# Debating the Pros and Cons of a Flat Tax

Flat tax... hmmm... sounds good. But graduated tax... hmmm... a little more complicated. Ok, then, let's take a peak at a couple of examples that already exist: sales tax (as the flat rate example) and income tax (as the graduated example). Let's see what's right and what's wrong.

The sales tax in your state is 10%. Your "taxable amount" is the total of all that you purchase. You go to the store and by a widget for \$20. You pay 10%, or \$2 tax. The person behind you buys 2 widgets, \$40 total, pays \$4 in tax. The last person buys a candy bar for a \$1, and uses a dime to pay the tax. Nobody likes the 10% sales tax, but nobody complains, they all paid their fair share. This is how flat rate tax works, everyone pays the same rate.

If sales tax were like income tax, first, there would be a deduction, say, \$10, deducted from your total before taxes are calcuated, to determine your "taxable amount". For your \$20 purchase, your taxable amount would be \$10, and your sales tax would be \$1. The person behind you buys 2 widgets, has a taxable amount of \$30, but pays \$6 in taxes, or 20% of his taxable amount. The last person buys a candy bar for a \$1, and with the \$10 deduction, pays no tax at all. The last person, obviously, doesn't complain. But the last person walks away peeved. This is how graduated tax works, and as you can see, the more you make, the higher you are taxed. Very unfair.

In the current tax rate system, everyone is penalized for increasing income. And if you happen to be lucky enough to get a raise that just crosses one of the thresholds, you would notice a decrease in income after taxes! So, the more you make, the less you make?

Looking at the tax rate table for 2012 (http://www.irs.gov/pub/irs-pdf/i1040tt.pdf), skip to "Schedule X". That's what I'm talking about.

Now let's put the 2 together and look at a "linear tax rate". Like the flat tax rate, the percentage is the same across the board, regardless of what your taxable income (with respect the the tax rates shown, I'd ballpark a rate of about 20%). And like the graduated tax rate, there would be a deduction, somewhat similar to the current deductions (another topic to be discussed).

What would be wrong with that?

you're are #retarded

I am confused by the comment that "Greg" made "Someone mentioned sales taxation only, and having people keep their money and only pay taxes when they buy something. Unfortunately, a plan like that would cripple the economy and cause government layoffs because of an inability to pay workers. Unless, of course, your intention is to pay more in taxes than the item you're buying."

How can that be? I want to be the one deciding where my 23% goes. Everyone, 100% of all visitors, citizens, even Congress would pay sales taxes.

As I undertand it, the Fair Tax seems more reasonable to me.

- The Fair Tax would be collected by each State as the sales taxes are now. The states would take their funds for Federal programs off the top and and send the rest to the Fed Govt. States would have more power.

- The IRS would be abolished and yes, government workers and lobbyists would lose their jobs. But companies would blossom because they could fire their tax lawyers and tax accountants. I am sure there will be enough jobs in the private sector for those who want to work.

- Rich people who love new expensive things would naturally pay more tax

- Everyone, rich,poor, illegals, drug dealers corporations, businesses, visitors would pay the same tax on everything - no exceptions, no rules

- No one in the government would know how much money you made - not your income, gifts, inheritance, gambling, etc TRUE FREEDOM -- It is none of the government's business.

- If the people are doing well, the government gets more money.

- If the people are hurting, so would the government spendthrifts - what an incentive

- You can keep all the money you get. NO TAXES except sales tax

- If you lose your job, you can spend your prebate (\$220/mo/person) on the tax for food and buy everything else used - no tax on used items - tax was already paid on it when it was new.

- we are a nation of consumers, How could this not make enough money for the government!

- You will be in total control of your own money and which charity or organization You want to support. no judgment by the government on whether a group is worthy of tax-exempt status, You decide who gets your money.

At first I was very skeptical, but the more I have researched this, the more I think it is right for America. Questions? Go to FairTax.org. They have a great FAQ section.

I welcome comments. We can figure this out, Not only rely on Congress to do this. What a mess!

The authors purposefully conflated the Flat tax with the Fair Tax and did a great disservice to their readers. They are vastly different and one is ridiculous while the other (the fair tax) has merit, although anything we do to simplify our outrageous current system would be extremely controversial, despite its virtues and the real necessity for change.

wow so boring.... does everything have to be reflected back on the president #stupid <3<3<3

I love how one side believes a Flat Tax is regressive? what ever the magic number is here is the simple truth. for arguments sake let's use 10% for simple math. A man who makes 10\$ pays 1 makes 100\$ pays 10,1000\$ pays 100,makes 1 Million pays 100 thousand! So a man who makes more money already places more dollars in the pot than a man who makes ten. How is it that someone who earns 1 Million dollars uses more highways, police protection govt essential services than the poor who made 10\$ ? He/She doesn't and we aren't talking about his employer or his business who pays separate taxes on profit.

Now we have all been brainwashed into thinking that somehow taxing the rich a high percentage is the moral thing to do. Some in my family believe this and back it with their religion. But as I recall my Bible School, God charged us with 10% tithe....he never said 2% for the poor and 25% for the rich. But ok let's say you aren't religious let's say you believe its the moral thing to do...and from my observation it's the (left,democrats,progressives,liberal) whatever name you prefer,call for a progressive tax. usually based on some morality stand. Well aren't these the same folks who decry the right trying to push their morality down their throats?. So why is it immoral unfair to ask the poor to pay something at the federal level assuming income.

But ok lets get over this I could even handle a three tiered tax rate . But here is the deal no exemptions no deductions . And all income is treated the same you dig a ditch ,you win it in the lottery or casino,Aunt Millie leaves it to you,earn it on the job or thru business.

How is this unfair? You don't think retirees own stock? receive dividends? but somehow only the rich get this benefit so it should be taxed more. Oh you inherited it that's not fair it should be taxed at a higher rate. you didn't work for it it should be taxed higher?

The only way I can interpret anyone that backs this is,you were more fortunate than someone else by chance or effort on your part or your relatives. So I want to take some of yours and give it to someone else?

Taxes as Morality should only be in that No one should be taxed less or greater on their money.

Morality as in reach down and help your neighbor and brother out? Sure spend a portion of my taxes for that.I want to help the down out and unfortunate. But to take a higher percentage from one man by force to give to another?

If either side were truly interested in making taxes fair they would develop a flat tax. It is transparent easy to calculate would eliminate tons of govt overhead because it would be easier to audit and enforce. A flat tax done correctly does not hurt the poor it simply asks them to pay a fair to be a citizen which sets a good example and gives them a stake. Ultimately thru assistance programs they will get that money back.

But Do politicians on either want a more transparent system? Do tax attorneys/accountants IRS employees want a simpler system

@ Jamie of MN - When you get rid of all the bs of credits, deductions, etc... the "increasing percentages" idea you spoke of is what we have right now. It does start at 10% and grow in increments of 5% and 10%. The income range for each bracket changes depending on what you file as (single, HOH, M-Joint, M-Sep).

It is what is considered a progressive taxation. That's not really what the problem is, though. The problem with our tax system is that each credit and deduction was made in an effort to tinker the tax system to appease all the different parties with grievances. The Tax Code has been tinkered with so much that now we have all these different credits and deductions added into the Tax Code, it's like playing Wheel of Fortune.

Nobody ever just does their taxes, anymore. No matter what "class" of income you have, people are seeing what they can use to either pay less money or gain more in refund. The more money you pay is more money the government wastes. The more money you're refunded is less money the government has to operate with.

This is the major point to flat rate taxation. To get rid of all the additional credits and deductions that were meant to ease the burden of middle class families, but were ended up being used by the rich, as well as everyone else, to lessen their tax responsibility. Those very same tax codes meant to help the middle and lower income families are being used by the rich to increase their savings which end up on offshore banks.

By removing everything extraneous regarding taxation and saying, "Everyone pay 17% of your income" (with a bottom margin, of course. Probably about 20k or less income and you're exempt, but must still file), then we remove all the walls and curtains that unscrupulous people have used to avoid paying their taxes.

As I mentioned in my previous post, many states already have flat rate taxation. So, it's not like it isn't being used already. We just need to put it on a federal level.

I think people tend to forget a lot of things regarding taxes. Without taxation, the government has no revenue to operate. So, to say "how about no taxes" is kind of ridiculous (I'm guessing you meant it to be).

Regarding the Flat Tax. Certainly, it is a different system than we're used to and people are going to gripe about the rich not paying enough. That's always going to happen, though. Rich people may be corporate jackholes, but the majority of them got rich through their own efforts. I, by no means, have any favoritism towards rich people, but I also don't see going after them because they have more money than everyone else.

Fact is, a "fair tax" IS a flat tax. One tax rate for everyone, with no credits, deductions, loopholes, etc. I couldn't care less if it fits on a post card. Personally, I wouldn't write my financial information on a post card and mail it, that's kind of moronic.

I've actually spent the morning crunching numbers, doing excel sheets, and breaking down the numbers on a flat tax. The argument that it gives tax breaks to the rich is fallacious. In fact, initially, the rich have the burden of tax, not the poor or middle class. 36% of the burden, in fact. However, when you start breaking the numbers down into tax brackets and household income percentages, the numbers shake out differently. But, that is ONLY because 50% (split evenly at 25%) of household's have an income of 40k annually or less.

That is why it seems like the lower middle class and poor take the burden of taxation. There are just more of us, period. The least tax burden is on those who make 80 - 100k, followed by 60-80k. But, again, initially (meaning without breaking down the numbers on households and income percentages) the higher tax brackets shoulder the burden of taxation.

Someone mentioned sales taxation only, and having people keep their money and only pay taxes when they buy something. Unfortunately, a plan like that would cripple the economy and cause government layoffs because of an inability to pay workers. Unless, of course, your intention is to pay more in taxes than the item you're buying.

The last point I want to mention is that many of the opponents of the flat tax proposal should know that many states already have flat tax systems. Before dismissing a plan to revitalize the economy while keeping meddling politicians from creating new tax deductions and such, take a look at your state. As well, most of the world has switched or are exploring the switch to a flat tax system.

The advantages outweigh the cons. The choice is simple - Are you going to let this government continue to tinker with a failed system in the same way that caused it to fail? Or are we going to implement a system that has proven to work?

Fair Tax IS Flat Tax. More money in consumers pockets, less financial invasion by government, better economy, more jobs.

17% tax with a reduction of earned income by an amount equal to 150% of the federal poverty level based on your family size. Examples: Family of 4 with an income of \$80k - \$34.6k = \$45,425. \$45425 x .17% is \$7722, an effective tax rate of 9.6%.

Family of 3 with an income of \$250k -28.6k = \$221,400. \$221,400 x .17 = \$37,638, an effective tax rate of 15%.

If you earn less than your 150% poverty level, you pay no tax and get no refund.

I have nothing against the flat tax, problem is a majority of people will still be to ignorant to accept the change. And what politician who is supported by lobbyists want to contribute when their whole agenda is to take hardworking people's money for their greed?

Margaret Thatcher tried to get her cabinet to go for a flat tax (or as she called it, Poll tax) but as we all know was forced out by her own party. More politicians need to have those guts.