Why we need a flat tax

[Brother Hesekiel 2,236]

What would be the incentive for a corporation to even exist, if its owners can't make any real money?

You'd have to make over 100 million dollars to buy a million-dollar apartment (which in NYC is a basic 1 bedroom), and over a billion to buy a 10 million-dollar home.

But let's say you do that and the government becomes flush with more money than they might be able to reasonably spend. What would the government do with all those trillions of dollars? Invest back into the same businesses they took the money from, in essence nationalizing them? Invest in foreign countries? Give everyone a $100,000 check?

See how ridiculous your idea is?

The "owners" of the corporation are the shareholders. I'm a shareholder in 19 corporations and I pay capital gains tax. No problem, as I made silly money since the drop of '08.

The CEO is an employee. He's overpaid. If he'd say he wouldn't work for a mere $5 Million per year, I'm sure there are plenty of people ready to take his job.

[Mr. Big Dog 10,747]

If their tax evasion is due to having a kid or two, then the issue should be not that almost 50% of Americans pay no income tax. The issue should be that almost 50% of Americans are dirt poor!

But this, nobody wants to talk about. Nobody wants to talk about the huge share of the population that has been squeezed by falling real wages over most of the last three decades. Nobody wants to talk about the lost decade (2000-2010) for people who work for a living in this country. Nobody wants to connect the dots between an ever larger share of the population not owing federal income taxes and an ever larger share of the population working for peanuts. And nobody wants to admit that there is neccessarily a flip-side to this in an economy that is and has been growing over that same time period - that flip-side being that you have a decreasing pool of people taking home larger shares of the national income and that, hence, shoulder the majority of the burden of the federal income taxes.

Want tax fairness? Look at a point in time when taxes were more evenly distributed. Then look at the compensation structures of those days and start reverting to those. Of course, those that bemoan their high tax burden wouldn't want that. Back then, top executives did not get compensated many hundred times the pay of the staff that kept the business they were hired to run going. Back then, company success trickled down to the rank and file. And the top dogs didn't get huge payouts after running the company they were hired to run into the ground. Back then, earned income wasn't taxed more than passive income either.

The tax code we have today is the result of the lobbying of corporations and the well funded. Why are they complaining? They got the very tax code they purchased from Congress. It's their tax code. EITC? That's wage subsidies. That's all it is.

[luckytxn 2,265]

If we have a fair tax the poor would end up paying at least some taxes. All of a sudden their votes that are bought and paid for will be gone. Fair tax would never become a reality. The upper income already pay most of the taxes. They will just have to pay for more of them so tough luck to them. The extra taxes we will soak them with will still not pay for what we spend so the only way we will ever have a budget approaching a balance is for the middle class to pay more. Anyone think either major party will propose taxing the middle class more?

[Mr. Big Dog 10,747]

If we have a fair tax the poor would end up paying at least some taxes. All of a sudden their votes that are bought and paid for will be gone. Fair tax would never become a reality. The upper income already pay most of the taxes. They will just have to pay for more of them so tough luck to them. The extra taxes we will soak them with will still not pay for what we spend so the only way we will ever have a budget approaching a balance is for the middle class to pay more. Anyone think either major party will propose taxing the middle class more?

Fair isn't neccessarily flat. Do I think that EITC is a bad idea? You better believe it. As I said above, EITC is essentially nothing but a wage subsidy which - as any other subsidy - distorts the market. Companies paying the lowest wages benefit from this - the EITC serves as a pressure valve. I would even go so far as to suggest that EITC is actually an incentive for low wages. It makes them more palatable.

I would not have any issue with a flat tax even. Exempt the existential minimum from income taxation and then tax every dollar beyond that at a flat rate - whatever that rate may be. But apply it to each and every dollar of income. No loopholes, no exceptions, no write-offs, nada. You get an exempt amount of income and then you pay, say, 15% or 20% after that. Shouldn't be too hard to figure out what the percentage needs to be. That way, everyone faces the same burden on any income that exceeds the existential minimum. If you make $1K above, you pay 15% or 20% of that to Uncle Sam - this would be $150.00 or $200.00 depending on the rate. If you make $1MM above that, then you pay the same 15% or 20% on that which would be $150,000.00 - $200,000.00 depending on the rate. This would be both flat and fair. But that isn't going to happen either. Again, we have the tax code we have for a reason - it benefits those that ordered and paid for it. And it wasn't ordered and paid for by the households that represent half of the country living on less than $50K a year.

ETA: The idea that the poor aren't paying any taxes is way off. They pay taxes. Measured on their income, their tax rates are outrageous. There's more than just the income tax which, yes, is somewhat progressive in design. There are a lot of consumption taxes which the poor pay all the same and which in their very nature are regressive.

Edited April 5, 2011 by Mr. Big Dog

[Obama 2012 1,714]

This is not what Bob suggested... read his example

Besides, who wants to punish success? High incomes and high taxes paid on them are rarely an indication of success... More often, they are a result of unfair practices or a result of inherited fortune

wealth and income are two different things.

[Obama 2012 1,714]

But this, nobody wants to talk about. Nobody wants to talk about the huge share of the population that has been squeezed by falling real wages over most of the last three decades. Nobody wants to talk about the lost decade (2000-2010) for people who work for a living in this country. Nobody wants to connect the dots between an ever larger share of the population not owing federal income taxes and an ever larger share of the population working for peanuts. And nobody wants to admit that there is neccessarily a flip-side to this in an economy that is and has been growing over that same time period - that flip-side being that you have a decreasing pool of people taking home larger shares of the national income and that, hence, shoulder the majority of the burden of the federal income taxes.

Want tax fairness? Look at a point in time when taxes were more evenly distributed. Then look at the compensation structures of those days and start reverting to those. Of course, those that bemoan their high tax burden wouldn't want that. Back then, top executives did not get compensated many hundred times the pay of the staff that kept the business they were hired to run going. Back then, company success trickled down to the rank and file. And the top dogs didn't get huge payouts after running the company they were hired to run into the ground. Back then, earned income wasn't taxed more than passive income either.

The tax code we have today is the result of the lobbying of corporations and the well funded. Why are they complaining? They got the very tax code they purchased from Congress. It's their tax code. EITC? That's wage subsidies. That's all it is.

In all fairness, the "lost decade" as you want to put it, wasn't exactly what you're making it out to be.

Between government and individuals, it showed that people did not know how to live within their means. When you're living paycheck to paycheck and making $125,000/yr, there's a problem.

When you're making $50,000/yr and have 2 kids and buy a new 60" HDTV rather than feed your kids healthy foods, then there's a problem.

We have become a consumer driven, overly greedy society in the past decade or so and it shows greatly. Just look at the credit market. Sure, all of those credit cards, offers, etc. were shoved in our face, but that's because credit card companies/banks made money no matter who they loaned money to because of the derivatives market. The underground nastiness that was allowed to take place thanks to the likes of Alan Greenspan and Larry Summers.

People were more than happy to spend on the 'credit' they were given, or buy a home that that way out of their affordability range.

You can say it's a lost decade all you want, but at the end of the day there is equal responsibility on the table. People still made the choice to not live within their means. It's a disease in America no matter who you are.

[Dan J 277]

If we have a fair tax the poor would end up paying at least some taxes. All of a sudden their votes that are bought and paid for will be gone. Fair tax would never become a reality. The upper income already pay most of the taxes. They will just have to pay for more of them so tough luck to them. The extra taxes we will soak them with will still not pay for what we spend so the only way we will ever have a budget approaching a balance is for the middle class to pay more. Anyone think either major party will propose taxing the middle class more?

If you want the poor and middle class to pay more taxes you need to do two things:

1. End tax benefits for having children (Considering that families most directly benefit from things like education they shouldn't pay less than people without kids for them).

2. Reduce the wealth gap. If poor and middle income people earn more on average, they will pay more taxes.

The tax rates and brackets should reflect the distribution of wealth and current economic growth.

[Mr. Big Dog 10,747]

In all fairness, the "lost decade" as you want to put it, wasn't exactly what you're making it out to be.

Between government and individuals, it showed that people did not know how to live within their means. When you're living paycheck to paycheck and making $125,000/yr, there's a problem.

When you're making $50,000/yr and have 2 kids and buy a new 60" HDTV rather than feed your kids healthy foods, then there's a problem.

We have become a consumer driven, overly greedy society in the past decade or so and it shows greatly. Just look at the credit market. Sure, all of those credit cards, offers, etc. were shoved in our face, but that's because credit card companies/banks made money no matter who they loaned money to because of the derivatives market. The underground nastiness that was allowed to take place thanks to the likes of Alan Greenspan and Larry Summers.

People were more than happy to spend on the 'credit' they were given, or buy a home that that way out of their affordability range.

You can say it's a lost decade all you want, but at the end of the day there is equal responsibility on the table. People still made the choice to not live within their means. It's a disease in America no matter who you are.

The borrowed economic growth we've experienced over the last few decades - and in an accelerated fashion in the past decade - is an issue for sure but it is not in any way a valid rebuttal for the fact that productivity gains no longer translate into wage increases. The fruits of today's productivity gains - which are siginificant - are harvested almost exclusively by executives and shareholders. As such, the rank and file have been disconnected from the success of the enterprise they keep going. Real median incomes have not only risen significantly less in the past three decades (roughly 25%) than they have in the three decades preceeding that (more than 50%) but have actually contracted slightly in the first decade of this century while the economy grew. It was the first time since records are kept that median incomes did decrease during an economic boom cycle. That is what I refer to as the lost decade for American workers. And it has nothing to do with the fact that US households relied ever more on credit to the point of irresponsibility. As I said, the latter is an issue but it's a separate issue that, at best, was triggered - among other things - by the declining incomes that households had to live with and by the disconnect of productivity vs. wage gains.

[Mr. Big Dog 10,747]

If you want the poor and middle class to pay more taxes you need to do two things:

1. End tax benefits for having children (Considering that families most directly benefit from things like education they shouldn't pay less than people without kids for them).

2. Reduce the wealth gap. If poor and middle income people earn more on average, they will pay more taxes.

The tax rates and brackets should reflect the distribution of wealth and current economic growth.

If you want to end tax benefits for people that have children, you'd also have to make sure that those without kids pay more heavily into the retirement systems since those without kids won't have contributed to the revenue stream that is needed to pay their beenfits. Today's tax benefits for children don't even begin to compensate a family for the cost of raising them. Without a next generation, without investing into the education of this next generation, this country is dead.

[ScottThuy 140]

Any tax that is levied on income is much like the sin tax that was mentioned earlier.. it creates an incentive for people to not earn alot of money.... the government and those still working hard will take care of you... For a time, I thought the consumption tax idea was the way to go... a sales tax accross the board and when people spent money, the government collected the revenues... Then I realized that the sneaky people would just start spending the money in another country... so we would have to keep the money here by charging a duty/penalty on money sent/spent abroad...

iF we were able to tax spending and keep the $ here in the states, we could in theory cause people to think before they spend to buy a big screen TV if the tax put the price out of reach and healthy food was affordable with lower tax...

A system that penalizes workers for working hard and earning money and at the same time rewards people for not working and having many children that they can't afford to support because they already drank the not working and earning is good kool aid... is absurd... A flat tax would be a good alternative only if it addressed the ieda of freeloading... if we have a flat tax and stilll give tax credits to those who dont want to work, we are still promoting a problem... As is said al over the news today.. it aint just about where the money comes from, but also what we are doing with it....

[Obama 2012 1,714]

The borrowed economic growth we've experienced over the last few decades - and in an accelerated fashion in the past decade - is an issue for sure but it is not in any way a valid rebuttal for the fact that productivity gains no longer translate into wage increases. The fruits of today's productivity gains - which are siginificant - are harvested almost exclusively by executives and shareholders. As such, the rank and file have been disconnected from the success of the enterprise they keep going. Real median incomes have not only risen significantly less in the past three decades (roughly 25%) than they have in the three decades preceeding that (more than 50%) but have actually contracted slightly in the first decade of this century while the economy grew. It was the first time since records are kept that median incomes did decrease during an economic boom cycle. That is what I refer to as the lost decade for American workers. And it has nothing to do with the fact that US households relied ever more on credit to the point of irresponsibility. As I said, the latter is an issue but it's a separate issue that, at best, was triggered - among other things - by the declining incomes that households had to live with and by the disconnect of productivity vs. wage gains.

significant?

When you have double the government workers in an overwhelming majority of states in comparison to manufacturing jobs, then we have a problem.

Look at where the lower income wage earners are: Macys', McDonalds, Wal-Mart, etc.

Wages need to go up on the miniscule employee on the market? Wages are fine and within the CoL depending on where they live.

The problem today is that we've sent all of our real manufacturing jobs overseas and what we're stuck with for the most part is our consumer driven economy. That's the danger here. That's why unless the tax code is re-written and attacks businesses that pay employees overseas or hell, businesses that leave the country and then have their items imported should be taxed heavily if you want to bring jobs back here. Cheap labor will always win the day though if it's still more cost effective.

The question that we need to truly ask ourselves, is outside of agriculture (and related industries) what exactly does the US produce anymore that it truly beneficial to our economy?

[ScottThuy 140]

The question that we need to truly ask ourselves, is outside of agriculture (and related industries) what exactly does the US produce anymore that it truly beneficial to our economy?

Nothing, because corproations have been penalized for producing goods here for too long...

[Mr. Big Dog 10,747]

significant?

When you have double the government workers in an overwhelming majority of states in comparison to manufacturing jobs, then we have a problem.

Look at where the lower income wage earners are: Macys', McDonalds, Wal-Mart, etc.

Wages need to go up on the miniscule employee on the market? Wages are fine and within the CoL depending on where they live.

The problem today is that we've sent all of our real manufacturing jobs overseas and what we're stuck with for the most part is our consumer driven economy. That's the danger here. That's why unless the tax code is re-written and attacks businesses that pay employees overseas or hell, businesses that leave the country and then have their items imported should be taxed heavily if you want to bring jobs back here. Cheap labor will always win the day though if it's still more cost effective.

The question that we need to truly ask ourselves, is outside of agriculture (and related industries) what exactly does the US produce anymore that it truly beneficial to our economy?

Of course it's significant. Productivity gains today are about the same as those of the post-war period until 1970. Over the three post-WWII decades, when productivity gains were between 2.5 and 3 percent, median incomes doubled. The middle class prospered. Prodcutivity gains then faltered in the mid 70's through the early 90's to then re-bound to annual growth rates of about 2.5%. Average productivity gains have remained in the 2.5% range during the first decade of this century but no longer do you see the middle class prospering. No longer do you see the productivity gains being shared between all the stakeholders. In fact, wage earners have actually taken a hit compensation wise while producing more. And that is an issue. This isn't sustainable. Sooner or later there will be no denying that fact. And the sooner we stop denying it, the better it is.

[mawilson 2,133]

If you want to end tax benefits for people that have children, you'd also have to make sure that those without kids pay more heavily into the retirement systems since those without kids won't have contributed to the revenue stream that is needed to pay their beenfits.

Either that - or reform the retirement system so that people save for their own retirement and don't rely on other people's children to pay theirs.

[rika60607 215]

I know that. But wealth generates income without necessity to work (wealth can do so even without producing anything).

quote name='Paul and Vanessa' timestamp='1302015175' post='4588341']

wealth and income are two different things.