The merits of the current tax system versus a "flat-tax" (simply curious)

[FVZA_Colonel]

Before I begin, I would like to clarify that I do not necessarily support the idea of replacing our current systems with the flat-tax proposal. I will also admit that I have not thought about this nearly as much as I ought to have, and am interested in the opinions of my fellow Duers on this issue.

[lumberjack_jeff]

1. Bad idea.

http://www.strom.clemson.edu/opinion/ulbrich/flatax2.html

[FVZA_Colonel]

2. Thank you.

I, unfortunately, do not have time to read it at this moment (need to meet friends for a study group), but I have bookmarked it.

[kaygore]

6. Thank you!

[flaminbats]

3. that is easy!!

with a progressive tax, you raise the same amount of money with a variety of tax rates..as opposed to the amount you could raise with a single tax rate. So...if you just wanted to keep the deficit from climbing without drastically cutting spending on safety nets or defense, you would have to raise taxes. Under a flat tax..everyone, regardless of income, would be paying a higher tax rate. With a progressive tax you can raise the higher tax rates without also hurting those who are making very little every year. More importantly people don't lose money because they pay a higher rate on the additional levels of money they make. But everyone loses money whenever a flat rate is raised to reduce the deficit. A higher flat tax also neutralizes government efforts made to fight poverty.

In other words someone rich will pay the same on their lower levels of income even if they pay more for their higher levels of income, but both the low income and rich person will pay more on those lower levels of income whenever a flat tax rate goes up. In other words the progressive tax makes it easier for everyone to meet the cost of living, while raising additional revenue from those who have plenty to spare. Basically it raises the most revenue while doing the least amount of harm to the private sector.

[Mechatanketra]

4. OK, I'll take a crack at it.

At the heart of it is this: The real 'burden' of a tax is not measured by how much is taken, but by how little is left. If I take $5 million from a billionaire, he's hardly going to notice; if I take $500 from someone living paycheck to paycheck, there's a very real chance it will cause problems for you. This is why, for instance, medieval "poll taxes" (fixed prices, like 'one shilling a head') are considered the most regressive form of taxes. As my brother puts it, people don't buy eggs in percentages.

Another merit that Joe Sixpack at times seems to not even recognize the existence of is that our current system is built on the conceit that everyone pays the same taxes on the same dollars. I pay the same percentage of my first $5000 in the year as Donald Trump did: nothing. Increasing the percentage of a given tax bracket only skims more money out of the stack of bills that actually falls in that range. This is what makes upper-class tax cuts such a grotesquely ridiculous subject: who really cares how much money a CEO has to pay the government from the top half of his income, when the bottom half is still more than 90% of the country has before taxes? If you were the richest man in the country before taxes, you'll be the richest man in the country after taxes, and the absolute last man in the country with a right to complain about them.

On the practical side of things ... if we shift to a flat percentage tax, we can imagine a point on the income scale where the old and new tax curves intersect — in other words, where that percentage happens to match what individuals with that income were paying before. Everyone above that point is paying less money than before; everyone below that point pays more. In other words, moving to a flat tax, regardless of where it's set, has to amount to a break for the people who by definition are least in need of "relief" from taxation, and an extra burden on those most in need of extra money to keep. Good job there, Sparky.

Not to put too fine a point on it, but the progressive margin system (the basis of our current income tax)remains the best option yet proposed:
• In practical terms, it's better because you can't squeeze blood from a turnip — the money has to come from where the money is.
• In ethical terms, it's better because it is actually the wealthiest sector that represents the highest degree of stagnation in the economy (if you increase your net worth, then by definition you took more money OUT of the dollarstream than you put back IN), and thus merit the greatest degree of any 'punishment’ inflicted by taxation.
• In moral terms, it's better because it distributes the "suffering" of taxation to those most insulated against it (as I alluded to in the first paragraph). Once more: The burden of a tax is measured not by how much is taken, but by how little is left.

[Telly Savalas]

5. It's a basic tenet of social justice

that money that would otherwise be used to put food on the table and a roof over one's head should be taxed at a lower rate than money that would otherwise be used to buy a yacht.

People that benefit more from our system of economic organization (i.e. those who make a lot of money) should take on a bigger part of the tab of paying for the government which maintains the system.