Me and a good friend from work were talking about taxes and tax reform. I know, I know, I've typically defended the progressive tax structure. However, the more I study (and the more I find myself paying) the more I'm finding myself agree with those who see tax reform as a major issue in the United States. The system we have now is too complicated, too corrupt, and is oppressive. We need serious change regarding our tax system, no doubt about it. My friend is a big supporter of the Fair Tax. I've been studying the Flat Tax (Dick Armey's version from Freedomworks) and personally I like it. My friend swears by the Fair Tax but I'll be honest, I don't understand the Fair Tax as well as he does.
I'm going to bat to support the notion of a Flat Tax on this thread. Can anyone here help me understand the Fair Tax?
strangly, I have always leaned more to a progressive system.... but i do think like you it needs reform.
I like both flat and fair tax too, and understand flat better....
I do think you have some serious blocks to moving this direction that include deductions... there is an arguemnt that charities will take a huge hit if you dont have that as a deduction.
also, you still have to deal with poor people. how do you make the really poor pay a tax like this?
I do think our current system leaves all of us with no clue how much we pay in taxes.
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I have always been a huge supporter of an across the board flat tax, however I can see advantages to a semi-progressive one in the sense that I would be in favor of the first x number of dollars being exempt from taxation (regardless of income!). For instance, imagine a flat federal tax of 18% with the first 30 thousand being tax free and 18% on every dollar after that -whether the person is making 30 thousand or 2 billion a year, they would all get the first 30 grand free. No deductions based on behavior or life situations such as child tax credits, first time homeowner, putting insulation in the walls, etc etc etc etc. The simplicity would be overwhelming, along with a dramatic decrease in administration costs for the IRS (and thus the government), as well as businesses.
Last edited by RandyWayne; 03-12-2010 at 10:10 AM.
strangly, I have always leaned more to a progressive system.... but i do think like you it needs reform.
I like both flat and fair tax too, and understand flat better....
I do think you have some serious blocks to moving this direction that include deductions... there is an arguemnt that charities will take a huge hit if you dont have that as a deduction.
Here's an interesting article from the Heritage Foundation regarding the Flat Tax and charitable giving:
[indent]Introduction
Congress passed the income tax deduction for charitable contributions in 1917, only four years after ratification of the Sixteenth Amendment, which established the federal income tax. The purpose of the deduction then, as today, was to promote private donations to nonprofit institutions. Through the ups and downs of federal income tax rates, the deduction for charitable contributions has remained constant and unquestioned -- until now.
With talk of overhauling the federal income tax in favor of a simple, consumption-based flat tax also has come talk of eliminating the charitable contribution deduction. This has raised considerable controversy. Many proponents of a flat income tax call for retaining the charitable deduction, but there are substantial reasons to eliminate the charitable deduction as part of any flat tax proposal. Contrary to popular opinion, the data suggest that giving to charities probably would increase with passage of a flat tax with no charitable deduction. The reason: The flat tax increases economic growth, personal income, savings, and net wealth, all of which lead to higher levels of giving.
US Congressman Dick Armey has advocated a flat tax on all income in excess of an amount shielded by household type and size. For example, draft legislation proposed by Armey would allow married couples filing jointly to deduct $26,200, unmarried heads of household to deduct $17,200, and single adults, $13,100. $5,300 would be deducted for each dependent. A household would pay tax at a flat rate of 17% on the excess. Businesses would pay a flat 17% rate on all profits. Others have put forth similar proposals with various rates and deductions. Armey defined income to include only salary, wages, and pensions; capital gains and all other sources of wealth appreciation were excluded from taxation under his proposal.[54]
While campaigning for the American presidency in 1996 and 2000, Steve Forbes called for replacing the income tax - which would have included a repeal of the 16th Amendment - by a tax at the flat rate of 17% of consumption, defined as income minus savings, in excess of an amount determined by the type and size of the household.[citation needed] For example, the exempt amount for a family of four would be $42,000 per year.
Modified flat taxes have been proposed which would allow deductions for a very few items, while still eliminating the vast majority of existing deductions. Charitable deductions and home mortgage interest are the most discussed exceptions, as these are popular with voters and often used.
US Congressman Dick Armey has advocated a flat tax on all income in excess of an amount shielded by household type and size. For example, draft legislation proposed by Armey would allow married couples filing jointly to deduct $26,200, unmarried heads of household to deduct $17,200, and single adults, $13,100. $5,300 would be deducted for each dependent. A household would pay tax at a flat rate of 17% on the excess. Businesses would pay a flat 17% rate on all profits. Others have put forth similar proposals with various rates and deductions. Armey defined income to include only salary, wages, and pensions; capital gains and all other sources of wealth appreciation were excluded from taxation under his proposal.[54]
While campaigning for the American presidency in 1996 and 2000, Steve Forbes called for replacing the income tax - which would have included a repeal of the 16th Amendment - by a tax at the flat rate of 17% of consumption, defined as income minus savings, in excess of an amount determined by the type and size of the household.[citation needed] For example, the exempt amount for a family of four would be $42,000 per year.
Modified flat taxes have been proposed which would allow deductions for a very few items, while still eliminating the vast majority of existing deductions. Charitable deductions and home mortgage interest are the most discussed exceptions, as these are popular with voters and often used.
It looks like without having read any details of plans being proposed by others, my idea is very similar -with the exception that Dick Armey allows for more exemptions based on number of children. I would rather not differentiate. Even married couples would only have the option of filing jointly or separate deciding if they want to combine their personal exemptions or not -whatever works out better for them.
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