We’re Ignorant Idiots! Please Tell Us Why A Flat Tax Is Not Fair.
Fight Inequality Forever
Can someone please give us a rational argument why implementing a Flat Tax system in America is not fair? We don’t know if we can continue posting without thoroughly understanding this issue first. From a percentage basis, each person pays an equal amount of their income towards taxes, and from an absolute basis, richer people pay more!
Why don’t we just start taxing people according to height? The shorter you are, the more you have to pay! Brilliant idea, thanks. Here’s a commentary from Money Bluebook that really got me thinking about the word “comrade” and the phrase “melt your pots for bullets.”
“Those of you rich folks in the top 35% tax bracket ($373,000 and higher) need to stop whining. You don’t get to whine. I hope this administration taxes the beejesus out of you all…it’s time you paid your fair share and get with the program. It’s only fair the wealthy pay more out of their millions and billions of dollars to subsidize the rest of us who need it the most. We are struggling in this recession and it’s time to fix the problem – by taxing the rich!”
Gee whiz, last I checked, we live in America not North Korea. Why people believe it’s fair to tax one class of citizen a higher percentage than another confuses us. Is this not a pure form of discrimination? Fine, let’s agree that anybody below the poverty line of $25,000 for a family of four ($10,000 for a single person) are exempt from all income taxation.
Here’s a reasonable 15% Flat Tax Example:
“Poor” Man Income: $50,000 / year.
“Rich” Man Income: $1,000,000 / year.
How much does the poor and rich man pay as a percentage of their income? 15% each = equality!
How much tax does the poor man pay in absolute dollars? $7,500.
How much tax does the rich man pay in absolute dollars? $ 150,000
———-> The rich man earns 20X more than the poor man, but also pays 20X more than poor man in taxes! Equality!
Let’s put a twist to this example. Let’s say the rich man is a 50 year old ER doctor who saves lives every single day. He spent 15 years after high school studying, and $300,000 in tuition to become a doctor. Is it right to reward this doctor who studied harder than most of the population with a higher tax rate just because he makes $1 million a year? One could argue this doctor deserves a tax holiday, or should spend regressively less on his taxes. But then, the honorable $50,000/yr school teacher says she’s helping people too, and should pay less taxes as well. It gets complicated, but not with a flat tax!
CONCLUSION
Should we tax everybody who makes more than us an even greater amount than we are taxed to help subsidize our own living? Should I buy the domain name: “Financial Socialist Samurai’s of America?” We are craving for rational reasons from the personal finance community as to why the flat tax is not fair. Everybody understands racism and bigotry is bad. Why then do we accept discriminating against income levels?
Mathematically, the flat tax makes perfect sense and expunges words such as “should, fair, subsidize” from the tax argument. What the government has is a serious spending problem, and Obama needs to hire Financial Samurai as an economic advisor. The first thing we’ll tell him is the mother of all personal finance advice: spend less than you earn! We have a monster budget deficit due to reckless spending and this must stop. The second thing we’ll tell Obama is: discrimination is illegal! Damn, maybe we shouldn’t have revealed the secrets, for now it’ll be hard to make millions from the government.
Readers, give it to us. Tell us we’re stupid, insensitive, whatever you like, but please back it up with your thoughts as to why. We’ve always accepted our taxes at whatever income level we grew with. Believe it or not, we’re apolitical. We’re just middle class citizens who believe in equality and fiscal prudence.
Related Post:
“Do Higher Taxes Lead To Socialism In America”
“2010 Federal Income Tax Brackets (Estimated)” over at our friends at Bargaineering
“Obama’s Universal Healthcare Proposal – Different Viewpoints For A Better Understanding”
Keigju,
Financial Samurai – “Slicing Through Money’s Mysteries”
Follow Us On Twitter @FinancialSamurai and subscribe to our RSS feed if you like the post!
PS: Congrats Mr. President for winning the Nobel Peace Prize! Go USA.
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Under our current Tax system there is no doubt the Govt. is practicing discrimination. Our constitution is supposed to protect us from that. “All Men Are Created Equal” not All Men are Created Equal except in the case that they earn more money than their neighbors. I don’t believe it is my responsibility to support my neighbors kids nor theirs to support mine. Nor for a single person to have to pay more just because they are single. Nor a divorced person who is supporting kids still to have to pay more because they are divorced (single). Heavily taxing corporations is an indirect tax on individuals since the cost is just passed on in the price of their products. A flat tax on EVERYONE with no minimum income, deductions, loopholes, nothing, is not only the only fair way of doing it and also would dramatically reduct the cost of administering the system. Get the Govt. out of the way and the economy will thrive and people who are willing to work hard not just go to work to collect a paycheck will prosper. This is supposed to be the land of opportunity not entitlement.
However, without other changes to the system a flat tax will not fix the broken mess we call our Govt. To start, a balanced budget amendment to the constitution would prevent the people in our Govt. from overspending to buy votes. Additionally, term limits to prevent these people to become career political elitists with no sense of reality. A complete ban on lobbyist and an outright ban on any political contributions from ANYONE to ANY candidate would stop the buying of favors. Every candidate should receive the same FLAT amount from the Govt. for their political campaign. That would show the voter how they manage money and also allow a broader field of candidates since you would not have to have big money backing to run for office. Once you serve your one or 2 terms max, you go back to your former life and work until you collect the same social security and Medicare benefits as the rest of the population. All pretty fair or “Equitable” to me.
Additionally, the levy of property tax is equally against the founding principles of our country. How can anyone justify the Govt. being allowed to step in and take property YOU worked and paid for if you don’t pay taxes. You NEVER own your property, the Govt. owns it and charges you to use it and even more for the right to spend your money to develop it. Then, when you die, the Govt. takes another big chunk of what you left behind, and were by the way already taxed on. Is this what our founding fathers envisioned? The Revolutionary War was fought for much less.
How can anyone think the current system is fair. The United States was founded on the principal of Democratic Capitalism. It is what made us the most prosperous nation ever known. Socialism has caused many world leading nations of past to loose their dominant position and is doing the same to us. The Tax system is one of the root causes.
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admin Reply:
February 6th, 2010 at 11:10 pm
Ed – Bravo! Well said and I appreciate your thoughts! I never thought about the ridiculousness of property taxes and the gov’t taking away your property if you don’t pay it. What a shame. I look at my property bill, and there are like 10 things some of the taxes go to pay towards, which I don’t use. Hmmm.
The only thing I disagree with you on is taxing people below the poverty line, even if that line was created by the gov’t. I think they’ve got it hard enough already no?
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Your version of the ‘poor man’ is … pardon the pun… inflated.
Family of Poverty level if below…
1 $ 903
2 1,215
3 1,526
4 1,838
A ‘poor’ single person in the USA earns no more than $10.800 a year if they’re single. 15% of that is $1,620. That leaves $9,180… or $765 a month to pay for all their expenses.
A ‘poor’ family of four would end up with no more than $22,056 before the ‘fair tax’. Remove 15% from that tally and you end up with $3308 less. $18,748 annually or $1562 a month to cover all their expenses.
Keep in mind these are the absolute top ‘poor’ (aka ‘Poverty’) earners. The 98+% of them who don’t even attain this level would earn even less. Right now that amounts to 40 million Americans.
Now let’s throw a guy like me into the equation. I’ve been fortunate enough to be in the six figure income level for the last five years. I went to excellent schools, got a top notch education at two private schools, and earned two graduate degrees that cost me almost nothing due to scholarships. I’m a genuine winner in this system and yes, I have earned it.
I’m also fortunate enough to have no addictions, no medical conditions, and a tightwad tendency that is more than likely genetic. My family of four has comfortably lived in the confines of a $30,000 to $40,000 annual income without wanting for more. I also graduated college with no debt and was given supplements by my own family when I was first getting established. Though I never used that money, it did enable me to qualify for a home which I only paid a small fraction of during my first few years in the real world. I rented out the two other bedrooms and subsisted on $3 a day in meal expenses. So I’m definitely a frugal fellow.
But on the flip side I also got a free ride through college, a new car, and a healthy stipend during my college years. I had an easy life before pursuing the more challenging life… and when it came time to be an entrepreneur I had a lot of support I could depend on.
So have I earned it? Perhaps… perhaps not. I went through other hardships in life and only God can eventually make that determination.
Have I had a ‘fair’ opportunity? No. I would consider my life’s journey to be far more than fair as far as education and income are concerned. I was a mediocre high school student. Only SAT scores and my parent’s ability to pay full tuition got me into a top tier school. I earned my way after that but my entire teenage years were mediocre as far as academics were concerned. I also received a wonderful income boost after college as well that made debt a non-issue.
If a wealthy upper-middle class suburban kid like me benefits from the current system, which already taxed my parents about half their gross income, what of the ‘poor’ folks when yours truly has his net income boosted by the mid-five figures. On a ‘FAIR TAX’ platform aren’t they and the folks living paycheck to paycheck going to pay more?
Have they receive a ‘fair’ education compared with me? How about their kids?
Did they have access to the same quality of teachers? The same private schools? The same supplements to get them through the challenging times in life?
How about the same level of health? The same sleepaway camps that gave me thousands of hours in athletic and extracurricular activities? The same opportunity to pursue drama, music, finance, history, economics, and all the self-guided subjects I pursued in my childhood simply by ‘buying’ whatever I wanted?
I had all these things that those 40+ million didn’t for one simple reason. Money. Money gave my parents the means to offer me opportunity. If I had been one of the 40 million instead of one of the 1%, none of that would have happened.
There are elements of the ‘FAIR TAX’ I like. Paying the same percentage for big ticket items. Adjusting the percentage so that we can have a balanced budget and a pay as you go system (okay, I can dream here). Destroying the current tax system for one that is simple and pursues the idea of fairness. I like all of those things except for one little thing between the lines…
People cheat… and as a well established member of the wealthy, I can tell you unequivocally that the wealthy cheat more than anyone else.
Disagree? Consider the tax code… and then consider this..
You want me to pay for the Mercedes? Screw that. I’ll get a dealer’s license which will end up costing far less than the taxes on one luxury car under a ‘FAIR TAX’ system. The title will never be in my name and my dealer tax will cost about $20. Not bad, eh.
You want me to pay for the addition on my home? Screw that. I’ll pay the contractor in cash.
That goes double for the food that I buy. Why the hell should I pay an extra twenty percent on my produce when the farmer a few miles from here will give me 20% more for free?
Come to think of it… I’m going to just start buying home related items at garage sales, friends houses, and barter for the rest. Hell, I’m saving 20%+ just off the top and I’m not even poor. I’m sure the ones who barely scrape by will find other new and exciting ways to avoid paying their fair share. Let’s face it. 20% of your pennies saved equal 20% of your pennies earned. Not to mention that the seller of all these wares will also keep an extra 20%.
We can do it either through one big ‘easy to avoid’ FAIR tax… or develop dozens of smaller taxes that largely reduce the incentive to be a compulsive tax avoider. I agree the tax system sucks. But anointing a fair tax will only benefit the financially parsimonious. Those who can pinch the most nickels are those that simply have the most nickels.
But better yet, I can help out other American citizens by simply paying a greater part of their burden so that they can more easily make ends meet and pursue a better life.
After all, it’s the American citizen (and foreign debtholder) who has enabled me to enjoy this great life. The teachers, firefighters, soldiers, musicians, artists, college professors, journalists, road pavers, ditch diggers, day care folks, and millions of other professionals may not make as much money as this auctioneer.
But they gave my father freedom from the tyrants of Germany and Russia… and a better life.
They gave my mother a college degree at a time when women weren’t supposed to be educated in that way.
They gave me, a completely hopeless kid with learning disabilities, the opportunity to become educated without having to worry about so much ‘competition’ when it came time for college.
They carried the burdens that gave me an easy life when it came to the $ sign. I may not be willing to donate directly to their cause voluntarily. I am a stingy bastard overall who enjoys working the system. But if you create taxes that are simple, small, and several, chances are I’ll be too focused on my family and my business to cheat my fellow citizens out of the opportunities they deserve.
Think about it… thanks for your inspirational write-up and I wish you all the best…
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Thats a good post!!
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Flat tax systems do more than just apply one flat rate to everyone, they eliminate deductions, many exemptions, and tax credits. So, instead of a system like what we have now that taxes disposable income, you’re taxing everything. Tell me how its fair that the poor should have to pay taxes on the money they need for food and housing while the rich get a rate cut. Also, flat tax systems don’t tax investment income, so for many rich people this is cutting out a sizable chunk of their income….helping them out even more while the middle class carry the burden for them.
No, our current tax system isn’t perfect, but the flat tax is a carefully marketed and packaged deal for the rich. They make it sound very fair and simple to get you on board, while they get a tax break.
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admin Reply:
May 29th, 2010 at 3:37 pm
The “rich” are the ones with the most deductions, so how does that help them if deductions are removed?
What money the poor need for food and housing money are you talking about?
Let’s keep the investment income flat tax of 15 or 20%. That’s fine too.
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