement and at the same time will produce the most revenue. There is ample evidence that the flat tax will generate more revenue through simplification, while making it easier to conduct commerce.
The issue with trying to idenitfy things like luxury items is troublesome. It was tried by Bush 41 and failed miserably. The wealthy purchasers of items like sailing yachts simply went over seas to buy them and it devastated the New England boating industry.
Additionally, any form of an increase in additonal consumption tax will be troublesome in that we have a demographics in the US that represent an aging population. That makes it quite unfair to those retired or about to retire whom have been taxed on earnings their whole life. Then in retirement when in most cases their income has gone down, they would now be taxed on consumption. It could however be phased in over time.
Great info here! I was not surprised about the government wanting to control us, just hoping as a country we could ban together and get things back to the way they should be. Our founding fathers are turning over in their graves! Thanks for sharing
I happen to think the flat tax is the fairest way to ban together. But it's not appealing to those who don't pay any tax now, or pay a nominal amount. When I was 14 I didn't care if I left the lights on, because I didn't pay the electric bill.
One more thing to keep in mind--People who are retired and living on Social Security, which depending on total income is not taxed, would be faced with your flat tax. I really like the idea. I just see a whole much of problems to resolve.
That could be easily addressed by eliminating numerous other tax burdens that effect retirees, like taxes on dividends and interest, or even a standard deduction. They tend to have more in assets than in earned income at that stage.
Or issue retirees something like a tax exempt card that they can show when purchasing necessities like food. No one can get out of paying taxes entirely but we could make it doable for those retirees.
That would be too complicated I think. The goal is simplification. I just want to make sure nobody pays zero. If there's no skin in the game, people vote for nonsense. I never turned off the lights when I was a kid because I didnt pay the electric
Not really, if they are carrying a medicaid card or something they are already issued like that from the government they just use that to get some things exempt. It's not that they wouldn't be paying but because they've paid so much already.
Programs like medicaid are riddled with fraud. I would not want another program where the gov't in in charge of verifiying things like that. They're just too inefficient.
When they retire they should be issued something that states they are retired. I agree about the gov't keeping tabs, but we've all paid into it. Maybe joining something like AARP (which is reasonably cheap) could be the identifier.
By having a flat tax, there would be no filing,of a tax return. Everyone including illegal aliens would pay there share, and there would be no way they could get around it.By getting rid of the income tax a full paycheck would start to get this country back on track.
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