Would you support a flat 15% income tax?
Would you support a flat 15% income tax in this country? Other than a personal deduction (possibly in the neighborhood of 25k per individual/50k per couple) there would be no deductions.
Yes, I wish it would be that simplified. I also think they need do something differently with how the USA taxes stocks. Or I need to make my money solely from stocks. LOL.
That is certainly a move in the right direction. The historical revenue of taxes as a share of GDP is typically 15-20% anyway regardless of the rate. The average is clsoer to 17-18%. So I would say flatten the tax at 18% vs 15%. But that type of simplication would go along way to creating efficiency. In addition there should not be a difference in the treatment between earned income and unearned income. The rate should be the rate. We should be able to complete a tax return on a single sheet of paper instead of 8,000 pages of tax law.
The difference in the treatment of earned vs. unearned income was a Bush Tax Cuts provision. prior to 2001, dividend & capital gains income did not have a preferential tax rate (was taxed ad ordinary income). Favors the wealthy, doesn't it?
No, it favors anyone who saves money. And if you are in the 10 or 15% brackets, you pay nothing on long term capital gains. All higher brackets pay 15%.
That's not true. LT Cap gains were taxed at 20% as per Clinton in late 90's. EGTRAA just dropped the rate to 15% and ZERO on marginal rates below 15%
Landmark is 100% correct. jh720 claims to be an acountant but neither his math nor history seem to add up. Looks like he's just here to spam this question with his Marxist propoganda.
Under current law, when you sell your final home and moved to retirement community or nursing home, as many do, there is no capital gains tax on the home under current law. That's is very important for retirees.
It is the sale of any primary residence up to 250k per person. And there is now a 3.8% obamacare/medicare tax on the sale of the home for 2013. In general I don't believe in cap gains at all, just tax on cash flow, dividends interest etc.
I would support a flat tax and like Landmarkwealth, feel it should be closer to 18%. No deductions, no difference for earned and unearned income. Would probably need a standard deduction or at least some concession to lower income taxpayers.
Pennsylvania has a flat tax, 3.07%, for its state tax. Few if any deductions, only those that were necessary to make money (such as work shoes, tools, professional or union dues). There is tax forgiveness for low income earners and it depends on your income and family size.
The retires particularly like the PA state tax. Currently, there is no tax on retirement income. They may pay federal tax on their retirement income, but not state tax. Not on pensions, IRAs, annuities or whatever.
Is this for Federal taxes only or would this apply to State, County, and City taxes as well? I think 10% would do, but if every one had to pay taxes to the above referenced entities, that would be 30 to 45 percent of their income taken for taxes.
No. First, you're not going to get enough income from a 15% tax, and it's absurd to charge the same percentage to the people struggling the hardest and the people reaping society's greatest benefits.
The Gov't never collects more than 15-20% of GDP anyway for the better part of the last century. Rates do not correlate to revenue.
That's why it won't ever pass, e-five. And really....does congress EVER pass anything that is simple and easy to understand?
jh720...Please cite your source. in every instance where marginal rates were flattened, higher end earners paid increased revenues. 1982's reform increased revenue by nearly 70% in about 5 years as per IRS tax receipts.
When I lost my job and got my severance check, it was taxed at 25 percent. That is standard for lump sum payments and bonuses--regardless of regular income. Just what a guy who just lost his job needs, a 25 percent tax hit, regardless of his wealth.
I agree, it should have been a flat tax at someplace between 17-18%. Most people end up there with their effective rate anyway. The point is no matter what the rates are the gov't will collect 15-20% period. That is what has happened for a century
a flat income tax would be fine... if they raised taxes somewhere else, like letting the Bush tax cuts expire, or raised the capital gains/estate taxes. You know, raise the taxes the Republicans want to cut.
this is what the GOP doesn't want! It was hard to get the bush tax cuts passed back in 2001 which is why it was passed as a reconciliation (bill with a shelf life). and they pushed hard for the low tax rate on dividend and capital gains income (10%)
Yes, it is a good idea. Many complications in computing tax will be eliminated. Government will also have more revenue. The only hitch is that both poor and the rich will be taxed in the same brackets which will be unethical. But this can be ignored is we take into the fact that the government spends more for the uplift of the poor and so is justified in taxing all at a flat rate.
I think it would be a huge step in the right direction. The tax would apply equally to earned and unearned income. So assuming 15% tax rate and 25k personal deduction, a person who earns 40k/year would pay tax on 15k, which works out to $2250 per year in federal tax (for those who are interested, this works out to 5.6% of his/her overall income. If you have someone who earns much more, the formula is the same. A person earning 10million a year would still get the same 25k deduction, which means they will pay tax on 9,975,000, which is $1,496,250 in taxes. For this wealthy person, this works out to 14.97% of his income. (Essentially, the more you earn, the closer you get to the 15% rate)
As was pointed out by Landmarkwealth, historicaly, the US takes in 15-20% of GDP in taxes, so his 18% may be more accurate than my 15%. And the standard deduction may need to be adjusted up or down slightly; while I think everyone should contribute, I also would not want to sock it to low income families.
Since there are no deductions other than the standard deduction, only the truely poor would not pay income tax. Currently, because of the current tax code, it is both possible and legal to payno income tax and be middle or upper income. This system would eliminate that. While there is always the chance that some people would offshore their money, with such a low tax rate, that is much less likely than today...the risk far outweighs the benefit.
I do think that this system would have a great stimulating effect ont he economy. Many people will have more money in their hands because of the lower tax rate. Rich or poor, something will be done with the money in your hands. It will either be spent, which stimulates the economy, or invested, which also stimulates the economy.
And some people will just be able to pay their bills. That is not bad, but is it really fair to apply the same rate to someone making $50,000 by working 40 hours a week, to someone who makes $200,000 in interest from investments he inherited?
Larry, you and I have different views of what "fair" is. To me fair means the same rules apply to all equally. So yes it is fair.
Without the low rate on earnings from investments there is a reduction in Cap Ex and that hurts us all and produces less revenue to the treasury. Investment income requires some degree of risk. It requires proper incentives.
Bracketed income rates are fair. There should be a cap and the tax code needs major revisions. But you do not achieve fairness by putting excess burden on the poor and without deductions for the blind, elderly or sick, you are doing just that,.
It is not fair because I will always find away around it for my wealthiest clients. If you want the wealthy to pay more, give them incentive to declare more income rather than defer income Flat rates produce more revenue from the rich in totality
Flat taxes are not as attractive as the sound.
Person A makes $50,000 per year. Has wife and two kids. Total tax is $7,500 for next income of $42,500. That would be tough to live on.
Person B makes $100,000 per year. Has wife and two kids. Total tax is $15,000 for net income of $85,000. Not rich, but comfortable.
Person C makes $200,000 per year. Wife, and two kids. Total tax is $30,000 for net income of $170,000. You can live pretty good on that.
Also, if you switch to a flat tax, you are still faced with Social Security Taxes, and state income taxes, which in many states, at least my state, is based on the amount of federal taxes you pay.
Also, without deductions, contributions to charitable organizations would decline.
The idea has been bounced around for years. It really creates more problems than it solves. Would the elderly still get to claim extra exemptions for their age. Would a blind person be able to claim an extra exemption.
To answer the question, my answer is no. The example offers deductions for individuals and couples, but does not mention other dependents.
Also, would tax deferred income such as IRAs and 401Ks still be allowed. There are a lot of questions to answer and I think the negatives would outweigh the positives.
Larry, I include a single deduction, a personal deduction which is 25k/person or 50k married couple. Your 50k earner would thus pay tax on 25k, which is $3750 in taxes.
Flat tax favors the wealthy.....something most don't understand. Im a tax accountant and follow this topic pretty closely....just don't think a flat tax will ever happen...
Even with your deductions, it does not address the issue of people with several children, the elderly or the blind. Without the mortgage and contribution deductions, some people will be paying more in taxes and will be unable to buy a new home.
It should be exactly the opposite. The tax code should not incent debt creation while punishing wealth creation. A home should not be bought for tax benefits. That's one of the reasons we are over leveraged in this country. wrong incentives
Property is often purchased for tax benefits. If I can buy a house and have a note of $1,000 each month, with most of that going to interest, then the interest deduction saves me money when I file my tax return. I get a refund that is saved or spent.
Larry, you are making Landmark's point for him. The tax structure should not benefit or penalize certain behavior.
Exactly, you should not be buying a home for the tax break. It should be for the home. This creates incentives to leverage. Debt for the sake of tax breaks is a bad habit to get into unless you are extremely liquid. Better to drop marginal rates
I was not advocating buying a house for tax purposes. A $1,000 is not an unusual house note. However, during the first f5 to 10 years most of the payment goes to interest. The deduction gives some relief--even for those in the 15% bracket.
You might not be advocating it, but the fact that it is a dedcution is often a motivation for many buyers to get in over their head. Tax incentives should never encourage debt.
I agree. It is even worse in the business. With tax rates are so high companies are more concerned with using every tax deduction than sound business models. So you have companies like GE that pay no tax and small companies heavily taxed.
Worst was microsoft, they are debt free and floated corporate notes to get a deduction rather than bring back foreign profits to avoid the repatriation tax.
Are we also going to tax all forms of income, including bonuses, commissions, and prize money at that rate?--all of these are taxed at quite a high rate right now. Are we going to tax corporations and foundations at that rate? What about foreign investors' incomes in private equity firms? Can we start taxing the private income of churches and all religions at that rate? Or is income tax only going to apply to people? Does that 15% include Social Security?
This includes all forms of income...it is all taxed at the same rate. And Yes, I would put corporations on the same system, getting rid of all of the special deals (or higher rates) that companies get because they belong to a certain industry.
churches are usually classified as nonprofits and not subject to tax. That is also true of charitable organizations. I doubt that will ever change and for good reason. Corporations are subject to tax, not just individuals (and some forms of trusts)
Corporate tax is a myth. It just gets passed to the consumer. We generally dont tax churches because their non profit, but their employees do pay tax. Currently only 85% of SS is taxed at earned income rates. i believe it should be fully excempt
The medical deduction is another example. Most people do not reach the threshold to use it, but some with children or spouses with serious illnesses do reach that mark and surpass it. Do we really want to tax legitimate medical expenditures?
Medical would be part of the personal deduction. Again, I see fair as the same rules apply equally to everyone. I have 6 kids which gives me more deductions that someone of equal income who has none; I see thas unfair.
Obviously, you never had any major medical bills. Because I am unemployed and cannot buy real insurance I am paying about $1,200 for limited coverage, have a $5,000 balance at the hospital and have paid out about $3,000 in co-pays this year.
But if your unemployed you couldn't use it anyway regardless of the 7 1/2% agi phaseout (now10%). You need income to get a deduction. You can't deduct against nothing.
I have had major medical bills, although not for a few years. I set up payment plans to pay it off. .
Yes, most definitely! I despise doing our taxes each year. Besides the headache it causes everyone, there is so much money spent on the tax system. It would be much easier and more cost efficient to make the tax system more streamlined.
Even though there wouldn't be a tax break for charitable donations in a system such as this, I think that people would still donate. The tax break is minuscule for these types of donations anyways.
I agree that charitable giving wouldn't be hurt if the tax rate is low. And like you said, the amount of time spent on taxes is mind boggling. Hong Kong has a similar tax system to what I have described; their tax form is on a post card.
A postcard- that is genius! Maybe I should move to Hong Kong!
Studies conducted with when Sen. or Rep Archer of Texas was proposing a flat tax that showed contributions would drop. Romney claimed less in contributions last year so his tax bracket would look higher. The deductions are necessary for fairness.
Those studies were financed by those who had a bias against the flat tax. I have read both research studies and both were flawed to say the least. They surveyed no high income earners and their "research" was based on opinions, not data.
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