The flat tax

Here are some notes on the flat tax:

Flat Tax proposals

When mankind formed it’s first government, taxes sprang into being. Perhaps the first government consisted of one big guy taking control of a group by threat of force or punishment, and the first tax was his method of extorting benefits (money, goods, services) from his group. Current governments operate by the same principles – except the “big guy” is now a group of people, perhaps a political party, and taxes are numerous and probably much more onerous. The key idea here is that the we, members of the population, are forced to pay the city, county, state, and country. It is institutionalized extortion, but of course, we receive many benefits in return. Maybe the original big guy kept the other males in his tribe from misbehaving. Perhaps he settled arguments between them.

How do I tax thee? Let me count the ways – they are innumerable and inescapable. The most onerous is the current United States Federal Income Tax. Our current income tax code is the product of many years of legislation since President Wilson introduced it (as the first permanent progressive income tax) in 1913. Tax rules have been made ever more complex by Congress since then, with many concessions made to one group or another. What’s wrong with the tax code: a good stab at that, from 1999, is here.

How would politicians reform it, if they could? The two main proposals are the Fair Tax, (see my post on this site), or the Flat Tax. The Fair Tax is a sales tax that would affect anyone spending money. The Flat Tax is a single, one-tier tax, computed on all taxable income at the same rate. Here’s a good article from the Heritage Foundation describing it:

Heritage Foundation Report. Here’s one not in favor of it at all: Flat Tax Fiasco.

I favor the Heritage Foundation report.

A danger in the Fair Tax is that politicians might just pass the sales tax and keep or later restore the income tax. You’d end up with both.

As always, the devil is in the details. Both kinds of taxes should increase the number of people paying into the system. The percentage charged would make a lot of difference, but with either system we would have many fewer forms to fill out, and both systems would hit the wealthy much harder than the poor, especially the Fair Tax, since the wealthy spend more by far. With the Flat Tax, there would be fewer – if any – loopholes for the wealthy to use.  But they could always avoid income.  They really can’t help spending, they love it, so the Fair Tax would nail them for sure — unless they did all their spending outside the U.S.  I’m afraid that for any tax, there is a way it can be avoided.

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One Response to The flat tax

  1. nice work keep it up

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