The Pros and Cons of the Flat Tax
There are many benefits to a flat tax rate. Efficiency is probably the most compelling. More complicated tax systems require complicated algorithms and long lists of rules to follow. They don't cost money to fill out (unless you are doing them on-line), but they do cost time. They cost time to fill out and time to be processed. A flat-tax system would cut that time dramatically, and all those man-hours saved could be spent doing something far more productive.
However, there are some very real, not so obvious, consequences to making such a dramatic change in our tax system. The first would be the almost complete dissolution of the IRS. The IRS is not just a governmental institution bent on inspiring fear in the citizenry; it is composed of people whose livelihood comes from working in the tax industry. Most of them would lose their jobs. Some people have suggested we could retrain them and send them down to the border to enforce it, so perhaps that is one possible solution.
However, there is a key word in the above paragraph that points to the problems that would result from implementing a flat tax suddenly. It is "tax industry." The tax industry consists of more than the IRS. There are entire companies like H&R Block, that are devoted to dealing with taxes. Additionally, we have tax attorneys. And I'm sure there are many others. All these people would lose their jobs with the stroke of the President's pen when he signed such a tax bill into law.
To be sure, these people could eventually find new jobs. Perhaps, the government could even help (although I tend to be a fiscal conservative and really think it is more the individual's responsibility to find employment, than to have the government do it for them). And arguing that we should not seek to progress because someone might lose a job that will become obsolete if we do so, is a poor argument to make at best. One does not hire someone to dig a hole, then fill it, then dig it, only to fill it again. Wasteful effort should be cut out.
Basically, we suffer from something like "tax system inertia." It is a difficult and painful process to go from a complicated, wasteful tax system like the one we have now, to a quick, clean and efficient system overnight. It would be almost analogous to switching from an oil-based economy to a hydrogen based economy in the same amount of time. Perhaps, the best answer is to ease into the system gradually.
Ultimately, I think a flat tax would be a great boon to our economy. Such a system was adopted by Lithuania (http://en.wikipedia.org/wiki/Lithuania) and has demonstrated some promising results. However, I do think we should be aware of the consequences before we jump head first into the pool.
Published by Matthew D. Ryan
Matthew D. Ryan is a published writer who lives on the shores of Lake Champlain. View profile
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- The benefits of the flat tax.
- Some unfortunate consequences.
- Tax system inertia.
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Your soooooo dumbbb Tabitha what are you talking about why are you acting like you go to a school that you really dont. AND YOU WANNA KNOW SOMETHING? i hate you sooooo gosh darn muchh and fair tax is wayyyy better.
I was just kidding i dont even go to that school I actually live in Juneau, Alaska
I am a student at Wisconsin Lutheran High School on glenview avenue in wauwatosa Wisconsin. I think that the fair tax is not a smart way to do things. I would much rather have a flat tax. Im sitting in room 104 its about 9:30 A.M and im in economics class if you would like to come kidnap me or talk about this then you just come and try.
The reason we have the system we have today is based on purchase power ie $10 vs $50 an hour, it's called a progressive tax system. the biggest problem is the 40% in this country who don't pay any taxes thru loopholes called excemptions.
I assume folks are thinking about doing things fair and some may be thinking about how to get more of their money. Here's something to consider since our market works off of supply and demand. If everyone takes home more money, prices will go up since demand goes up leaving everyone with the same buying power. Unless of course you don't buy anything that most folks like or want.
I heard alot about the flat tax rate and like this idea. To be sure I understand how that would affect me, I decided to crunch some numbers. 10% flat tax rate would be nice, but that is not what the rate would be. In order for the govt to take in as much money as they do now, the tax rate would be roughly 28% for everyone. The catch is the top earners (above $1 million) per year represent roughly 1% of the population, but pay more than 25% of the total income taxes in the US. To make up the difference, those of us making less than 82K would see out tax go up if they went to a flat tax.