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Flat Tax Proposal -- A Simple Overview

Updated on July 22, 2012
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Based on the U.S. National Debt Clock site (http://www.brillig.com/debt_clock/) each American citizen, as of writing, (date: 22 July 2012) owes $50,732.52. This is shocking. What is more shocking is, unless America is able to pay up, the interest of the debt accumulates every day.

Alarmingly, the present administration proposes again, more stimulus money. So far, there are no concrete plans and justifications as to where the money will be exactly allocated. Obama gave generalizations in his speeches – creation of jobs in infrastructure, hiring back teachers and constructing more school buildings. Worst, he threw the Republican Party under the bus, declaring “Pass the Bill.” The thing is, the bill includes higher taxes on the rich. He proposed the “Buffett Bill.”

Do you think taxing the rich more would solve and help America? The answer is in the negative. There are approximately only 450 thousand rich people and only 1% of the total American population can be considered super-rich billionaires. Because the rich are the job creators taxing them more would mean limiting their investment portfolios.

There is actually nothing wrong in taxation per se because it creates revenues. What happened was, it became too complex to the point that there are so many loopholes and screened curlicues for graft and corruption to easily exist.

All would like to eliminate heavy taxes and eradicate poverty. Everybody whether rich or poor desires a good, comfortable life and would like to see America in progress. But, how can this be when the taxes are hindering each step to dream big, and obstructing each move towards more business ventures.


Herman Cain: 9-9-9 Plan

Source

A Simple Flat-Tax Proposal

So, one simple proposal is for America to take on the flat-rate tax. This would lead to income tax at very low levels for everybody. I read the simplicity of this tax in the article entitled, “A Brief Guide to the Flat Tax” written by Daniel J. Mitchell,Ph.D http://www.heritage.org/research/reports/2005/07/a-brief-guide-to-the-flat-tax. The following is a summary based on the above-mentioned article:

1. Definition of Flat Tax – “simple, fair and good for growth” tax that uses 2 kinds of forms: the labor forms and the business and/or capital forms.

2. Main characteristics -- a.) Single rate falling way below 20%. b.) Definitely, no special partialities, meaning eradicating political favoritism, “deductions, credits, exemptions and other loopholes.” c.) Abolish death taxes and capital gains taxes and other double taxation on savings and investment.

3. Benefits of adapting Flat Rate Tax are several:

3.1. It leads to long-term economic growth because knowing how much you pay in taxes results in faster calculations on foreseeable profits.

3.2. The effect of a much less government intrusion into in how much an individual makes also leads to better financial management and investment by individuas and/or the private sector.

3.3. Businesses are benefitted because knowing ahead what the profits are after taxes, bolster confidence, security and vigor towards more business ventures and assets purchases.

We cannot get our economic system to work at full speed so long as all business decisions are dominated by the question: "What will be left after taxes?"

3.4. Graft and corruption will be greatly minimized because of its straightforwardness in nature and form, there is clarity and openness as to where income and taxes alike are spread out.

3.5. “…the flat tax moves the system much closer to where it should be-raising the revenues that government demands, but in the least destructive and least intrusive way possible.”

http://www.heritage.org/research/reports/2005/07/a-brief-guide-to-the-flat-tax

Freedom Flat Tax Act

The Freedom Flat Tax Act, H.R. 1040 was proposed by House Republicans in March 14, 2011. For a gradual recovery and reformation, the tax rate will be set at 19% for the first 2 years of election. Afterwards, it will go down to 17% fixed for individuals and families. Corporate taxes at present is at 35% and according to analysts, the ideal fixed flat rate should be set at 20% - 23% for America to mobilize its economy fast. The sponsors of this bill are: Michael Burgess (R-Tex), Roscoe Bartlett (R-Md.), Tom Cole (R-Ok), and Dennis Ross (R-Fl)

Presidential Candidates Who Endorse the Flat Tax

1. Steve Forbes – is one of the proponents of Flat Tax back in the 1990’s. He believes that it ends crony capitalism in Washington, D.C.

2. Fred Thompson – was a member of the Congressional Flat Tax Caucus.

3. Herman Cain – he proposed his 9-9-9 Flat Tax Plan.

4. Newt Gingrich – his 10-point plan includes flat tax and changes in healthcare and social security.

5. Rick Perry -- he announced that his economic plans include scrapping the current tax code and replacing it with the Flat Tax system.

My Fellow Hubbers' Hubs on Taxes

Enduring the tough times due to high taxes should not be our case today. We, Americans are free and we have the voice and the power to turn things around for the better. To know more about what’s happening, READ. The following articles about taxes from HubPages members are very interesting and informative:

http://americanview.hubpages.com/hub/The-Taxes-Are-Coming-The-Taxes-Are-Coming

http://rachellrobinson.hubpages.com/hub/Are-Taxes-Really-the-Answer-to-our-Economic-Woes

http://thefrogprince.hubpages.com/hub/Representation-Without-Taxation

http://staci-barbo7.hubpages.com/hub/Which-7-States-Have-No-Income-Tax

Other Simple Proposals

Other suggestions that would help lower our taxes which would be discussed more in future hubs are:

1. There should be a readjustment of government officials’ benefits and wages; what they earn with their private enterprises will not be touched. Government workers’ pensions and salaries should also be recalculated.

2. Eliminate superfluous projects. Taxpayers’ money should NOT go to researches like ‘Shrimp on a Treadmill.’ It is better to leave foundations to the private sector.

3. The government should prioritize spending – military, infrastructure, education, agricultural and all other industries.

My References

Hubber is very grateful to the following sites and references:

Flat Tax- Wikipedia, the free encyclopedia http://en.wikipedia.org/wiki/Flat_tax

A Brief Guide to Flat Tax, by Daniel Mitchell, The Heritage, July 07, 2005, http://www.heritage.org/research/reports/2005/07/a-brief-guide-to-the-flat-tax

Issues: Flat Tax, Freedom Works, 2010, http://www.freedomworks.org/issues/flat-tax

Flat is the New Fair by Stephen Moore, Sept. 30, 2011, The Wall Street Journal Online, http://online.wsj.com/article/SB10001424052970204138204576600760327683564.html?mod=googlenews_wsj

Tax Day 2011 - We Need A Flat Tax More Than Ever by Mike Kibbe, Apr. 18, 2011, Fox News.com, http://www.foxnews.com/opinion/2011/04/18/need-flat-tax/

Fred Thompson: On Tax Reform, On The Issues, Feb. 08, 2010, http://www.ontheissues.org/2008/Fred_Thompson_Tax_Reform.htm

Herman Cain uploaded by Fox News Channel on Sept. 22, 2011 www.youtube.com/watch?v=x9LFwX7YfKg

Fred Thompson: On Tax Reform, On The Issues, Feb. 08, 2010, http://www.ontheissues.org/2008/Fred_Thompson_Tax_Reform.htm

Herman Cain uploaded by Fox News Channel on Sept. 22, 2011 www.youtube.com/watch?v=x9LFwX7YfKg

Gingrich outlines 10 point plan that include flat tax, healthcare and social security changes, by AP on Sept. 29, 2011, The Washington Post National.


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    • MonetteforJack profile imageAUTHOR

      MonetteforJack 

      6 years ago from Tuckerton, NJ

      @ Thank you, Sir James! I am sorry I haven't responded. Either my server or laptop, both are going bonkers these past couple months. True, one huge problem of taxation are the tax lawyers, the auditors, accountants -- they make it so complicated. I have nothing against their professions; though some people in those professions take advantage of the system and that is what I am against at. Thanks for reading and commenting!

      @ RTalloni, hello! I am glad that you are glad ;) I aim to please those who read my article. Thank you for your time, I really appreciate it.

    • RTalloni profile image

      RTalloni 

      6 years ago from the short journey

      Interesting read--lots to consider. Glad to see this highlighted and to see discussion on it.

    • James A Watkins profile image

      James A Watkins 

      6 years ago from Chicago

      Thank you for this excellent Hub. I would like to see either the flat tax or the fair tax so we can get rid of all the tax lawyers and close the loopholes.

    • MonetteforJack profile imageAUTHOR

      MonetteforJack 

      6 years ago from Tuckerton, NJ

      Thanks, The Frog! Also, I read your hub "Representation Without Taxation" and I mentioned it here in mine :)

    • The Frog Prince profile image

      The Frog Prince 

      6 years ago from Arlington, TX

      As Herman Cain aptly puts it - 9 9 9. Great article.

      The Frog

    • MonetteforJack profile imageAUTHOR

      MonetteforJack 

      6 years ago from Tuckerton, NJ

      Wilderness, what you commented is so true. It all boils down to implementation by the lawmakers/politicians because of their pet projects and whatever motives they have. Seems to me whatever we propose to make it right, we are in their mercy. Whoever we sit, start out goody-two-shoes and then, the system swallow the good ones up. Not all, but a lot. Sorry, am being negative here.

      I was and still am contemplating which I like better, the flat tax or the fair tax. Anyway, you are also VERY RIGHT about this hub. I plan to edit it as it goes as I learn more. I am deeply indebted to those who commented and gave me advices about this. I truly do. It will take time, for this hub to get better. I have to do a lot of research and editing. Please, accept my gratitude and really, thank you, thank you very much. I look forward to learning more from you, Again, thank you very much!

    • wilderness profile image

      Dan Harmon 

      6 years ago from Boise, Idaho

      I very much agree - I would like to see a flat rate tax, although I would include any income, such as capital gains, in it.

      The biggest problem, it seems to me, is that our politicians could no longer continue the practice of social engineering via the tax code. They couldn't push pet projects by offering tax breaks and couldn't buy votes that way either.

      While that would be a very good thing (it's much easier to hide the value of a tax break than an outright giveaway) the politicians won't agree and it will be like pulling teeth to get that "goodie" away from them.

    • MonetteforJack profile imageAUTHOR

      MonetteforJack 

      6 years ago from Tuckerton, NJ

      Many, many thanks Karen N !!! Me, too ... I truly hope so, for the sake of America.

    • Karen N profile image

      Karen N 

      6 years ago from United States

      I would really love to see this one come to pass!

      Voted up and left you a google +

    • MonetteforJack profile imageAUTHOR

      MonetteforJack 

      6 years ago from Tuckerton, NJ

      Hi, Kathleen! Yes, I did. In fact, my husband favors it better than flat rate. I was about to hub about it, but changed my mind. From what I have researched, the reason it did not passed is because the percentage is too high -- 23%; if only it were lower, then it would be agreeable. Also, the fair tax is a little bit tricky, as exemplified by some European countries wherein they have the national sales tax AND federal income tax.

    • MonetteforJack profile imageAUTHOR

      MonetteforJack 

      6 years ago from Tuckerton, NJ

      Zubair, thanks for the comment. But, I do disagree with you about where the wealthy stands.

      TeaPartyCrasher, no, it does not mean the wealthy would pay LESS. In fact, it would mean the wealthy would pay ON TIME and NO LOOPHOLES OR EXCEPTIONS. Like, they no longer can do tax write-offs for dining with clients. The wealthy will pay their dues accordingly in this situation and cannot get out of it.

    • Kathleen Cochran profile image

      Kathleen Cochran 

      6 years ago from Atlanta, Georgia

      Interesting. Have you heard of The Fair Tax? It's a national sales tax, which would be levied on anyone who buys anything in the U.S. whether they are a citizen or not. Those below a certain income level would be exempt. I think it would bring in more revenue in a fair way - hence the name. First introduced by Rep. John Linder (R-GA) now retired.

    • TeaPartyCrasher profile image

      TeaPartyCrasher 

      6 years ago from Camp Hill, PA

      Zubair:

      A flat tax on WORTH or WEALTH maybe. But basing it on earned income would likely mean the wealthy would pay LESS in taxes.

      Hence why their mouthpieces are so keen on it, and people that rely on them for info get behind it.

    • Zubair Ahmed profile image

      Zubair Ahmed 

      6 years ago

      I agree with you that a flat rate tax system not just in the US but every other developed country would make life so much more simpler and would allow working class people to retain more of their hard earned cash. But the wealthy in society would not want that.

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