I noticed that there was quite a discussion here spurred on by the recent Tea Party / Tax Revolt movement (?) that enthralled the country (or at least the relatively small Fox Noise portion of it). It seems that most every point and counterpoint was made there, so I won’t even ask why there was no revolt by these same well intentioned folks when the Bush admin was showing us their brand of fiscal responsibility.
The reason for this thread is not to pick a fight but rather to put up a solution to eliminate ALL of our nation’s financial problems once and for all. I have reasoned it our, tossed every “policy grenade” at it I could think of and still it seems to be such a simple and obvious solution, I can not for the life of me figure out why our trusted (?) leaders don’t get on with it. And please, read it all before you dismiss it out of hand, because I really am interested in a fully informed opinion by everyone here.
The idea is, of course, the flat tax. Please allow me to make the case and then, at your leisure, tear it apart. Perhaps if we can iron out the bugs here, something may come of it…
Idea
To remove ALL forms (more than 800), deductions, special allowances, etc. from the Federal Tax Code, replacing them with a one page form.
Personal Income Tax
On Line 1, you would list your Labor Income.
On Line 2, you would list addition sources of income (i.e. interest, dividends, inheritance, etc.).
Right-wing think tanks such as the Heritage Foundation consider such income as “double taxation”, stating that such taxes are discriminatory against the wealthy, but I disagree. While monies inherited may have been taxed by the original earner, when they are inherited, they become “income” for the inheritor, and that person has never paid a tax on that money (income). Similarly with dividends or other capital gains, I do not suggest we tax the monies invested to reap additional profit, but the additional profit (income) itself that is earned by investing those already taxed monies should indeed be taxed.
If people of means choose to make their living in a way other than labor, that is their choice, but it should not exempt their form of “income” from being taxed.
On Line 3, would be your tax due (adding Lines 1 and 2 and multiplying by the 15% taxable rate, the sum total being your tax liability for the year).
Line 4 would be the amount of Federal Income Tax been withheld by your Employer(s) during the year.
Line 5 would be your end of year tax status. Subtracting Line 4 from Line 3 would inform you if you still owe a tax payment or have a refund coming.
Business (Corporate) Tax
Again, groups such as the Heritage Foundation insist that corporations should be allotted tax exemptions such as depreciation on machinery and buildings, etc.
Nope.
Here’s how I would propose the Corporate Tax would work…
Line 1 would be your total Receipts (income)
Line 2 would be the total of labor costs, input and business investments costs (HEAVILY REGULATED and DEFINED with no loopholes or garbage).
Line 3 would be your Taxable Income (subtracting Line 2 from Line 1)
Line 4 would be your Taxable Income multiplied by the tax rate of $15%
and give you your tax liability for the year.
Now, pro-business groups (and remember, we’re not supposed to have pro-business or anti-business sides here, this is supposed to be FAIR taxation, remember?) allow for additional lines in their “Fair Flat Tax Code, so that businesses can offset taxable income from losses from a previous year or so that they may “carry forward’ looses from this year to future years.
Again…nope.
If a person chooses to go into business, they do so knowing the risks, and they have (hopefully) weighed the possible benefits against the possible losses and gone into this venture with reasonable expectations. If you do not agree with this, I would love to hear an explanation of why a business should be able to benefit in the form of a tax deferment or other such adjustment because of a failure in their business, when the average household gets no such benefit when they lose their job and their bills are paid late or go totally unpaid. In fact, when we suffer a “business failure” in our everyday lives, we are penalized, with late fees, interest fees, etc. I am not suggesting that if a corporation suffers a set back they be penalized, but similarly, they should NOT be rewarded.
Also, conservative supporters suggest that corporations should not be taxed for business done or profits made overseas, claiming this will give them a fair playing field on the world market.
Again, nope.
No one is forcing U.S. businesses to do business overseas. Similarly, as we have seen since the days of deregulation during the Reagan administration, when corporations benefit by not paying an income or labor tax overseas, that’s where they move their jobs. This is no to the benefit of our nation’s citizens in any way, shape or form. My flat tax proposal would be addressed in this manner…
1. Any business sales income you achieve overseas is still taxed, but at a reduced rate of 10% as opposed to sales income within the U.S., which is taxed at 14%.
2. Any labor (jobs) that your business employs outside the U.S. will incur a labor income tax equal to the federal revenue that would have been received were that job being held (and the income taxed) to a citizen in this country.
3. There will be a $1,000 tax deduction for every FTE (Full Time Equivalent Employee) employed within the U.S.).
Items 2 and three will help to encourage U.S. businesses to keep jobs here at thome and employ our own citizens which will certainly help our economy.
Now for me, the end-game benefit of a Fair/Flat Tax is this…
Because the tax loopholes for the wealthy and connected (read: politically contributing) corporations are gone, the income hat comes into the federal government will skyrocket. Budget deficits will evaporate in a matter of a couple of years and, here’s the kicker…we can now make all congressional and presidential elections FULLY publicly funded, thereby erasing the need for the 65,000 lobbyists on K street and the elected officials can then go back to making their business that of representing their constituents instead of constant fundraisers so they can get themselves re-elected.
Ok, I think that about covers it for now. Aside from the obvious, that the elected are the ones who don’t actually benefit from this, so why would they ever pass it?…I can’t think of a reason why this shouldn’t be law tomorrow.
Comments?
cheers!
Dennis Jones
Idaho Falls
Popularity: 6%
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Gato got runned over by Marcus many moons ago. Be ye daft, 2486? 
Let's have a new poll, alright, Joe?
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{ 11 comments… read them below or add one }
I, for one, am all for a totally revised way of taxing that would take out the middlemen and, unfortunately, make anyone working in tax preparation look for a new job. I think it would have to be drastic and initially painful, and that’s why I’m afraid it would never happen.
I do hope that someone looks into this type of reform before it becomes absolutely necessary though. I think that there are way more people living on government incomes (high up, not teachers or city workers) than we need to run the country.
My Dad had a great theory on how to take care of the tax problems. Abolish all taxes except sales tax and raise it to where it would need to be raised. That way everyone would pay taxes equal to their own ability. Rich people would pay more because the buy more, and you would get those elusive dollars from ‘illegal enterprise’ because we all know that a lot of big ticket items are purchased with “that” money.
I realize that’s not realistic, but in the end, I wonder if the solution will be something that seems impossible right now, whatever it may be.
I think a flat sales tax would work similarly enough and simply enough to the flat/fair tax that I would be for it.
I actually did my high school thesis on the flat tax. I find it interesting it’s not being pushed more by the american people. I haven’t met a “normal” american citizen (outside of those that make money off of the current system aka accountants etc) who doesn’t think it would be a good idea.
High school thesis?
you know that freakin paper you do at the end of your senior year to prove to your English teacher that you actually can write a paper?
It’s 8 pages long and a ridiculous graduation requirement. I think he was making a backhanded insult because you brought up a senior thesis rather than a college term paper.
Knowledge isn’t forced in months or years or schooling, but rather gathered through experience and fed by personal interest. You college elitist bastards need to shove off. Anybody with the motivation and drive to do so, if given the chance, can learn through experience what you spent thousands of dollars on and sacrificed years of your life for, and I will stand by that until the day that I die. I’m a firm believer that a kid fresh out of college hasn’t learned a thing until he applies what little information he has retained from school in the field…and is re-trained to do it the right way.
lol Marcus. No need to get your panties in a wad.
Gotta agree, term papers are only in the 10 page bracket, the High School thesis is not only improperly named, the kids aren’t prepared to write a decent paper of that length.
But I’m certain you wrote a great paper April.
Now about those taxes. The sales tax idea would be great if it weren’t for the fact that many businesses would get away with paying very little in the way of taxes as compared to the amount of money they make. A lot of businesses sell information/advice with the bulk of their expenses being nothing more than basic overhead. No materials equal no sales tax. That’s assuming businesses would have to pay sales tax on materials under a sales tax only plan.
But the sales tax plan is probably much more workable than the flat income tax plan outlined above.
If taxes were only paid on the end-product, wouldn’t the same apply to any business, not just a business selling a non-tangible product? I’m guessing that a sales tax would have to be paid on even advice and such, or the taxing idea wouldn’t work.
Do you pay taxes on things like lawyers fees or consultants fees? I haven’t had much experience with that type of thing, so I don’t know. I’m guessing the only taxes that get paid there are by the people supplying the need.
Untwisted…a few good points, but actually, the biggest problem with a national sales tax would be that it would require us to impose a tariff on imported products, so as not to give other countries an unfair advantage. This would, of course, wreakhavoc with existing trade agreements as well as severly limit those in the future.
Also, as you so aptly pointed out, it would be difficult if possible at all to enforce a sales tax for service businesses.
All in all, the flat income tax would be the most efficient, manageable, incusionary system that has thus been proposed. IMHO…
thanks Marcus. I agree… though I do have a college education, it does not make anyone elses knowledge any less valuable. I didn’t do any college papers on the flat tax mainly cause I wasn’t an economics or english major. meh.
I hate it when people assume others are stupid, and though it was a highschool paper I did learn a ton from it even if it wasn’t well written etc. I know something about the Flat Tax, that is all I was trying to imply. Not that I was an expert, just that I had looked into it in the past.
I wish the governmental “powers that be” would maybe look a little more into the ideas of the so called common people. I think they could get some great insight, and I also think that people in these governmental positions get so used to seeing things one way that they kind of get tunnel vision, if that makes sense.