For years I've heard various conservatives -- people like Steve Forbes -- advance the notion of a flat tax. The idea is that wages would be taxed at one rate and exemptions would be chucked. So, a person earning $150,000/year and another person earning $15,000 per year would each pay federal tax at the same rate (e.g., 5%).
From my perspective, the problem with such a scheme is that the wealthy derive only a small part of their income from wages. This means that, in essence, the poor and middle class would end up paying a higher percentage overall because the wealthy would have much of their income not subject to the tax.
With all the problems we're having with funding government these days, I have given the idea of a flat tax a second look. In order to make it fair, all income -- regardless of its source -- would be taxed at the same rate. In other words, it wouldn't matter if the source was a job, social security, capital gains or any number of other ways to derive income.
The current tax code with its volumes of exemptions and deductions would be ripped up. In its place, there would be one solitary exemption: $12,000 per person. The first $12,000 in income would be excluded and the rate would apply to everything over that. The $12,000 exclusion would apply if you are a low wage earner OR if you are a multi-million dollar hedge manager. It would be the same across the board.
So, what do you think? Does it sound workable?
From my perspective, the problem with such a scheme is that the wealthy derive only a small part of their income from wages. This means that, in essence, the poor and middle class would end up paying a higher percentage overall because the wealthy would have much of their income not subject to the tax.
With all the problems we're having with funding government these days, I have given the idea of a flat tax a second look. In order to make it fair, all income -- regardless of its source -- would be taxed at the same rate. In other words, it wouldn't matter if the source was a job, social security, capital gains or any number of other ways to derive income.
The current tax code with its volumes of exemptions and deductions would be ripped up. In its place, there would be one solitary exemption: $12,000 per person. The first $12,000 in income would be excluded and the rate would apply to everything over that. The $12,000 exclusion would apply if you are a low wage earner OR if you are a multi-million dollar hedge manager. It would be the same across the board.
So, what do you think? Does it sound workable?
It's better than the other plan.
ReplyDeleteHow workable it would be would depend quite a bit on what the tax percentage would be for income over the limit.
Someone who makes 15,000 a year would be _much_ harder hit by, say, a 10% flat tax than someone who made $150,000.
I don't know enough about economics to know if a system that taxed all sources of income equally would bring in more revenue, though.
Does anyone else know?
If the 10% tax kicked in after the standard $12,000 exemption, the person earning $15,000/yr would end up paying only $300.
ReplyDeletebut 300 dollars to someone only making 15,000 is still a lot of money. A flat tax isn't as fair as they say, because 10% hits the poor harder than the rich; even if the rich guy is paying 100,000 dollars, he still just made 900,000! He may have one less sports car, or whatever. It's easier to absorb. A person making 20,000 a year, 2,000 means a hell of a lot to them.
ReplyDelete... but your system is better, for sure.
ReplyDeleteRealize though that the $300 would be paid out over the period of 1 year or about $25/month. As a poor person myself, I can tell you that, some months, $25 would make a big difference, but we could live with it IF we knew that everyone else was paying in.
ReplyDelete