It's Time for the Flat Tax
Let's face it. Our current tax system is broken. It is extremely complicated, with nearly 900 different tax forms in all. It is easily manipulated by those who know how to do so in order to take advantage of the bureaucratic mess and inefficiency that is the tax code. And it stifles growth by penalizing productive behavior, savings and investment. Everyone hates it, and everyone complains about it. It is a system in desperate need of reform, or better yet replacement.
A flat tax is the perfect alternative to what we have today. Implementing a flat tax system would be simple and, more importantly, fair to American taxpayers. Establishing a single, low rate, regardless of income, would treat all taxpayers fairly and equally. If the rate were, for example, 20 percent, then all income would be taxed at 20 cents on the dollar one time and one time only: when it was earned. I don't know what the actual rate should be, but many of the former Soviet republics have adopted flat taxes that range anywhere from just over 10 percent to over 30 percent. Right now, though, it is not the number, but the principle, that is important.
If taxpayer A has 50 times more taxable income than taxpayer B, then taxpayer A pays 50 times more in taxes. What could be fairer than that? Those who argue that the rich should be required to pay a greater percentage in taxes ignore the economic realities of penalizing some of the most productive contributors to the nation's wealth.
Now, I know that some will argue that those at the bottom of the income range suffer more by paying x-percent than those at the top of the income range. This may be true, but it is fundamentally fair. Taxes are the cost of citizenship in a country where people demand services like police and fire protection, roads to drive on, and schools for their children. The costs associated with these citizen demands should be borne equally, with each taxpayer remitting the same percentage of their pay to the government.
A flat tax would also eliminate deductions, credits, exemptions, and all the other items that make the current code so difficult to understand. By simply taxing citizens a single rate on what they earn, there is no need for tax provisions that attempt to dictate behavior. Many flat tax advocates include a set deduction based on family size. Low-income families that have taxable incomes less than the deduction would pay no taxes. I disagree with this approach, as stated before, because I believe that anyone who takes advantage of government services should contribute to the costs associated with those services.
A flat tax would also put an end to the practice of double taxation. By taxing income only once, at the time it is earned, there is no need for the imposition of taxes like the estate tax (or death tax, if you prefer). If the money earned has already been taxed once, why should it be taxed again? Doing so penalizes those who engage in wealth accumulation by saving and investing.
Finally, a flat tax would treat all businesses equally. Corporations or companies would pay taxes to the U.S. government on all income earned within the United States, minus necessary expenses such as labor and investment. Simplifying the tax system for businesses would make the United States more attractive to corporations from around the world.
There is no disputing that our current tax system is in desperate need of help. Implementing a flat tax would simplify the process of collecting revenues for the federal government, eliminate unfair tax practices, and encourage business operations within the United States. But perhaps most importantly, it would level the playing field for all Americans by treating all taxpayers equally and encouraging savings and investment without fear of penalty. The time for a flat tax has come, before our current system drags us deeper into the abyss of government inefficiency and waste.
Published by Greg Reeson
I am a Featured Writer for The New Media Journal and a The Veteran's Voice. I also regularly contribute to GOPUSA and The Land of the Free. View profile
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21 Comments
Post a CommentPaul, you say "Well the top rate used to be 90% and there were still very wealthy people." Almost sounds like you advocate the classic Marxist classless society, where everyone is equal. Is it so terrible for someone to be wealthy? Our founding fathers said we we were guaranteed the PURSUIT of happiness, not happiness itself.
Oh yeah, and again Greg--when the top rate was around 50%, this nation experienced it's greatest across the board prosperity, and businesses and the wealthy prospered as well--I think that you have too easily accepted the supply side lie of the Reaganites. Politicians, think-tanks and conservative activists who advocate for low taxes at all costs, are simply misleading people.
Well, the top rate used to be 90%, and there were still very wealthy people. However, that is obviously way too high. To answer your question--yes, I think the top rate should be somewhere around 50%. Again, demand for products & services has nothing to do with taxes, and taxes should not be considered a "penalty" anyway--which is exactly why supply & demand have no direct relationship with tax policy.
"If the money earned has already been taxed once, why should it be taxed again?" Absolutely. We get taxed on our state refund by the fed. The state wants a slice of our fed refund. Everyone wants to tax the dead. As you say, the whole code is a jumbled mess in sore need of a major overhaul. Unfortunately, special interest have too much to lose if we trash the current system. CPAs, H&R Block, bean counters in general will fight to keep the common man convoluted so they can cut their own slice of the pie. Flat tax, Fair tax, Progressive tax...I'm all for anything that reduces the cost of collecting taxes. The Federal government shells out over $10B in IRS budget just to make sure we pay. That means we're PAYING that much in taxes to have our taxes collected. Not to mention the other recording costs in the private sector. Then the serpent ate his tail.
The top rate is too low? High high would be too high for you? The top rate is over a third of the income!! Would you take half? As for demand, you want to penalize further the companies who provide the SUPPLY to meet consumer DEMAND. Basic economics: there would be no companies providing the product if the people didn't want the product. I don't know how to make it any simpler than that.
About demand Greg--I still don't see what that has to do with the income tax. No matter the product or service and any demand for it, the income derived from success in business is made possible by the regulation & infrastructure paid for in large part by income taxes.
Perhaps we can find common ground. But, I was just combing through the things federal income taxes pay for, and I still believe the majority of agencies and programs primarily benefit the wealthy. It is only one mans perspective, but for me, that is enough justification for a progressive tax. In fact, I think the top tax rate is too low and should be raised. The greatest prosperity this country has ever seen occurred in the days when the top rates were high. We still had very wealthy people, businesses prospered, but we didn't have nearly as much of a wealth gap as we have today. Flat tax and natl sales tax schemes would be a disatser IMO.
But Paul, the consumer public demands those products. Why is that hard to see? I think you overestimate the use ratio of the commons. Besides, the income tax, which is what this article is about, is not used for transportation infrastructure. That's what corporations like Microsoft pay transportation taxes and fees for. There is a tax on just about everything we do and everything we buy and every service we take advantage of. To argue that those same things should be taxed again in higher income taxes doesn't make sense. I'll make a bargain with you: eliminate all of the other taxes associated with common use items and maybe we can find common ground on the income tax.
I think the problem is that you see taxes as a "penalty". But, I really don't see how it is a "ridiculous" argument to say that the wealthy use public infrastructure more than the average working man? It is simply a fact. Demand for products has nothing to do with my point, which is that in order to produce and deliver their products, Microsoft uses much, much, much more public infrastructure than the average person. Taxes, including those the wealthy pay in the higher brackets, are used to improve and maintain that infrastructure, and to contribute to programs that help maintain a standard of living that will perpetuate a demand for Microsoft's products, for example. Isn't it fair to contribute according to our use of the commons and our benefit from it?
I'm not even going to argue the police and fire thing; you've already essentially ceded that one, and it is a ridiculous one. And just because Gates is in favor of a progressive tax doesn't mean it is fair or right. It's his personal belief, just as I have mine. As for the progressive tax, the more you make the higher the tax rate goes. When do you reach the point of diminishing returns? That is an individual decision as to when continued productivity is no longer beneficial to the point you want it to be. Leaving it in the hands of the government is no less subjective.