Taking the Same Amount of Shirt Off of Everybody's Back
March 17, 2004 10:38 AM   Subscribe

Ahh, the Flat Tax. The utopian vision of Steve Forbes, Dick Armey, and anybody swimming in 1099-INT forms is now a reality in Iraq (Wash. Post link). It sounds ideal in a lot of ways; everybody pays a similar amount, people save lots of time, and IRS workers are put out of a job. But the downsides are plenty; higher deficit, no write-offs for charitable donations, and more chances that people that earn their money through labor rather than stock trading will be left holding the bag.
posted by destro (25 comments total)
regressive taxes suck.

don't the rich put a far higher strain on the infrastructure?
posted by luriete at 10:44 AM on March 17, 2004

The flat tax is a good start.

But Fair Tax is much more like it.

Just think of all those IRS worms out looking for jobs.
posted by hama7 at 11:00 AM on March 17, 2004

Flat tax sounded good to me when I was about twelve years old. I also thought it would be a lot simpler for mapmakers if the whole world were just one big country.

I grew out of it, though.
posted by ook at 11:07 AM on March 17, 2004

How does the fairtax deal with imports exactly ? What's to stop me buying 90% of my goods from overseas thus consuming mucho and getting taxed little o ? You also end up in the position that the rich get rich much quicker than the poor as their wealth/consumption ration is way way less than the poor. Crap idea.
posted by zeoslap at 11:08 AM on March 17, 2004

make that ratio and not ration, mmm rashers....
posted by zeoslap at 11:08 AM on March 17, 2004

(thats rashes of bacon, not the red itchy kind, that's it i'm done)
posted by zeoslap at 11:09 AM on March 17, 2004

(and hama7, that "fair tax" sounds like a glorified sales tax -- which is if anything even more regressive than a flat income tax would be -- crossbred with a perpetual motion machine. I don't think I'd have fallen for that one even at age twelve.)
posted by ook at 11:20 AM on March 17, 2004

I'm still making my tax strategy where everybody pays depending on points they've earned. And you earn points by walking old ladies across the street. Still working on the details.
posted by destro at 11:24 AM on March 17, 2004

You can keep your progressive taxation, I suppose, but for the love of God, do away with the unintended consequences and social engineering that our myriad deductions encourage.
posted by trharlan at 11:31 AM on March 17, 2004

I like how, instead of seriously focusing on how best to rebuild a country and (make the Middle East see that our way is true and right/ atone for our hasty actions), we instead use them as ideological lab rats. That's bound to end well.

Also, from the Washington Post article:

After major combat ended, the discussions continued with Iraqis in Baghdad, with emphasis on tax policies adopted by other countries making the transition from controlled economies. "One was Russia and subsequently Ukraine, where we heard good things after flat taxes were adopted," Taylor said.

Oh, fuck me. Yeah, Russia's transition from a controlled to a capitalist economy was fantastic. It's blind luck we don't have Russia's nuclear stockpile scattered amongst the highest bidders in the Eastern hemisphere.
posted by furiousthought at 11:35 AM on March 17, 2004

regressive taxes suck.

Can you explain to me how a flat tax is possibly regressive? Just because it doesn't assist the class-war agenda doesn't mean it is regressive.
posted by jammer at 12:02 PM on March 17, 2004

Can you explain to me how a flat tax is possibly regressive?

"Regressive" is merely a technical term in statistics meaning that it's a smaller percentage of higher incomes. Of course, if the tax is truly flat, it would be neither regressive nor progressive.
posted by kindall at 4:45 PM on March 17, 2004

How would the wealthy feel if we had a flat tax but it worked in favor of working familes? A flat tax that comes from capital gains, dividend income and corporate earnings instead of wages.
posted by fresh-n-minty at 4:46 PM on March 17, 2004

how about a flat tax on all income, with the bottom 15% exempted completely? I would go for it.
posted by chaz at 5:17 PM on March 17, 2004

A flat tax is a bad thing because people at the lowest end of the income scale are forced to pay a higher proportion of their total income to meet basic needs than high-income people do. The idea of progressive, non-flat taxes is to give poor people a break at the expense of the wealthy.

This is because past experience has shown that the wealthy can end up burned out of their homes and dead if they don't give the non-wealthy a break.

Of course, that is the most extreme example, but let's just say that a flat tax could be a bad thing for society in general.

Personally, I'd be all for a simple tax without all the loopholes and deductions, but I would prefer it to be a progressive simple tax starting at 0% for those at and below the poverty level and becoming a flat 20-30-40-something % once it reaches a certain high income.

Of course, some wealthy people would consider that unfair, but that's because they don't understand we all benefit in a society when we do what we can to keep poverty as low as we can. It's a compromise so that the poor don't rise up and tear everything apart.
posted by moonbiter at 5:21 PM on March 17, 2004

A flat tax is a bad thing because people at the lowest end of the income scale are forced to pay a higher proportion of their total income

If you stop this sentence here, you realize this sounds ridiculous, right?

to meet basic needs than high-income people do.

But this is the sticking point. If you are making $1280 a month ($8/hr, 40 hour weeks, 4 week months), giving away $128 cuts into your ability to pay for necessities far more than it does if you're even making $3000 per month.
posted by weston at 5:40 PM on March 17, 2004

Er, yeah, that's my point. Flat tax is bad because it hurts a person making $1,280/month more to give away $128 than it does a person making $3,000/month to give away $300.

I'm not sure what you are getting at here.
posted by moonbiter at 5:46 PM on March 17, 2004

As much of a crazy moonbat Steve Forbes is, I've always liked the idea of a real flat tax. Real meaning no crap-ass exceptions or breaks for corporations. Everyone and everything pays 15%. Every April you get a neat printout from the government saying "Hello Citizen, this year you made X and the Federal Government took out X x 15% for Taxes. Thank you, and have a pleasant year."
posted by owillis at 5:49 PM on March 17, 2004

Ok, what if we go to a flat tax with a "standard deduction" equal to the poverty line plus the tax rate? So 10% flat tax means everybody gets a deduction of 110% of the poverty line. BLAM! Nobody gets put into poverty by taxes, and all those poor people who spend a greater proportion of their income on basic necessities don't have to worry about the so-called regressive nature of the flat tax. And most people can still do their taxes on one side of a piece of paper with a pen and a pocket calculator. People with complicated earnings will still probably need accountants.
posted by ilsa at 7:47 PM on March 17, 2004

and hama7, that "fair tax" sounds like a glorified sales tax

Many western countries, including Canada, the UK, Australia and New Zealand, have introduced 'Goods and Services Tax' or "Valued Added Tax' -- GST or VAT -- in the last couple of decades.

For better or worse, these were introduced in addition to standard income taxes in the countries in question, and in Canada at least, in addition to provincial as well as federal sales taxes.

As a replacement tax? I'm not sure I see that that's any better than a flat tax on income.
posted by stavrosthewonderchicken at 9:25 PM on March 17, 2004

Value Added.
posted by stavrosthewonderchicken at 9:25 PM on March 17, 2004

Personally, I hate the idea of the flat tax, but would love to see all of the ridiculous deductions and exceptions and loopholes taken out of the tax code. Congress needs to set a percentage of our pay that they're going to take out and just frigging stick with it.

The added bonus to this, of course, will be that on the whole, nearly everyone will be paying a much lower percentage out of their weekly or monthly paycheck, except perhaps those who are too rich for it to affect. Honestly, if every millionaire and billionaire in this country paid his full 35%, I doubt we'd be stuck in humongo deficits right now. As it stands, tho, most pay much less as a portion of their income than I do (fully ensconced in the 25% bracket), and they have the added bonus of not having to worry about how they're going to pay the rent.
posted by dogmatic at 9:23 AM on March 18, 2004

don't the rich put a far higher strain on the infrastructure?

i know you were probably just being snarky here, but no they do not. they provide most of the jobs and pay dramatically most of the taxes.

i dont know if flat tax is the answer. but lord knows its absolutely ridiculous how complicated taxes are right now. the fact that people go to college and start businesses that exist with the sole purpose of helping other people do their taxes is evidence in itself that the system is a little bit overly complex.
posted by glenwood at 12:00 PM on March 18, 2004

The flat tax is popular among people who have similar views about the shape of the earth.

It's also useful as a first, desparate step when dealing with a collapsed economy in which the structures for collecting taxes have also collapsed, such as in post-Communist Russia, when it was a choice between a flat tax and even more grannies starving to death. It's the fiscal equivalent of checking the back of the sofa or the car's glove compartment for coins when you're really out of cash.

So, it'll probably be introduced to the US by the end of the decade, once its economy starts resembling that of mid-90s Russia. (i.e. concentration of wealth and power in the hands of oligarchs who pay no taxes; elimination of welfare /health benefits for the lower classes.)

Honestly, if every millionaire and billionaire in this country paid his full 35%, I doubt we'd be stuck in humongo deficits right now.

Quite: as Warren Buffett has said, if other corporations paid the same proportion of taxes as Berkshire Hathaway -- which doesn't use overseas tax havens, shell companies etc -- then there'd be no deficit. It's particularly egregious when, say, Rupert Murdoch, who took US citizenship in order to control a large section of the American media, pays practically fuck-all in corporate taxes, since his corporations are subject to the tax policies and accounting standards of several little green dots in the middle of the Caribbean.

[the rich] provide most of the jobs and pay dramatically most of the taxes.

'provide'? You make it sound like they're doing it out of the good of their little capitalist hearts. And if you're focusing on the dramatically more wealthy, then perhaps they pay dramatically most of the taxes because the salary gap between the shop-floor and the boardroom has dramatically widened in the past couple of decades. And even then, fiscal policy hasn't evolved to reflect that dramatically wider gap, though I doubt that a CEO earning 400 times more than a corporation's lowest-paid worker makes such a dramatic difference to earnings than one earning 40 times more.

Flat Tax Keeps Oligarchs Happy. Remember that.
posted by riviera at 2:39 PM on March 18, 2004

Fair Tax - no one seems to be picking up on the rebate system (see "The FairTax is Progressive" section).

Through this, the government gives each individual (or family) a rebate equivalent to minimum living costs per month, meaning the less-well-off avoid being unfairly burdened. Also, the onus for compliance rests not with an army of taxmen or the taxpayers themselves, but with disinterested merchants. State needs only write cheques for taxpayers at the beginning of the month and collect 'em from businesses at the end.

Seriously, who doesn't like the idea of their government giving out money at the beginning of each month?

Hama7 thanks for pointing it out.
posted by pots at 3:30 PM on March 18, 2004

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