countingdays

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So, why aren't we implementing the Flat/Fair tax?
Money and Power.
Rich people and businesses like all the loopholes they've paid to have inserted in the tax code.
Politicians like the power they gain by being able to give their donors special tax treatment.
 

pgg

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So, why aren't we implementing the Flat/Fair tax?
Because compared to what we have now, it's a very regressive tax that would effectively raise tax rates on the poor (who now pay NO federal income tax) and lower tax rates on the rich.

There is no way - NO WAY - to get a tax plan passed when it can be so easily and accurately summed up as: raise taxes on the poor, lower taxes on high earners (but not necessarily the "rich" depending on how capital gains are treated).

It's a dead idea.


The whole thing is complicated by another issue that's hard to measure and quantify - poor people still pay other taxes. Sales tax, gasoline tax, property tax (even if they're renters it's factored into their rent), payroll taxes, etc. As a % of their income those those taxes are higher compared to wealthier people, who may spend a smaller fraction of their money on those things. (Eg, a person who earns $200K doesn't drive 10x as much and pay 10x as much gasoline tax as a person who earns $20K.)
 

countingdays

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Because compared to what we have now, it's a very regressive tax that would effectively raise tax rates on the poor (who now pay NO federal income tax) and lower tax rates on the rich.

There is no way - NO WAY - to get a tax plan passed when it can be so easily and accurately summed up as: raise taxes on the poor, lower taxes on high earners (but not necessarily the "rich" depending on how capital gains are treated).

It's a dead idea.


The whole thing is complicated by another issue that's hard to measure and quantify - poor people still pay other taxes. Sales tax, gasoline tax, property tax (even if they're renters it's factored into their rent), payroll taxes, etc. As a % of their income those those taxes are higher compared to wealthier people, who may spend a smaller fraction of their money on those things. (Eg, a person who earns $200K doesn't drive 10x as much and pay 10x as much gasoline tax as a person who earns $20K.)
That isn't true. The fair tax doesn't increase taxes on the poor. Their rate is zero or less than zero depending on which version we are talking about. Plus, the regressive payroll taxes are unnecessary with a fairtax system, so lower income people benefit further when social security is funded by a progressive consumption tax.
 
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pgg

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That isn't true. The fair tax doesn't increase taxes on the poor. Their rate is less than zero
But it's already less than zero. There's already a list of refundable tax credits.

A flat tax with an exemption of $20K or $50K will either be zero or more than zero if the poor person earns more than $20K or $50K.

The "Fair Tax" at least one form of which proposes a "prebate" is an interesting idea but I'm not really convinced that it's any different than what we've got now, which is a confusing pile of refundable tax credits including child tax credit, earned income credit, making work pay credit, and a handful of other credits which actually result in people collecting money from the government. If we got rid of all that crap then sure, a prebate would be simpler. But what's the difference between giving someone a cash handout and calling it a prebate vs calling it an earned income credit?


For the record, I favor a flat tax with an exemption of the first $X of income. I just can't see a way to get there, because ultimately you can't get around the FACT that a 20% flat tax is a huge tax cut for high income earners who have 39.6% marginal rates ... indeed, it's a tax cut for anyone earning over $100K. (Total fed income tax owed on $100K for 2013 is $21,293.) For this to be revenue neutral or positive, the very large number of people earning under $100K will have to pay more.

You can't spin that as anything other than a tax cut for high earners and a tax hike for low earners, because that's what it is. Whether or not that's "fair" or a good idea is another issue, but it is what it is, and it's unsellable to the voting public and the people they elect.
 

countingdays

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But it's already less than zero. There's already a list of refundable tax credits.

A flat tax with an exemption of $20K or $50K will either be zero or more than zero if the poor person earns more than $20K or $50K.

The "Fair Tax" at least one form of which proposes a "prebate" is an interesting idea but I'm not really convinced that it's any different than what we've got now, which is a confusing pile of refundable tax credits including child tax credit, earned income credit, making work pay credit, and a handful of other credits which actually result in people collecting money from the government. If we got rid of all that crap then sure, a prebate would be simpler. But what's the difference between giving someone a cash handout and calling it a prebate vs calling it an earned income credit?


For the record, I favor a flat tax with an exemption of the first $X of income. I just can't see a way to get there, because ultimately you can't get around the FACT that a 20% flat tax is a huge tax cut for high income earners who have 39.6% marginal rates ... indeed, it's a tax cut for anyone earning over $100K. (Total fed income tax owed on $100K for 2013 is $21,293.) For this to be revenue neutral or positive, the very large number of people earning under $100K will have to pay more.

You can't spin that as anything other than a tax cut for high earners and a tax hike for low earners, because that's what it is. Whether or not that's "fair" or a good idea is another issue, but it is what it is, and it's unsellable to the voting public and the people they elect.
The REAL rich who get their income as capital gains, stock options, etc. would get a tax increase.
 

pgg

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The REAL rich who get their income as capital gains, stock options, etc. would get a tax increase.
Would they? Long term capital gains rate is now 20%. A 20% flat tax on everything would be neutral there, or is there some other factor here?
 

countingdays

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Would they? Long term capital gains rate is now 20%. A 20% flat tax on everything would be neutral there, or is there some other factor here?
Well, the fair tax is consumption based so they'd pay it every year on whatever they spend vs not paying anything in the current system if the investments sold don't show gains or the gains are paired with loses, right? Taxing people who haven't made any money kinda sucks though even if they're very wealthy.

I was thinking more the 15% capital gains vs the 23% fair tax, but the very rich wouldn't be in the 15% bracket.
 

chocomorsel

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I don't remember the actual numbers on it, but a flat tax of something like 17-20% would provide more tax revenue to the government than our current system does. 30-35% for everyone would actually be more than the Democrats could find a way to legitimately spend. You probably don't want a rate that high. Even with 25 ish % you'd still make the debt go bye bye in not too long.
Awesome. Sign me up. Why the hell haven't we done this yet?
Lemme guess, lemme guess, the rich people buy out the politicians to keep their tax burden low. Just a guess. Rich people do rule the world, let's face it.
 

VA Hopeful Dr

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But it's already less than zero. There's already a list of refundable tax credits.

A flat tax with an exemption of $20K or $50K will either be zero or more than zero if the poor person earns more than $20K or $50K.

The "Fair Tax" at least one form of which proposes a "prebate" is an interesting idea but I'm not really convinced that it's any different than what we've got now, which is a confusing pile of refundable tax credits including child tax credit, earned income credit, making work pay credit, and a handful of other credits which actually result in people collecting money from the government. If we got rid of all that crap then sure, a prebate would be simpler. But what's the difference between giving someone a cash handout and calling it a prebate vs calling it an earned income credit?


For the record, I favor a flat tax with an exemption of the first $X of income. I just can't see a way to get there, because ultimately you can't get around the FACT that a 20% flat tax is a huge tax cut for high income earners who have 39.6% marginal rates ... indeed, it's a tax cut for anyone earning over $100K. (Total fed income tax owed on $100K for 2013 is $21,293.) For this to be revenue neutral or positive, the very large number of people earning under $100K will have to pay more.

You can't spin that as anything other than a tax cut for high earners and a tax hike for low earners, because that's what it is. Whether or not that's "fair" or a good idea is another issue, but it is what it is, and it's unsellable to the voting public and the people they elect.
I think the idea being, as we've seen from the 2012 election, that many high earners use the myriad of loopholes so that their effective taxes rates are in the teens somewhere. For example, wasn't a big deal made of Romney's overall tax rate being like 15%? A flat tax of 20% would mean he paid much more than he currently does (or did, I guess).
 

pgg

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Awesome. Sign me up. Why the hell haven't we done this yet?
Lemme guess, lemme guess, the rich people buy out the politicians to keep their tax burden low. Just a guess. Rich people do rule the world, let's face it.
Those rich people you love to hate would loooooooove a flat tax of 17%. That's less than their capital gains tax rate now, and way less than the nearly-40% federal income tax rate for high earners.
 

pgg

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I think the idea being, as we've seen from the 2012 election, that many high earners use the myriad of loopholes so that their effective taxes rates are in the teens somewhere. For example, wasn't a big deal made of Romney's overall tax rate being like 15%? A flat tax of 20% would mean he paid much more than he currently does (or did, I guess).
Romney made all his money via investments, and was only paying the 15% capital gains tax on that. The capital gains tax has been raised to 20% since then (except for low earners), and there's a 3.8% medicare tax added to that now. So a flat tax of 20% would cut Richie Rich's capital gains taxes now too.
 

Mad Jack

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I'm not sure where you're getting a minimum of 30. Most people start college at ~18. Add 4 for med school, and 4 for an anesthesiology residency, and boom, you're 26.]
Wut?

I'd love to see what magical medical school they attended in the United States that takes people right out of high school. 18+4 years undergrad+4 years medical school+4 years residency=30, minimum, unless you are one of the -RARE- few who get into a 6 year BS/MD program, in which case, you're 28.

I also don't get how you assume someone can earn 400k for 40 years if they are graduating at 30. You'd have to somehow convince a practice to hire you on at 400k a year, and then maintain an extremely high level of productivity until you were 70 years old. I don't think I'd be wanting to pump out 65+ hour weeks in the OR at 70 years of age. And this all neglects the uncertainty inherent in the future of anesthesia pay, which seems very likely to take a dive in the next 10 years (probably way sooner!), and shows virtually no sign of ever increasing.

I'm not saying it's all doom and gloom, but your numbers are painfully unrealistic.
 

Mman

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Would they? Long term capital gains rate is now 20%. A 20% flat tax on everything would be neutral there, or is there some other factor here?
The super rich have insanely low effective rates. Making Warren Buffet pay 20% would mean he pays millions of dollars a year extra in taxes. They shield their income from taxes in various ways so while their marginal rate is high, most of their income isn't subjected to it.

The way a flat tax works is by removing exemptions and credits and all the like.



On a side note, I hate it when people refer to payroll taxes as impacting employees, particularly low income employees. They don't. SS and Medicare taxes are paying for benefits that a person presumably eventually receives. It's functionally equivalent to retirement savings. Unemployment and other such things paid by the employer don't hurt the employee because if they didn't exist, their paycheck wouldn't go up since in a free market the employer will presumably be paying the minimum to find an employee willing to do the job.
 

countingdays

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It's regressive. The higher your income the lower your paytoll tax %. It's part of maintaing the lie that this is a retirement fund and not a welfare program.
 

Mman

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It's regressive. The higher your income the lower your paytoll tax %. It's part of maintaing the lie that this is a retirement fund and not a welfare program.
when you make enough money to pay a lower percentage on social security, you obtain the same relatively smaller benefit. It isn't regressive unless you believe social security won't exist in the end. But the people that argue it is regressive are the same ones that think social security isn't going away.