We’re Ignorant Idiots! Please Tell Us Why A Flat Tax Is Not Fair

Flat Tax Argument

Let’s all move to France! 35 hours a week, pensions, the good life.

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 a site 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 (~$380,000 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!

LET’S STOP DISCRIMINATING AGAINST PEOPLE

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 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.  

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Updated on 2/21/2015: After leaving Corporate America and making little money in 2012 from a lot of money a decade before, and now back to make a decent chunk of change with my online media business, I’ve got to say that my feelings about a flat tax have not changed. A flat tax above a certain poverty level by individual and family count is absolutely the fair and simple way to go to not only collect more tax revenue, but to also simplify the tax filing process.

Regards,

Sam

 

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

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Comments

  1. John says

    47% already avoid Federal Income Taxes. A family of 6 (2 parents/4kids) making 62,000 a year will receive a tax refund equal to or greater than what they paid in taxes throughout the year. When 53% (many of whom are not “Rich”) are paying the Federal Taxes for the other 47%…isn’t the debate about “poor/lower middle class” folks getting the IRS Shaft completely moot?

    • Roy Winston says

      It’s not as if they pay not taxes at all; they pay payroll tax, state tax, sales tax, etc.

      Also, did you know the current income tax for the “richest Americans” is actually historically quite low? Up until the Regan tax cuts in 1986, the income tax rate for the highest bracket was around 70%. And it was at this rate since the 1940’s (it was 90% in the 40’s!). This is based off the ability-to-pay principle and it’s how this country has been running things since the ’20s.

      It’s hysterical to me that people seem to think the richest Americans are only just now getting taxed more. If anything, they are being given a HUGE break, because for 46 years, they were taxed at rates as high as 70%… And guess what? Our economy was never better then.

      I’m an 89 year old WWII vet, and I find the comments here to be DISGRACEFUL. Americans used to be PROUD to pay their fair share. Now, everyone just wants MORE MONEY for themselves. Greed will be the death of this once wondrous country…

      • Mike S. says

        Well Roy, you are all over the board with your comments, so let’s go line by line:

        1) you say they pay other taxes such as payroll, state, etc.
        Answer: #1 technically Social Security and Medicare are not taxes at all, that has always been the Dems argument. We get Social Security back after all, I’m sure at 89 you are no doubt a recipient of SS money getting back perhaps more than you paid in. #3 This is a moot point and red herring argument because the payment of other taxes is irrelevant to the payment of income taxes.
        2) you are correct that the highest tax rate used to be higher. #1 It was lowered by that Democrat Demi God JFK! #2 loopholes made the effective top marginal rate much lower than the advertised 70% or even 90%
        3) You set up a straw man “…the richest Americans are just now getting taxed more” #1 This claim was never made! #2
        4) I actually agree with your last comment, but not for the reasons you stated. The Greed of politicians who feed the Pork Barrel, the Social Safety Hammock and endless giveaways for the lazy will be the death of this Country. As for proud to pay taxes, give me a break will you? Who in the history of the world has ever asked to pay more taxes? Why is a discussion about a flat tax disgraceful? We the People would be Proud to pay a Fair Share. A Fair share being an Equal Percentage or a Flat Tax. That’s Fair, not someone pay 70% and someone else gets a refund of money they never paid!

        • Don says

          1)The payment of other taxes is not moot. How is that even remotely moot? When nearly all taxes except income tax are regressive, it is precisely the point, and absolutely relevant that income taxes are and should be progressive.

          Sales taxes, fees, and all the other forms of taxation, regardless of what they’re called, take a FAR LARGER share of a poor persons income than it does a wealthy persons. How you say that is moot is astounding and absurd.

          2) Yes, Kennedy started the lowering of the marginal rate. But that is almost meaningless. Someone can suggest taxes should be much higher than they are today and still not be suggesting that they should be what they were when Kennedy lowered them. For instance, I would argue that taxes should be much higher, and that it should be a steep increase once you reach massive amounts of income. Maybe the current rates up to 1 mil per year. Above 1 mil is 50%. Maybe above 10 mil is 60%. And above 100 mil is 75%. And if you understand marginal rates, you would understand that that doesn’t mean that the person who makes 100 million pays 75 million in taxes. I suspect you understand that, but just making sure because far too many people don’t. — However, even those rates I suggest are below what even Kennedy lowered them to.

          4) I may be wrong, but I don’t think Roy was suggesting that a discussion about the flat tax is disgraceful. I think he was suggesting that when you say that people who are poor are lazy is disgraceful. When you make statements like “social safety hammock”, it’s disgraceful. When make statements like “endless giveaways for the lazy”, it’s disgraceful.

          And when you misrepresent his words it’s disgraceful. There is a difference between being proud to pay taxes and wanting to pay more taxes. I am proud to pay my taxes. I’m firmly in the middle class, but had to work hard to get there. I need every penny I can get to work my way out of debt from when I wasn’t in the middle class. However, I am PROUD to pay my taxes. And even though I don’t want to pay more taxes, I’m more than willing to pay more taxes to help strive towards that goal of a more perfect union.

          Sadly, it feels like those on the right care nothing about a more perfect union. And only care about demonizing the poor, taking what they can, paying as little as possible. I can’t tell you how often I’ve heard those on the right claim that taxes are taken by force. Or how the IRS should be abolished.

          The Republican cuts to the IRS are absurd, because the cuts themselves are more expensive than they cost. Because the money that was cut was directly taken from areas of the IRS that search out and find income tax evaders and fraud. It blows me away the lack of forethought of the modern right-wing.

          Our infrastructure is disturbingly outdated. And yet the right wants to cut taxes, not fix the infrastructure and somehow spend more on the military despite the fact that we spend more than the next eight nations combined or something like that. Seriously, it’s absurd.

          Anyway, now that I’ve turned what I intended to be a quick paragraph into a rant, I’ll go.

          • JC says

            Conservatives love to avoid talking about what has actually worked and what hasn’t. The decades during which the top tax rates were the highest were our most prosperous and innovative, when the middle class was built, when large portions of this country as we know it today were built through the thoughtful investment of those taxes, and when our economy was nearly as strong as the rest of the world combined. This fantasy that high taxes on the wealthy kills jobs and innovation and reduces the incentive to create new businesses is something that just can’t be defended with facts.

            And what has happened while we’ve been slashing top rates (and regulations) over the past 30+ years? Hmmm, falling wages, higher unemployment, rising poverty, an unstable economy, a crumbling infrastructure, income inequality we haven’t seen since the gilded age, and America losing ground as the world’s economic superpower and builder of the world’s best products. The jury is no longer out. You’re nucking futs if you think trickle-down tax cuts does anything but hurt this country.

  2. says

    The problem is not that we need a flat tax on income, it’s taxing income in general. Typically, those who are richer, intelligently know that income taxes in their tax bracket are higher than capital gains taxes. That is why they decide to generate passive income that is taxed at the lower rates. Those who make 200k income pay more than those who generate 200k passive income from what I understand.

    So the real problem that needs to be solved is education. Let’s teach every one how to legally avoid taxes and vote with our ‘absent’ tax dollars in order to change the tax code.

    (This would be a great #yakchat by the way. I love talking about taxes.)

    • heynow@hey.com says

      Captial gains are lower to account for the fact that the owner of the property has not really experienced a gain. Only inflation. My house rose in value but so did all comparable homes.

  3. State of Reason says

    On the whole, I agree with you. Some version of the flat tax is the way to go. As you pointed out, taxing people who are below the poverty level are barely supporting themselves so there’s no point taxing them. So, I propose one correction to make it more equitable to everyone. Flat tax with a standard deduction that actually represents roughly what it costs just to survive in this country. Let’s say $20k for arguments sake and I’ll stick with your 15% tax rate though I think it would have to be a bit higher than that.
    So:
    Person A makes $20k
    20k-20k=0x15%=0 taxes

    Person B makes $50k
    50k-20k=30kx15%=$4,500 taxes

    Person C makes $100k
    100k-20k=80kx15%=$12,000 taxes

    No deductions for anything that has it’s own value (home, school, etc) but leave deductions for charitable contributions (but not political contributions) because America benefits from a healthy non-profit sector. All income (wages, capital gains, inheritance, etc) taxed the same.

    It’s simple and equitable. Everyone could do their taxes on a 1040EZ. You could probably cut IRS staff and still double enforcement. The reasonable standard deduction is what turns a flat tax into a fair tax.

      • State of Reason says

        HA! No kidding. Unfortunately it would put a lot of tax preparers out of work. I’m sure they’d find something else to do though. The great thing is that you can sell it to conservatives as a flat tax and you can sell it to liberals by pointing out that the poor are paying a far lower effective tax rate. In my previous examples person A pays 0% effective rate, person B has a 9% effective tax rate and person C has a 12% effective tax rate. All while everyone has the same actual rate and gets the same standard deduction. I still think you’d need a rate somewhere in the upper 20 to lower 30% range but that sort of detail can be handled by policy people with far more info at their fingertips and far better math skills than I have.

        Even better, you tax a huge amount of money that’s currently being hidden through all sorts of loopholes and tricks. I think you could probably apply this same system to businesses too and just have everyone on the same system but there may be good reasons I’m not aware of that it wouldn’t work for business.

    • Mountain Man says

      Like Sam, I like your idea, and would have no problem with it, and on first blush most would also agree.

      That is until people start thinking about things and others start talking.

      Current taxes are, that a couple making $40k using standard deduction of $5950 each or $11,900, and basic exemptions of $3,800 each or $7,600= $19,500 in deduction and write offs.

      They currently pay 10% on the first $17,400
      and will pay 15% on the remaining $13,100

      Again, their highest tax rate is 15% the same as your scenario describes.

      The problem is, that the upper income earners are paying tax rates as high as 35%
      AND YET others want them to pay MORE.

      People want double standards (when it benefits them).
      They look at actual or SUPPOSED tax breaks for the rich, and yet refuse to see their own.

      Example, most anti-rich will talk about tax deductions the rich have. They claim the rich hide half of their income. And yet refuse to see their own.

      A family with 2 kids earning $51K (the average income) have 2 standard deductions of $5,950 each, or $11,900 and then 4 personal exemptions of $3800 each, or $15,200 for a total of $27,100.

      Just using the basic deduction and personal exemptions, thats over a 50% write off.

      Now lets look at the rich person who makes $1 million. If he uses the same deductions, $27,100, thats 2.7% of his income.

      The average person who writes off his home mortgage interest, writes off all his interest. The average person buys a house 3 times his income. If the average family income is $51K, the house is $150k.
      Lets look at the rich man who makes $1M.
      If he buys a house 3x his income, thats $3M
      The problem is there is a limit of interest write offs on home mortgages of $1M. So even though the rich man makes 20x as much, he’s limited to a mortgage write off of less than 7x what the average person makes.

      According to IRS stats.
      The top 1% make 20% of the AGI, and yet pay 38% of all the federal income tax.
      The bottom 50% make 12.26% of the AGI and yet pay 2.89% of all the income tax.

      The top 1% pay an average tax rate of23.27%
      The bottom 50% pay an average of 2.99%

      And yet the poor claim the rich don’t pay enough.

      When capital gains tax is discussed, 15% is always mentioned. And the poor or average always claim the rich don’t pay their fair share…though the average or poor NEVER pay a tax higher than 15%
      Also, whats never mentioned is that capital gains earned in less than a years time are taxed as income at current income tax rates (as high as 35%)

      Here’s the real issue. People want what THEY WANT, no matter the cost to someone else.

      The government spends on average of almost $11k per student in public education.
      According to IRS stats, the break off point for the top 25% is $67,280 AGI and they pay an average tax rate of 15.68%.

      If we multiply $67,280 x 15.68% = $10,549.50

      In other words, unless a family is making $67,280 after tax deductions, they aren’t paying enough in taxes to even cover the cost for one of their own childrens education.

      But not everybody has a child in public schools.

      Military spending is $687 BILLION, there are 310 million people in the US.
      We ALL receive equal benefits of military protection in this country.
      That means the cost of military protection for every man woman and child is $2200.

      Simple numbers show that those in the bottom 50% don’t pay enough to pay their share of military protection.

      As a society, we are demanding certain benefits from society. The problem is, the MAJORITY of society is demanding these benefits that they can’t afford for themselves, and so demand, that the minority pay for for being part of that society.

      The majority of society claims they pay too much in taxes, or claim they pay their FAIR SHARE. And yet they demand that society should do more.
      The problem is, this part of society is using a disproportionate amount of government spending, for their own giving.

      • Maggie says

        If the taxes on the rich are so unfair to the rich, then why/how do the rich keep getting richer while the poor are getting poorer?

        For the rich to complain about a system that is totally skewed to their benefit, is ridiculous.

        Look at the facts, not the propaganda.

        • Mountain Man says

          Are you really so obtuse???

          Lets look at facts.
          First fact-There isn’t a money fairy fluttering around, waiving a magic wand and money suddenly appears.

          First comes the work, then comes the money.

          The average person works 40 hours a week.

          I work 50-60 usually, sometimes 72-84, and a few times more. I’ve worked 5 days at 16 hour days. I’ve worked 24+ hour days.

          If I got paid hourly what the average person does, I’d make more because I work more. Thats HOW rich get richer. Or in my case, the average get rich.

          Since the work comes first, then the money.
          I started working at 12 years old, in the 6th grade, with a paper route. I got up at 5:30 in the morning, 6 days a week to deliver papers. I did this for 4 years.

          When I was a sophmore in HS I got a job at a local restaurant, as a busboy. Working that Friday and Saturday nights. I worked that job 2 years.

          Then I got another busboy job my senior year of HS, and worked that 3-4 nights a week.

          After HS I got a job working in a hotdog joint, while going to a community college 35 miles away. I worked that usually 30-40 hours a week WHILE going to school full time. During the summer or breaks I’d load up on hours, usually 50-60 hours a week. The summer after my freshmen year, I got a job at a log home building company. Between hotdogs and log homes, I was working 70 hours a week.

          My parents were divorced after my freshmen year of HS and my dad wasn’t involved in my life. My dad didn’t pay child support, and my mom did the best she could working in factories. Because of that, there was NO money to send me to school, so I PAID my own way to school. That includes tuition, the commute back and forth and books.

          My first job outside of restaurants, was working in a factory. I was still going to school, but finishing up for the most part. I still had 3 months left. I worked 6 days a week 10 hour days and went to school 3 nights a week.

          My education, though nothing great, allowed me to enter a factory with a skill. A skill that allowed me to make a little more than the average person entering a factory.

          Over the next 5 years I worked in a handful of factories and developed my skills further. I also continued to take courses at the community college.
          My last factory job, I was 1 or 54 welders. 1 of 3 with Heliarc experience, and the only one who could weld aluminum and stainless.
          I also had machine shop experience. Which allowed the company to transfer me into the machine shop when that department got backed up.
          Everything was time studied, so every job had a tame frame to be done. In the welding department I was constantly either #1 or #2 for rate. I ALWAYS had the lowest rework.
          Because of my knowledge and skills, I had the position of Master Welder. 5 Master Welders, and I was the youngest by 10 years.

          I left factory work and got into construction. The pay is MUCH BETTER. I have been doing that for 23 years now.

          About 6 years ago, things were slow, where I went back to find a welding job, just to make ends meet. I was hired because of my resume and my interview. NO welding test to see if I could back up my claims.

          After 1 week of working there, the owner wanted to buy my contract out from the temp agency. It would have been an instant $2 an hour raise. I turned it down because I knew work in my construction field was going to break soon, which it did.

          My point is, I was REAL good at my skills when I left factory work for construction. Over the years my skills have increased IMMENSELY. I am well beyond where I was 23 years ago. And I get paid for it.

          Also, my job requirements today are vastly beyond anything I did in factories. The conditions I might have to work in might be 200 ft up in the air, with winds blowing 30-40 mph and temperatures just above zero (without the wind chill). Or I might be working in a steel mill, in the summer, with temps around 120 and having to wear fire retardent clothes over work clothes.

          For all that they pay me a decent hourly wage.

          When one job gets done I might get transfered to another job, while others get laid off, or I’ll get a call from a former employer or I’ll call a former employer, and get a job because of not just my skills, but my reputation as a worker.

          Its all those things that add up to how much you make.

          Because of what I did years ago, it trained me to work hard. I learned numerous skills. I get up real early and work real late. I work off hours. While others complain “how hard” their average job is, I just do my MUCH HARDER than average job, without complaining. When others complain about getting up at 5:30 or 6 am, I get up at 3:30 to 4:30, because thats what has to be done to get the job done.

          I don’t have time for whinning and complaining or those who do. The VAST MAJORITY of people in this country or where they are at because of the decisions and choices they have made (or lack there of). Lifes hard. Deal with it.

          Complaining ain’t dealing with it.

          Now here’s some simple math. If you and I both make $10 an hour, but you work the average 40 hours and I work 60 hours. You’ll gross $400 in a week and I’ll gross $700.

          If I go and develop skills that will pay me an extra $5 an hour, while you’re still making $400, I’m making $1050.

          I then take those advanced skills to a harder and more knowledge andskill required job, where they pay me even more $$$.

          While you’re complaining how your job sucks, I’m dealing with mine and getting it done. Because of my work ethic, I’m put in a position over other workers, making me more money.

          Outside of work, you take your paycheck and live to the very limits of what it affords. I take mine and live below your lifestyle while I make the same as you. As my income increases, my lifestyle barely changes. (In fact I live in the same house I lived in 25 years ago. I buy and drive used cars)

          I’ve educated myself on finance and investing. Making MANY mistakes along the way.
          I take a portion of the income I earn and invest it. Planning for the future.

          And that is how the rich get richer and the poor poorer. While the poor COMPLAIN about life, there are those of us who don’t want to stay poor, and do something about it. The rich live below their means and then invest the rest. The returns on their investments they reinvest and get more returns. Thats how you become rich and how you become richer.

          You advocate a progressive tax system, because though you and I might have at one time made the same hourly, I work more hours, thereby getting more pay. And that pisses you off. If you make $400 and the government taxes you 20%, thats $80. If the government taxes me the same 20% but I make $2000 dollars, thats $400. Same percentage, different amounts.

          I have often found that those who think that all work is equal are often the ones who do little on the job. Or little out of the job to improve themselves.

          I am now approaching 50, and still I take classes or read to learn new things or improve what I do.

          Lifes hard. That don’t bother me, I’ve always worked hard. I know its hard and accept it.
          But…
          Like John Wayne said: Lifes hard. Its even harder if you’re stupid.

          No need making life any harder.

          • Rob says

            Me thinks that was more a Tea Parry rant against those who are different, besides that my impression is you need to learn to work smarter not harder. My Wife, senior manager Fortune 500 company took a day and a half off as we needed to travel and one of her co-workers asked if she would be reachable (phone/email) No was her answer. She is NEVER reachable on holidays, and rarely on weekends and it hasn’t hindered her career.

            Besides that I fail to see how a flat tax would be any different or easier, the US has only 3 tax bands anyways, what would change if it was one

            Not much.

          • Shasta Jones says

            I easily put in 60 hours a week of work. I only get paid for 40 hours. I rarely go to a fast good restaurant. I made my bread. I make my pizza. I grow a garden. I work for free so that I don’t have to pay someone to do the work for me. Well at least I don’t get taxed on that…yet. I supposed since I”m not in the work force working that I’m not really working. What about people with children who choose to stay home and take care of their children instead of paying someone big bucks to do that. I guess that isn’t work either–sitting on the couch watching soaps–right? That’s what they do–Ha!

            • Bryan says

              I say HA to your comment. Is it my fault or anyone else’s that you choose to be a stay at home parent, let alone our fault you decided to have children? The answer to that is simply NO, so why would you expect me to help you knowing full well the financial impact of having kids in the first place.

              I would turn this around and say if you feel stressed financially as a stay at home parent then you should’ve thought about that before having kids. Your trying to make your life choices mine and other peoples problem, when they’re in fact YOUR choices. Try and rebut that!

          • Moonlight says

            So I am worthless since I make less than 50K. I lack ambition. At the age of 49 it took me more than a year to find a low pay job, even though I had six years of college and a BA. I am worthless and don’t deserve to put food on my table and have a roof over my head. How plentiful do you think jobs are? I have friends that can’t find enough work to keep them working 40 hours a week. People like us ought to be shot–but then you wouldn’t get our taxes.

            • Steve says

              That is a result of one of your life choices. Let me tell you a story. I am a tenured Computer Science professor at a reasonable university in the United States. Over my 20+ years of teaching, I can count on one hand the amount of people that have not been able to get a job or that I have not been able to suggest one to. That is out of around 10 thousand students. Now, one of my coworkers that teaches Philosophy, frequently has students beg him for job opportunities and say they are working at McDonalds for years after they graduate. Guess what? He says sorry, I can’t really help you. If you cannot get a job after you get out of college, it is YOUR fault for picking a major that does not make you marketable. It is YOUR fault for not doing internships and networking during your time in college as to secure your life afterwards. No one is forcing you to take “Art History” or “Women’s Studies”.

              The purpose of college is to make yourself marketable and secure the rest of your life financially. Not to “learn something I like to do in my spare time” (At least for most people). If you reply to this, you may say “Oh LOL my friend that has a degree in Transgender African American Art History of South Eastern African Liberal Arts Students and she makes 100k! Take that!”, or “My Engineer friend can’t find a job after 2 years and still works as a waiter… Are you saying that it is his fault??? How dare you???”. I instruct you to read “https://en.wikipedia.org/wiki/Outlier” thoroughly.

              Have a nice day.

    • Shasta Jones says

      It’s pretty much that way. EVERYONE pays 10% of the first level which would be 10% of the first $9075. EVERYONE who makes more than $9075 pays 15% of income between $9076 and $36,900. EVERYONE who makes more than $36,900 pays 25% of income from $36,901 to $89.350 and so on. The highest is 39.6% but that is only on income ABOVE $406,751. Maybe I pay 15% of my income which is way less than 50K and a rich making a million pays 15% but I am paying a higher percentage of my income for food and and rent and commuting. I have a smaller percentage of income left over for saving and entertainment.

  4. says

    It’s too bad that I don’t have the time to read everyone’s comments, but there seems to be many advocates for the poor.

    Maybe less money will be a greater incentive to do more, or make people really think about their decisions to have children.

    • Shasta Jones says

      This is going to get me a lot of bad publicity. Deductions should be allowed for two children. I don’t think it is fair that I, being childless has to subsidized a family with seven children.

      • Brandon says

        You Shasta, talk out of both sides of your mouth. In one comment you cry foul at the current tax system and subsidizing multiple children, yet you argue that because you don’t make as much and have less for food that the rich man should have subsidize your poorer lifestyle. It’s no one’s fault but your own so stop arguing it’s fair for someone wealthier than you to pay a higher portion of taxes. That’s idiotic.

        • Shasta jones says

          Where have I talked about subsidizing extra children? People can have as many children as they want but I believe it should be limited to two children. I guess I confused people when I wrote about work that a homemaker does and doesn’t get paid for because he or she doesn’t want to pay to have it done. Earlier some posters were talking about working 60 hours a week FOR PAY. I could pay someone to make my bread and cook my meals or watch my children(if I had any) while I go to work to earn money that I am taxed on or I could do those things myself and not get paid for them but I save money by because I am not paying anyone to do those this. If I choose to stay home and take care of children do I expect to receive pay for it? Do I expect the government to give me money to do this? Of course not? If I cook my meals do I expect to receive pay for it? No. I already received my pay have by not having to pay someone else to do it. These are two different points I am making and I guess I confused everyone. Sorry. First, just because we don’t receive a paycheck that doesn’t mean it’s not work. Second I believe that dependents should be limited to husband and wife and two children.

  5. john dunn says

    Silly argument! Point #1 You can’t really tax the rich, their accountants graduated at the top of the class and work 16 hours a day for big bonuses. IRS hires from the bottom of the class and pays little and they work 8 hours a day max. Many years GE and Ford paid less in taxes than I did (I’m below the poverty line) #2 The “golden goose” hunt is doomed to fail, good friends who are very rich have had it and are building their “escape house” in Costa rica and they are not alone. #3 There is absolutely nothing wrong with high taxes…. if you get what you pay for. In Denmark tax rates can exceed 50%, but health care is free, transportation (by train) is ubiquitous and cheap, education is subsidized, so living is affordable on after tax dollars. (may be old information but the concept is still valid)

    • Foosfan says

      John, Now you not only want the richs money you want more of it to pay for your healthcare, your transportation, and your education. That is the socialist governments in Europe. I do not live in Europe nor want to live in Europe. If you feel compelled to give away more of your money to subsidize everyone else I would ask that you consider moving instead changing outr Constitution in this country. As you can see in the last few days Europe is imploding. They are now figuring out that they cannot give everyone everything for as long as they want it. There is no money left at the top there to tax so its the bottom of these countries that is getting destroyed with taxes now. Be careful what you ask for because soon that hand you have extended to ask for my money will one day have to work 2 or 3 jobs to sustain the type of government you desire.

      I do not want a Socialist government. People in this country have to learn to fend for themselves. We are losing our backbone.

      Foosfan

      • Shasta Jones says

        Let’s allow the poor to have enough of their money so they can pay for the necessities of life instead of raising their taxes so the rich can buy more cars and take more vacations.

        • Mike says

          Shasta, the poor do no pay the way for the rich, it’s quite the opposite. The greatest disadvantage the poor can have is the handout mentality where they expect to be given something instead of working for it. Paying a share of their earnings in taxes would go a long way towards getting rid of their handout mentality.

          You sound like someone who really hasn’t thought this stuff out for yourself, so I’ll give you something to think about. The government found a way to tax the poor quite heavily, and the taxes are so well crafted and promoted that the poor pay these taxes more than any other income group. Do you know the taxes I’m speaking of?

          Cigarette taxes and the Lottery!

      • anthony says

        Foosfan Europe is not imploding.Actually parts of Europe are doing better than we are. ex. ( Germany). You are Subsiding the rich, but you don’t know it. Break the Bubble you live in. European countries have a strong middle class, better wages, more time off, shorter work weak, better healthcare, and they live longer. All people in Europe pay taxes, the difference unlike the US is that the rich pay their fair share. They don’t pay 1 trillion dollars for BS wars, that is how they can afford it. You believe what republicans say that the poor are hurtin are economy when actually its the rich.

        • Steve says

          The difference there is that the “rich” are ceasing to exist. Why would you stay in a country that aggressively taxes your success in order to finance people that have not worked as hard as you?

          The parasite class is running out of people to leech off of.

    • Ryan says

      I only wish my tax dollars were being spent that way! Instead, we are financing TRILLIONS for a foreign religious war, just to cram “democracy” down another culture’s throat. Nevermind if they actually want to be democratic. (Democracy can only be By The People, For The People) We need to get real about our war coffers (“defense budget”) I don’t mind spending money on medicare, roads, education- whatever since the money benefits US and stays in the US instead of paving a road through a war zone. Laissez Faire!

  6. John says

    Ask Adam Smith, who proposed progressive taxation.

    It is simple math, though, randomly claiming people are socialist doesn’t benefit your argument.

  7. john dunn says

    I absolutely agree that a progressive tax is a right and proper approach to funding the activities that the government elects to engage in. If the framers of the constitution envisioned an income tax I’m sure it would be progressive, one more effort in their quest to avoid the development of an aristocracy this side of the pond. The devil is in the details and The sheer volume of our tax code provides too many details. I hope the effort in Washington can address this but I’m convinced it is a chore that will consume a LOT of time and co-operation…

  8. says

    Hi Sam,
    I’m catching up on the last few months of posts here :)
    This topic was discussed among some friends earlier this year, and one example that came up: our military and defense. Working premise: without the military, foreign hordes will come in and loot the U.S. and all this talk of who pays what and how much in taxes, really it’s concerned with property and making sure we can all hold onto as much as we can (simply human nature) So…

    Could taxes be simplified? paid similar to how wealth management firms might charge their clients: as a flat % of total assets being managed (or “protected”). My quick hypothesis is that this won’t disincentivize productivity, since a) people are inherently ambitious (or greedy, if you want to be a cynic :P) and b) you’ll have to rake in money to pay the following year’s tax, unless you wish to see your net worth drop.

    • says

      Hi Saad, good to hear from you. I do believe in the inherent greed and ambition of people. However, after a certain level of taxation… I say 50%, one no longer wishes to work as hard anymore since they are no longer getting the majority of their income.

  9. L. Nichols Cook says

    I completely agree that a flat tax is the only fair tax. Any other system steals from one person in order to pay the share of another person! However, I don’t agree that it should be an income tax. I strongly believe a sales tax is far better. Even people who don’t report their income, or who gave illegal income, spend their money. By taxing spending, you capture the tax from those people, too. Also, I do not agree that people of any income should be allowed not to pay. ALL dollars spent, regardless of who spends them, should be taxed exactly the same. Only then will we see some restraint put on a government spending itself into destruction!

    • Shasta Jones says

      If rich people were taxed 35% of all they make that wouldn’t be fair. it doesn’t work that way. We are taxed 10% on the first $8000 we made and then 15% on the next amount of money and then there’s a higher amount. So if I make 15,000 a year and you make 250,000 a year I paid 10% on the first 8,000 and 15% on the next amount. You do to.

      • Garry says

        You don’t see the problem with that? If you aren’t ambitious and only care about making enough money to for pay rent, utilities and a bag of pot each paycheck, you’re obviously not going to care how people who make more than you are taxed. It is fundamentally punishing the desire to better oneself. It’s also counterintuitive because the people that bring in the lowest amount of tax revenue are the very same demographic that ‘need’ all the subsidies provided by people that actually pay taxes! Plus, even though we all pay the same taxes throughout every bracket, if you don’t exceed a certain level of total income, you are refunded every penny of what you pay (oftentimes more). Our tax code is one of the most pervasively fraudulent systems ever devised. And yet, socialist politicians are able to stay in a position of power by dogmatically appealing to the emotions of uneducated voters who will continue to receive more ‘assistance’ by electing those who promise them more.

        • Shasta jones says

          I don’t know quite what you mean. I guess all of you on here are rich. I do not collect any subsidies from the government or church or anything like that. I work 40+ hours a week. I have a BA and about two years of training beyond that. About 30 or 40 percent is gone before I even receive my paycheck. If there’s a flat tax I might have 70 or 80 percent taken out of my paycheck before I see it. II do know some people who are very poor. I have a friend who worked full time with benefits and then her hours were cut as well as her benefits. I have known several people who are on disability. I do not want to be subsidized by the government. I own my home–paid for. I do not receive food stamps. I do not live in low income housing. I do my best to live below my means. I also do a lot of things by myself instead of paying someone else to do them. I am a single person living alone and I have to pay single supplement if I want to travel. The two for one deals don’t benefit me. I pay 15% to the government. I do not want that to increase to 20% or more. I am not concerned with what you pay as long as what I pay isn’t increased. I do not want my income tax tripled. I take only one deduction for myself. That’s it. I believe I pay a fair income tax.

    • Steeve says

      If the only tax that existed was a Sales Tax then it would act as a strong disincentive to unnecessary/luxury consumption and would promote frugality and high rates of saving. Many might think this would be a good side-effect, helping to save the planet, and promoting earlier financial freedom.

      However, the knock-on effect would be a loss of jobs due to lower consumption, resulting in higher unemployment, and then even further reductions in spending by the unemployed. This vicious downward spiral would only reach equilibrium if the reduced domestic consumption of unnecessary/luxury goods was replaced with higher rates of exporting. Similarly, as people discover they can survive adequately on lower income, there would be less demand for increases in salaries. As more people save their unspent earnings, there will be an increased demand for investments and securities and their price will decrease, unless people choose to invest their savings offshore.

      Low income families will spend the large majority of their income on necessities. Richer families will have room to tighten the belt on their costs, increase their savings rate and therefore have paid a lower proportion of their income in taxes compared to the poorer family. Of course, this effect could be offset by government grants to help low-income families with the necessary costs of life and also with a zero-rate of sales tax for certain necessary goods and services.

      • Steeve says

        Oops… I meant: “…there will be an increased demand for investments and securities and their price will increase…”

  10. says

    “Should I buy the domain name: “Financial Socialist Samurai of America?’ hahahahahahaha

    That one made me laugh out loud. A LOT. Loved the post!!

  11. James Lemire says

    I am currently doing a report on flat tax, or the fair tax, and the reasons why they are good and as well as the reasons why they are bad. I have read the comments and most of them come to the conclusion that a flat tax would be fair and I believe so. Macarose did state that people would cheat, And I also believe that is true. But, cheating, and keeping money out of the government by buying from local farmers isn’t a bad thing. I say keep the government out of it as much as possible! Im for a small government, Not a huge one that controls everything. If you can get things without going through the government more power to you. Just a couple thoughts.

    If anyone would like to comment and gives me the pros and cons of a flat tax that would greatly beneficial.

  12. Brian says

    @James Lemire

    One good thing about the FairTax is that illegal aliens, crooks, prostitutes, and international travelers would greatly give us a boost for social security and medicare.

  13. Rob says

    I realize that this is not a new thread, but I just read it and wanted to comment. I do agree that a flat tax, with an exception for people at the poverty line, is fair. I also like the idea of a flat consumption tax (Sales tax). Several states have a little higher sales tax, but no state income tax which could be modeled at the Federal level. It is not fair that 97% of the income tax is paid by 50% of the population.

    The problem with this whole argument is that many seem to blend fair taxation with fair standard of living. This is the land of opportunity and anyone can improve their situation with hard work, but that does not mean we will all live equally. Everyone is delt a different hand in life based on family success. The goal should be that we improve our standard of living, which enables our children to live better than we did. If this continues over time, generations will benefit from their families hard work in the past.

    The socialist mindset is infecting our society by making people think that they can be taken care of by the government and don’t have to work hard. The issue with this is that the government has no money of its own. It can only take it from its citizens and redistribute it to others. People have no problem taking handouts from the government because it is a nameless, faceless entity, and there is no incentive to change anything. Imagine, though, if you had to collect it from the individual who was supporting you. You actually had to walk up to their door, face to face, and ask for it. Do you think that might give you more incentive to improve your situation? It would definitely entice the person giving the money to help the poor improve so they wouldn’t need it any more. I think it is our duty as citizens to help those in need, but I don’t think it is the governments role to force me to do it. We need to separate this conversation into two parts. One is helping those in real need (Charity), the other is people wanting to benefit from the hard work of others (Taxes). Taxes should be viewed as something we all contribute to in order to provide services to all of us, not taking from the successful to support the unsuccessful.

    Our high standard of living in this country has spoiled us (Me included). Most of us have never known hunger or homelessness. Even many of the poor in the country have cell phones, televisions, and automobiles and we tell ourselves that these are necessities, not luxuries. Hard work and sacrifice made this country great, not socialism. We need to change our mindset before we can ever find a solution to such a complex problem. History has shown that more government is not the solution. The people of this great country are the solution.

    • says

      Thanks for your thoughts. The government is indeed a wealth distributor b/c income inequality has gone too far.

      $250,000 is the maximum income for max happiness and government avoidance. I suggest everyone, rich or poor, strive for that income level.

      S

    • Shasta Jones says

      It’s fair that 50% if the population pay 97% if the income tax if they make 97% of the income.

  14. T-Bone says

    This is an old thread, but after reading through there seems to be a constant thought from those opposed to a flat tax.
    It’s not fair to tax the extremely poor because they are poor and need help; fair enough. The next constant seems to be that the “rich” should be taxed more so they can feel the pain of the poor; in effect we are penalizing them for being rich. The term equal sacrifice came up during the “floor=poverty line” comments. I can relate that someone who is just getting by feels they are sacrificing because they are poor. When did the thought of paying taxes become based on levels of sacrifice? Do we pay taxes to fund public use facilities, roads, defense, government overhead, etc… or are taxes now just a way of trying to penalize the rich and attempt to level the playing field!?
    I can promise you that the rich person who is paying X% is sacrificing just as much as the person that is paying X% in taxes. How can someone who isn’t paying any taxes (assuming we don’t tax the poor) or the guy paying $1,000 a year sacrificing more than the rich (making 10 times more) who is putting in $100,000? That thinking is irrational. Why aren’t the poor bettering themselves to make more money instead of rallying to punish the ones that are rich?
    Take taxes out of the sacrifice argument. I work hard, save money and live below my means. I don’t live in the now, I live looking into the future and try to make good decisions. I plan my life and my time to have kids (an expense). Is that not sacrifice? I sacrifice daily by not buying what I want to save for my future needs. How many poor can say the same? Do most spend money on things they don’t need just want? Do they have a nice car, do they eat out, do they have a flat screen TV, do they drink, smoke? Where is their sacrifice? Are their single parents who’s spouse isn’t around anymore and they have kids sacrificing – sure they are. But are the ones that have kids just to receive more government money sacrificing or just milking the system?
    I just haven’t heard a good argument against leveling the tax playing field with a flat tax. The upper rich would pay more (no or less loopholes), putting more into the system. I don’t think the rich are opposed to a fair tax, they just don’t want to be 200% more than the average Joe and why should they?
    For the record I am not rich by any of the models, I am just a working person that believe what I work for I should keep and not give to those that didn’t earn it…

    • Shasta Jones says

      How do the poor better themselves? I graduated with $600 to my name and no debt. I worked while I was in college because I wanted to graduate debt free. Then I came out of college and had no skills. I did grunt work doing things like filing and other entry level clerical duties. I went to school at night to study word processing and medical terminology and computer technology so I could increase my earning ability. That was good for awhile but soon those skills were obsolete. I have had to learn to do things for myself rather than pay someone else to do it. I also am single so I don’t benefit on two fers or family rates. My take home is $1500 a month out of $2170 and I pay $715 for space rent for my mobile home. I also have to pay taxes on my mobile home and I have to pay for maintenance of it and I have to hire someone to mow my lawn. I do the other yard maintenance- weeding and general cleaning. That leaves me $785 to live on and now you want to take from that. I realize there are those who get help from the government and when their child is grown and they are able to return to work they just have another baby and start over. There may be 47% who don’t pay taxes at all but I am not one of them. I do not like to depend on the government for my livelihood because I fear if I do I lose freedom. $670 is taken out of my paycheck every month and you don’t think that is enough.

  15. Lisa says

    T-Bone – I appreciate your perspective on this. I am wondering if you can elaborate on this statement: “I can promise you that the rich person who is paying X% is sacrificing just as much as the person that is paying X% in taxes.” How can you promise this?

    I’m not saying I have the answer here at all, but lately I have been really troubled by the whole idea that anyone else can dictate what constitutes a “sacrifice” to another individual and what does not. And I think this goes both ways- for the “poor” and for the “rich.” I cannot dictate that it’s not *really* a sacrifice for a person making $26,000 a year to pay $3,900 in taxes, nor can I say it *is* a huge sacrifice for someone making $1 million to pay $150,000. It’s really not my place to judge what is a sacrifice for another person and what is not.

    Ultimately, I just think it’s too subjective. For example, I’d say that it would be a sacrifice for me and my husband to not go out to eat at least once a month, but it’s not even a thought in our minds to have a maid regularly clean our home. But who am I to say that it shouldn’t be considered a sacrifice for a working class family to forgo eating out once a month if they feel this is an important part of their family time? And who am I to say that it should be considered a sacrifice for a wealthy business man with a very busy schedule to have his house cleaned once a week so that he does not have to deal with that and can enjoy his free time?

    Like I said, I don’t have answers- these are questions I am honestly trying to grapple with out right now. I welcome any thoughts!

    • says

      Lisa, you’re right, “sacrifice” is too subjective.

      But what about this curiosity: Allowing people to vote on raising other people’s taxes without having to pay more taxes themselves? This is what I have trouble with, especially if the someone else already donate the most to charity and pay the most share as a percent of their income share already.

      We need to fight for more equality, not less!

  16. rob something says

    everybody is looking at this all wrong. why don’t we stop worrying about taxes, and start thinking about how the government could earn money? it seems to me that we do all the work but we have to pay the government for it. the government is acting like a spoiled teenager and really needs to get a job of its own.
    it could rake leaves after school, or maybe see if the guy at hardware store is still looking for a cashier. the government bailed out the banks with money that didn’t really belong to it. maybe it could go work at the bank and try to earn some of it back.

  17. Shaun says

    Saying half of people dont pay taxes is just a misleading statement.

    Theres something called the payroll tax and even if you make very little money you still have to pay it. It equates to roughly 7 percent of low paid workers pay checks. If you make 40k you pay 7% if you make 400k you pay less than 2 percent and a million less than 1.

    People say you get out what you put in but Id argue taking care of the elderly is just as much a public good as roads or bridges. I dont think you can argue having that program doesnt benefit society as a whole even with whatever fraud and abuse is in the system.

    Then there are other taxes that add up. A sales tax on a person spending all their money each month will take a greater percentage of money than somebody who puts money into savings. Same with a gas tax, tolls, fees etc. It can be expensive just to register your car and get a license inspection etc a hundred bucks for somebody making 400k is nothing but if you make 20k 100 bucks is half a percent of your income.

    I had to pay personal property tax this year of a couple hundred bucks for a 10k dollar car. If I only made 20k a year thats another 1 percent of my income. When you start to look at how the govt nickel and dimes you its pretty clear that the bottom 50 percent arent paying no tax at all. Just with the things I mentioned a low income worker is easily above 10 percent in taxes. I think a flat tax has to account for this descrepancy otherwise you end up with lower class individuals paying a higher percentage of their income to taxes as higher class people. Your whole argument is saying rates need to be the same for it to be fair. If that was actually how it worked and there was one flat tax structure for everything including capital gains I could get on board with it.

    The super wealthy complain about masive taxes but in reality youre paying the highes percentage of your income to taxes around 100k before you can get past the payroll tax and where youre in all likelyhood still needing to spend a good portion of your income to make the hidden taxes add up to a decent percentage of your income and not making enough money to shelter your income. You pay 28% in federal tax depending on where you live maybe 6% in state tax at least 7% in payroll tax were already up to 41% of your income before you get to local, and property taxes plus ticky tac things like sales tax. When all added up you’re looking at half of your money going to taxes.

    If youre wealthy you likely make money through a business or capital gains where you can squeeze out lower rates than normal workers or deduct more on your returns to acheive a lower rate. Plus as stated above the smaller taxes you don’t think about dont add up to as big a percentage of your income. You can prob afford to own property and claim residence in a tax free state and pay no state tax on your income. Your payroll tax rate is lower. Suddenly your 35% tax bracket is actually lower than somebody not making nearly as much income as you. A flat tax needs to be a comprehensive tax otherwise its extremely unfair to lower income people.

  18. says

    Hey y’all, let’s start by whittling down the 71,000 pages of tax code. Like in that cold sixer of PBR, there’s a sandwich in every can or every lobbyist in that book, W.T.F. (What the French).

    And B.T.W. Middle Class (Sheople), did you check out your first paycheck of 2013? Um yes, you got that decent raise back in 2012, so now you earn more money however it appears you take home less. Hmmm, wait a minute; Obama said he “would not under any circumstances raise taxes on the Middle Class”. Well, he did! Sorry, he lied :( Perhaps the next four years of suffering will serve you right for not researching the one you voted for.

    M

  19. Mike says

    I couldn’t agree more with this article.

    God’s tax code is one sentence, and I’m paraphrasing, “Give one tenth of every increase”. The God of the Jews, and Christians imposes a flat tax. Sorry I’m not familiar with other religious teachings and what they may or may not have to say on the subject.

    The only way to justify a “progressive” tax system is start with the premise that those of lower income are disadvantaged compared to the wealthy. After you get over that hurdle, you can pretty much justify any level of tax. It might be necessary given our crushing debt level, but it’s not fair.

    The flat tax is the only fair tax because it doesn’t discriminate. Any tax that discriminates is unfair. The only way to get around this basic truth is to start twisting the meaning of “fair” until “fair” applies to outcomes and not how we treat people. For example, suppose I make 100K and pay 20% tax or 20K. Joe makes 200K and pays 20% or 40K tax. The treatment of both Joe and myself is fair and equal. Now suppose “fair” means that Joe’s outcome needs to equal my outcome (80K after tax income). This twisted and wrong definition of fair requires Joe to pay a 60% tax rate (120K in taxes for 80K after tax income).

    But the socialist says, life isn’t fair and if you have more you should not be whining. I say, then stop telling me to “pay my fair share”. Stop telling me that higher tax brackets are fair, because they aren’t. And disagreeing with an unfair system is not whining. It is a legitimate complaint.

  20. American Patroit says

    EVERYONE needs to carry their own weight. EVERYONE pays 20% of their income. That still is NOT fair. Why should someone who has no ambition that makes $10K a year (really wow lol OK) only have to pay $2000 but a VERY hardworking man that makes $200K have to $40,000? They both should pay the EXACT same. Let’s put that at $10,000 for each. What? You don’t think that’s fair? Why should someone that works harder have to pay more for working harder?

    OK, so that’s not going to happen. So EVERYONE needs to pay 20%. If that’s not going to leave enough money for you to live then you will need to work harder. End of discussion.

    • says

      How about everybody pays 20% of their income who earn above a livable wage of $30,000 a year for singles, and $50,000 a year for couples? I can dig that. IF you earn less, you get a regressive tax, and no income tax if you are in the poverty level.

  21. Brandon says

    Wow…Really enjoyed reading some of the arguments here. Lots of valid points. I was really glad to see Neal Boortz’s idea (The Fair Tax) come up. The concept is pretty simple. Everything you buy is taxed at 23%…Straight up. This means that BMW the bazzillionaire just bought…taxed at 23%. The loaf of bread the poor man bought, 23%. Collected upfront at the merchant. Oh, and that hamburger that the illegal immigrant bought at McD’s…You guessed it, 23%. Now, for those of you arguing, well the poor man feels the 23% more than the rich man does, maybe you’re right. The 23% goes to fund what he calls the prebate, which is a monthly stipend depending on household size. So, the family that is living at the poverty level and spending at that rate will only be taxed at 23% when they purchase goods, but they will also receive the equivalent back from their prebate.

    So here’s some math (everyone likes to use Joe/John/Carl etc. so I’ll stick with them, maybe add a couple at the end):

    Joe is a married father of two: A family of four gets $7,135 from their prebate per year or $595 to make sure that if they are at the poverty level they pay $0 in taxes. Joe makes $75k per year and spends 56k. His effective tax rate is 7.66% (56k*.23=12880; 12880-7135=5745; 5745/75000=.0766)

    John is a married father of two as well: His family gets the same 7135 prebate. John makes 150k per year and spends 100k. His effective tax rate is 10.6%. Same math just different figures. 100k*.23=23000; 23000-7135=15865; 15865/150000=.1058)

    Now there’s Carl: He and his husband Joe live together and have adopted a child: They have a combined income of 125k and their expenses are 110k. Their prebate is lower because they have 3 people in their home so it is equal to 6210 per year. Their effective tax rate is 15.3%…Again same math.

    One more example (this time the extreme’s):

    You have Sarah who is a single college drop out working at a fast food establishment. She just had a baby out of wedlock. Her annual prebate is 3567/year. She make 11k/year and spends every last dime to get by. Her effective tax rate is… -9.4%. She gets more than she puts in…

    Now you have Sam who is a doctor pulling in 1MM/year. He likes nice things and so he spends 750k per year on stuff…He is single and has no children. He gets 2643/year for his prebate. His effective tax rate is 16.99%.

    IRS is completely eliminated. Tax code is gone. People finding loopholes…No longer an issue.

    Seems like the actual FAIR way to do it (I am not opposed to a flat tax either, but there are to many complainers).

    Great read Sam. I’ll be back to read more of your site.

    • says

      Welcome to my site Brendan and thanks for reinvigorating an old discussion on the equality of taxes in America!

      You’ll find many more posts in Ye archives/categories below and to the right. Enjoy!

  22. John says

    American has no income taxes for over 130 years until the The fed( The Federal reserve Bank) came to be and 1913. There should not be any income taxes,flat tax or call fair tax. Never lay the fountaination of this. Flat tax is also call a ad value tax. Like in Europe.The only people that should pay taxes are : Antiamericans,some of Democrates,some of establishment gop, U.N supporters,communist, Muslims,illegals aliens, supporters of this lot.liberals, Facebook,G.E. bill Gates, Microsoft,Bankers,IMF, unions, and presidents. Like Obama,two bushes,ford,carter,Cliton two terms,Get rid of bush forever tax. As long as you are a American you will pay heavy taxes and have your bank account taken away under 348 g frozen your bank account.Before 1913, U.S. money has real value and people can be rich.It started to get more red tape and government control.If you allow flat tax we will be back to the start. It is time to change it for good and make the evil one pay. and rest not. and there is a American exit tax if you give up your citizenship by senator shoemer. see.www.commieblaster.com

  23. Shasta Jones says

    I make way less than $50,000. A flat Tax rate would triple my taxes. I pay half my take home for rent. iI’d be in real trouble. I’d be paying more than 500 a month.

  24. Brainburst says

    “Military spending is $687 BILLION, there are 310 million people in the US. We ALL receive equal benefits of military protection in this country. That means the cost of military protection for every man woman and child is $2200.”

    Equal Benefits of military protection? Are you kidding me? Besides life which we can say is all equal, the militatry PROTECTS WEALTH!!!!! Only wealth has a real hard value. Those who benefit the MOST from military protection of their wealth should pay the most for it. Furthermore who benefits the MOST from profits generated by the defense industry? OH that would be the wealthy!!!!

  25. Brainburst says

    “Now, for those of you arguing, well the poor man feels the 23% more than the rich man does, maybe you’re right. The 23% goes to fund what he calls the prebate, which is a monthly stipend depending on household size. So, the family that is living at the poverty level and spending at that rate will only be taxed at 23% when they purchase goods, but they will also receive the equivalent back from their prebate.”

    This works only in theory until the same right wing loons advocating for this want to start cutting the prebate allowance.

    I am for a flat tax— on wealth not income.

  26. Shasta Jones says

    I make 25,000 a year. My take home is $1400 a month. Half of that goes to pay my rent leaving me $700 a month to live on. If we have a flat tax rate it would double my taxes and put me out in the streets. I guess that’s fair.

  27. Emma M says

    Coming from the UK we are completely fed up of being one of the highest taxed. I know things are very similar in the US.
    15% of a low earner’s wage hits the earner harder than a high earner. For example, a low earner may pay 50% of their income just to keep a roof over their head. A high earner will only use around 20-30%.
    Higher earners are much more likely to know how to work around taxes and have more money to invest and make their money passively grow, whilst low earners live hand to mouth.

  28. Rob says

    Can’t edit my comment but I see nothing wrong with being part of the 47% it’s my goal not to pay any taxes on my income, and hell I’m not even American

  29. Shasta Jones says

    In 2013 my Gross income of 25,641. My income tax was 1859. So a flat 15% would be $3846. I have a 5% State income tax. I take home $1400 a month. My rent is $700 a month. I have $700 left over for food, phone, Internet and church contributions and groceries. Try living on that. I have six years of college. I cannot afford a car. I cannot afford cable TV. I cannot afford to go out and eat. I once made fairly good money but my skills are not obsolete and at the age of 60 I do not wish to take out a loan and return to school if were to be taxed $3856 that would leave me with 1235 a month and with my $700 a month rent I’d have $500 a month.

    • Brandon says

      And that’s why you should be a proponent of the fair tax. You would get a monthly check to ensure that you had the funds necessary to buy the things you need. http://www.fairtax.org
      I encourage everyone to read up on it.

      • Shasta Jones says

        I do not want a monthly check from the government. Depending on the government would reduce my freedom. I would rather keep the money I have to pay for my support.

      • wallstreet26 says

        why would she be a proponent of fair tax when we are in progressive tax system? is this sum kind of jedi mind trick?

  30. wallstreet25 says

    Flat taxes make sense when everything is fair, but as you’ve learned growing up, life is not fair. Some are born much smarter, more athlethic, better looking, or wealthier than you. These basic factors that you cannot control will affect your pay. People think that the amount they work correlates to the income they earn and that’s juss not true. Ask an average person in china vs a bsd in america. Both could be overworked at 100 hrs per week, but one makes 20k vs billions annually. Look up the annual salaries of top hedge fund managers and you will see what I mean. It really comes down to this, when income inequality is too wide then there should be higher progressive taxes to help stem it.

    I hear people constantly complain about the hours they work, how hard their work is, and the amount of taxes they pay. blah blah blah. Congrats, you are skilled, your work is in demand, do work. if you dont like to pay taxes, feel free to do something paid less. (it goes without saying that this happens a lot, but please no complaining).

    Lastly, Consider Lebron James who makes $20m/year for bball, does this guy really need a flat 15% tax? If media/TV was never invented he wouldnt be worth that. progressive taxes are better than flat taxes because people who are richer derive/derived it from society so it only makes sense that they give a higher proportion of it back. this is paraphrasing Warren Buffett, the biggest bsd of them all.

    • Brandon says

      So basically you agree in the curbing of hard work paying off? You think that it is perfectly fine that a doctor who works their butt off for 8-10 years in school making pennies through residency and taking out 100’s of thousands of dollars in loans should still have to pay an disproportionate amount of their income in taxes as opposed to the high school drop out who is changing tires at Jiffy Lube? It’s this kind of entitlement/lazy thinking that is killing the American way of life. Most “rich” people give back out of the goodness of their hearts. It’s called charity and it’s their choice. What the government is doing through taxing is their own form of wealth distribution which has absolutely no place in American society. Also, “….does this guy really need a flat 15% tax?” that statement right there sums up your way of thinking. IT ISN’T A MATTER OF NEED! The whole argument is about what is fair. I believe that the same taxation standards applied across the board are fair. As Lebron making 20MM per year would pay 3MM in taxes into the pool vs. someone making 20k per year would pay 3000. Now here comes the sob story about someone at 20k can’t pay for groceries…I direct you to the FAIRTAX. Look it up and get over your Robin Hood mentalities (rob the rich to feed the poor) because remember, Lebron had no father figure growing up and his mother was not rich by any means imaginable.

      • wallstreet26 says

        not my point at all. people should work hard and it should be incentivized, but a progressive tax is still sufficent to incentivize it. i am not talking communist 100% of your wealth. but a bump from 45% to 55% isnt that big a deal. taxes in the US in the 1930s for dividend income was like ~80%. so dont get all “high taxes have no place in America”, cuz learn ur history.
        If we are talking about fairness, i do not care whether lebron had a tough life or an easy life. the point is he is making a ton of money is because people are fascinated putting a ball in a hoop (i say this in all sarcasm, i love bball, i play it erryday)and would pay to have television sets that someone else invesnted, that is manufactuered somewhere else, and distributed all across the world, to watch him on their down time. In essence lebron james is rich because he benefits from society. So its only right that he give a larger share back to society, arguably at a higher tax rate. since his take home is still thousands of multiples higher than the average joe even if we institute a 50% or 60% tax rate on him.
        besides he isnt really who i am complaining about. most of what he makes is ordinary and not passive income. the latter is taxed more lightly. and the people who make passive income do not have to pay taxes annually.
        btw i have no robin hood complexity. i’ve juss seen both sides of the fence and prolly more informed than u. i’ve worked as a fast food guy to a stock analyst. the level of work i put for both is 100% yet the pay is like a 10x multiple. i was juss as smart then as i am now, with the difference of a top 10 degree to lend me its prestige to charge a higher price for my work. i wouldnt be where i am if i didnt have the govt pay for my degree, so i am definitely biased.
        Also respect on you doctors out there. I know from friends that yall grinded hard for your spot and are in a ton of debt. so juss do what it do.

        • Garry says

          Firstly, please learn how to type and stop using this ridiculous, unreadable slang. Secondly, LeBron making his millions is a perfect example of the beauty of the free market. Society demands to be entertained, just as they demand everything else in life. While you may view what he does as trivial, he is actually providing a very important service. People with skills like LeBron are a treat to watch and are extremely few and far between. As a result, fans spend hard earned money to watch him. While putting a basketball in a hoop isn’t helping to save lives or making some other altruistic contribution, he is creating a market that opens up jobs and gives people a reason to spend. LeBron possesses a skill set that is probably unique to himself. There are a few hundred basketball players in the NBA and yet there are none who can compare with him. Consequently, his very in-demand skill set is rewarded handsomely with big contracts and endorsements. He is getting paid what he is worth regardless of whether you or anyone else agrees. Lastly, whatever university you earned your degree from needs to have its accreditation removed if your post is a sincere attempt at intelligible communication.

          • wallstreet26 says

            1st of imo. apologies for not meeting your eloquent standards. for a guy who likes sports you sure sound a little uppity. if you can understand it, then it does its job. unsophisticated maybe? blame it on my youth and upbringing. my boss does. 2nd of unintelligent? impossible. i scored in the top 10% of SAT scores. <-(with that stat, very likely i am smarter than you too, stats dont lie) 3rd, you are right, i think sports is a waste of time. people need to spend more on models and bottles.

  31. DumbRepublican says

    Indeed, you are ignorant.

    If my tax rate goes up while a rich person’s rate goes down, then I’m getting screwed. If I spend more of my income on necessities and get taxed, then I am paying more than my fair share.

    If you let the rich make all the rules, then you’ll end up with a flat tax…but we aren’t going to do that.

  32. Claire says

    I am firmly middle class, and I am fine with a flat tax (and indeed support it for its simplicity–why does the government care if I pay for my dental expenses through my employer or more directly?) as long as Medicare and Social Security with holdings are classified as “income tax,” since that is what they are. Social Security, in my opinion is the scourge of the middle class–imagine how much more wealth the middle class would have if all of those withholdings had gone into tax-free 401ks invested in mutual funds. Instead, I am forced to put 6.2% of my post-tax income in something that, if I am very lucky (I am 32) will pay me back what I put in plus inflation–and then I’ll get to pay taxes on it, again. (And the self-employed get to do this twice, although they at least get a tax break on half of the payment).

  33. izraul says

    That’s an excellent question if your ignorant. It’s super stupid one if your well-versed in america’s dirty business & legal history. Here’s just 1 example for the sake of simplicity…

    It was supposed to be “voluntary” but is been made “mandatory”.

    Of course the IRS views any questioning of their authority an illegal “protest”, just as Courts view any older bonafide laws conflicting with new agendas as frivolous “conspiracies”.

    The same as any dictator would do when their authority is questioned, or criminal scam artists denying of facts in efforts to hide the true motives.

    The IRS says: [“Some taxpayers assert that they are not required to file federal tax returns because the filing of a tax return is voluntary. Proponents of this contention point to the fact that the IRS tells taxpayers in the Form 1040 instruction book that the tax system is voluntary. Additionally, these taxpayers frequently quote Flora v. United States, 362 U.S. 145, 176 (1960), for the proposition that “[o]ur system of taxation is based upon voluntary assessment and payment, not upon distraint.”]

    They also give their opinion of legal meanings, like “voluntary”. [“The Law: The word “voluntary,” as used in Flora and in IRS publications, refers to our system of allowing taxpayers initially to determine the correct amount of tax and complete the appropriate returns, rather than have the government determine tax for them from the outset.”]

    Notice… “as used in Flora and IRS publications” and “refers to our system”

    … kinda like, “elephants are always pink, according to me, and because I say so!”

    further they state.. [“The requirement to file an income tax return is not voluntary and is clearly set forth in sections 6011(a), 6012(a), et seq., and 6072(a) of the Internal Revenue Code. See also Treas. Reg. § 1.6011-1(a).”]

    …”and if you deny it, you are violating my own laws, that I make up and change for my own benefit, irregardless of any previous right or law, and thus, subject to my punishment.” (coincidentally always involves a fine (e.g. yes, more money is fine! or fine, whatever, just keep giving me money)).

    But of course in the end.. it just is ,what it just is.. wether or not you understand it, you must accept it for what it is. That’s the american way.. “Positions of power” and the natural need to abuse and keep it, at any cost.

    The irony … america’s is dubbed “the land of the free” because we fought to reject the British monarchy and aristocracy only to accept it when exchanged for our own.

  34. izraul says

    Never mind… I just noticed the question pertained to “flat tax” as opposed to just tax.

    A flat tax would be fair.. If corporations are considered people, why shouldn’t they be treated as the rest of the people? Especially when those people use up more resources and make more money than and off the people.

    Everything americans fought for not to become has been used and twisted to become exactly that.. all in and for the american monarchy and aristocracy.

    only this time, patriot means terrorist, as was the real reason for “the patriot act” (the anti-patriot).

  35. Mike says

    the reason the rich should pay a higher percentage is because it takes a lot of money to run the country and an equal distribution as you describe will not produce enough revenue (your example is revenue neutral) . I guess that is it plain and simple. If you look at what we currently spend, tax rates need to be raised to produce enough revenue to pay for it. Like many of you for years I believed starve the beast and it will shrink. however, this had not been proven to be true. for each spending program you or I may oppose, there is a large group of beneficiaries that support it. I understand, that i am not as smart as many of you, but until we have an open an honest discussion about what spending programs are essential to a prosperous nation and decide how much it takes to provide those services, we will always have budget deficits. This will eventually be our downfall. i do not believe that you can cut taxes and grow your way out of it. I also do not believe that by taxing the rich you will reduce revenue or cause folks to move. I have seen no factual verifiable data to support that position ( i am willing to examine your data if you have it) Just my opinion

  36. says

    a “flat” tax is not flat. It’s a percentage. So it’s a flat percentage but that means it costs more money for some and less for others. Here is why that is not “fair”. Does a rich man need to pay more for a loaf of bread when he buys it in the market for no other reason then he is rich? Do retailers price their items for sale as percentages of their customers income? No. Why not? Because it’s ludicrous that’s why. Only government can seem to get away with saying that the cost of government should be more for some then others. We certainly need bread more then we need government, imho, but somehow pricing for bread is based on reality and pricing for government “services” is based on envy politics. Not fair.

    • Garry says

      I don’t necessarily have a problem with a regressive tax system, but even then, the rich will still pay more. If everyone living under the sun made the same amount of money then yes, a single rate might do. That’s just not reality though. A flat tax (percentage) is as close to ‘fair’ as we can realistically get.

    • says

      That sad thing as I’m doing a housing remodel is that ALL contractors say that they charge much more for owners of more expensive homes than owners of cheaper homes, even though the labor and cost of materials is the same!

      • Garry says

        Naturally, because the quality of work has to be higher. They know you are more discerning and expect more for your money. As you well know, people will absolutely pay for quality!

  37. karla bonoff says

    The arguement you present against the flat tax is ridiculous. The rich man is benefitting from the college he paid for every day because his income is 20 times the poor mans (uneducated) income.

    Why not say the poor man works harder, sweats more and abuses his body more doing blue collar work than the rich, white collar man so he deserves a break in taxes just because of his sweat equity.

    We are middle class, earning 150k and we pay at the 24% tax rate. We own our home so get no break with mortgage. Kids are grown now, no dependants. And I’m guessing we are like most of the 49% not used in your numbers (50% poor, 1% rich) who pay the 50% of income taxes not covered in your arguement. The flat tax sounds good to us.

    And what person making more than 500K a year isn’t able to invest and save most of it in ways that keeps it from being taxed. But if you only make 100k there isn’t much left over after living costs to invest and hide. No one making a million a year will pay taxes on a million under the current system.

  38. Kenneth says

    I think there are some very good ideas on this page. I am by no means rich. I am actually very poor. I make quite a bit under 10,000 a year and I cannot claim any credits on my tax return. I am fortunate enough to be able to live with a friend who I split utilities with and his mom owns the house so we don’t have any rent. Part of the reason I make so low is because I donate my time to teach underprivileged kids in even poorer families how to play music and in a sense, and probably giving them something that could, theoretically make giant changes in their lives. I am okay with that. Am I doing something to change that because I am tired of being broke every step of the way? Yes, I am. I don’t blame anybody else but myself for making that low of money. It is entirely my own fault and I am okay with that. I don’t think that rich people should have to pay me for me doing what I wanted to do. Now, last year I made approximately 1500 dollars for the year. I had no expenses besides my phone bill which is a junk low end phone (3 years old and not a flagship phone like Iphone, galaxy, etc.), my gasoline and my food bills. I don’t get food stamps or any government assistance. The 1500 dollars I got last year, was given to me as a 1099-misc, which means I have to pay tax on that. My tax on that is ~13.9% which is the self-employment tax. Normally I wouldn’t pay taxes because of the exemptions, nor do I really care that I owe on it. I work in taxes now, actually, as a tax preparer. I deal with people on every end of the spectrum. My opinions are no more right than my coworkers, friends, family’s, or anybody else on this sites opinions. They are opinions. I agree with the idea of a flat tax, minus the exemption for what you can “survive” on. The number would have to be figured out, but I think that a “flat” tax would be good idea. I have no data to back my opinions up, but I believe that it costs quite a bit of money to get your income pushed through all the loopholes that these corporations are pushing them through. If taxes came down for them, instead of hiding their money and paying other people to save their money, don’t you think they would be more inclined to pay a bit more in taxes?

    Example:

    Joe is a doctor who makes 500,000 dollars a year. Say he pays 20% of this in an income tax. His tax is 100,000 dollars for the year.

    In a perfect world, that would be pretty nice. But say he is being taxed at the tax brackets we have in place today. (Which isn’t just 35% of total income like some people think.) His tax for 2014 would be 155,291 with the standard deduction and using HR block’s tax estimator tool.

    Joe is obviously going to be more inclined to figure out how to get his tax down either way, but with a ~30% jump in tax owed, he is going to have more incentive to figure out how to get a tax break sometimes with things becoming illegal. Why not let him keep his 50,000 dollars and figure out where to put it instead of giving it to a government that spends it how THEY want to spend it? Why not give more incentive to use the money in your communities and the downtowns which are disappearing instead of just putting money in a pool that we don’t actually get to see? Obviously that is more work than most people would be able to handle, but I don’t like big government and never have and probably never will.

    If they did a flat tax, they would have to cut down on what you can get tax breaks for and all the loopholes and our whole tax code would have to be rewritten, which probably wouldn’t be a bad idea anyhow, regardless of what does happen. It couldn’t be written so that those rich people can moreorless double dip on breaks. With a lower tax rate, they would in effect, pay less. Why would they be able to get a tax break and then get another tax break on top of that because they can afford it? I do believe that our current tax situation isn’t helping anything though. If it was working, our debt would be coming down. Instead, everything is going up and our debt keeps rising. What is the reason of the taxes to begin with? Do you know what is happening with your money?

    Anyway, this started as me saying that I liked some of the ideas and that was it, but I couldn’t help but express my thoughts on the subject! I work in taxes after all! =-)

    Regards,

    -Kenneth

  39. Syed says

    A flat tax isn’t fair. People with more income will pay more in taxes. If taxes are the price we pay for a civilized society, then why should one person be charged more than another person to live in that society? A truly fair tax system would equally divide the total expenditures of the government by the number of people benefiting from the government.

    If I invite my friends over for a pizza, we either pay for the pizza in equal proportions (i.e. if there are 4 people, we each pay for 25%) or we pay based on how much pizza we ate (i.e. if I eat 1/2 the slices, I pay for 1/2 the pizza). What we don’t do is get everyone’s most recent paystub out and have everybody pay based on a proportion of their earned income. The amount of money people earn is irrelevant to the pizza.

    The flat tax would represent a decent compromise in a sane society, but that does not mean it’s fair. It taxes some people more than others, yet these people are under the protection of the same exact government.

    • says

      Do you think someone making $1 million a year takes up $500,000 a year in resources? One could argue they take less resources than someone making $80,000 and pays $16,000 in taxes, as they send their kids to private school, don’t go to the library, or utilize the freebies at the park.

        • says

          If it’s all earned income in NYC, they could. If it makes you feel better, we can use a 30% – 50% effective tax rate for a $1 million income earner if you wish.

          No use arguing a phantom person’s financials. Let’s focus on the big picture of consumption of gov’t resources, fairness, simplifying the tax structure, and helping people out.

  40. Shasta Jones says

    Eleven years ago I made $35,000 a year. I got laid off–I supposed I was a crappy employee and that is why I got laid off. Last year I grossed $28,000. The feds took 29% of my paycheck. I guess that’s not enough is it? So that you wealthy people can have more money the feds ought to take out 60% of my paycheck. After pay rent and tithing I have about $400 a month to live on. Go ahead and take that too! I’ll live on the streets!

      • Shasta Jones says

        I’m told I am in the 15% tax bracket that I pay 10% if the first $9000 or so and 15% of the rest. So a 20% would mean that I would lose 34% of my paycheck so I would have $108 less a month. After rent and tithing this would leave me with $300 a month to live on. It’s fair!

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