Question for more liberal TI members

[yoshi121374]

I get that. Thanks

I didn't fully answer,but it also may give pause to spending. Do I buy that new car if I have to pay and additional 10% on top of the price? Do I just save money instead of spending?

Spending is what drives the economy.

Should the U.S. Switch to a Flat Tax?

Some countries have begun charging a flat tax rate instead of the gradual tax system of the Western world. Review the reasons why the U.S. should and should not switch.

www.investopedia.com

This explains the pros and cons pretty well.

 

[scotchtiger]

It is a larger impact on overall income. 10% of $40k is a much bigger impact on your daily life and budget than 10% of $400k. You miss it much more if you have less to begin with.

Most flat tax proposals have a basic deduction built in. For example:

• 15% flat tax
• Deductions of $10K per adult and $5K per child (capped at 3)
• Family of 4 making $40K pays 15% on $10K, or a 3.75% effective rate.
• Family of 4 making $400K pays 15% on $370K, or a 13.88% effective rate.
• The higher earning family pays 37 times the taxes of the lower earning family despite only making 10 times as much money.

This makes a ton of sense. It accounts for a basic standard of living without being punitive toward higher earners.

 

[yoshi121374]

Most flat tax proposals have a basic deduction built in. For example:

• 15% flat tax
• Deductions of $10K per adult and $5K per child (capped at 3)
• Family of 4 making $40K pays 15% on $10K, or a 3.75% effective rate.
• Family of 4 making $400K pays 15% on $370K, or a 13.88% effective rate.
• The higher earning family pays 37 times the taxes of the lower earning family despite only making 10 times as much money.

This makes a ton of sense. It accounts for a basic standard of living without being punitive toward higher earners.

I would love to have this. As I've stated a few times,I wish all Americans had incentive to care. We have created a toxic charity situation with many in the US. I'm all for helping people and giving assistance to rise up, but you have to actually want to achieve more.

Another benefit of a consumption tax is that nobody gets away without paying taxes. Even illegal aliens are paying taxes. It should create a lot of revenue.

How would you handle corporate taxes? I would be fine with lower rates with no loopholes,but I would want a much higher minimum wage to eliminate my tax dollars subsidizing corporations not paying enough.

 

[scotchtiger]

I didn't fully answer,but it also may give pause to spending. Do I buy that new car if I have to pay and additional 10% on top of the price? Do I just save money instead of spending?

Spending is what drives the economy.

Should the U.S. Switch to a Flat Tax?

Some countries have begun charging a flat tax rate instead of the gradual tax system of the Western world. Review the reasons why the U.S. should and should not switch.

www.investopedia.com

This explains the pros and cons pretty well.

I think you may be confusing a flat tax with a VAT. Flat tax applies to income and doesn't impact the price of goods. VAT eliminates or significantly reduces the income tax in exchange for a tax on spending (which generally excludes basic needs like food, shelter, etc).

 

[yoshi121374]

I think you may be confusing a flat tax with a VAT. Flat tax applies to income and doesn't impact the price of goods. VAT eliminates or significantly reduces the income tax in exchange for a tax on spending (which generally excludes basic needs like food, shelter, etc).

Ahhh. You're right. That's what I was thinking. I was thinking of a universal sales tax. What are your thoughts?

 

[scotchtiger]

I would love to have this. As I've stated a few times,I wish all Americans had incentive to care. We have created a toxic charity situation with many in the US. I'm all for helping people and giving assistance to rise up, but you have to actually want to achieve more.

Another benefit of a consumption tax is that nobody gets away without paying taxes. Even illegal aliens are paying taxes. It should create a lot of revenue.

How would you handle corporate taxes? I would be fine with lower rates with no loopholes,but I would want a much higher minimum wage to eliminate my tax dollars subsidizing corporations not paying enough.

Personally, I think the concept of the income tax is so engrained at this point that we are stuck with it. Because of that, I wouldn't support a VAT/consumption/fair tax because eventually, the government will just stick it to us at both ends. In theory though, a consumption-only tax with that tax waived on basic needs could make sense.

Corporate taxes are more difficult. I honestly don't know enough to intelligently comment. Big companies shouldn't be able to hide profits overseas and pay nothing in the US though, so things like that should be shut down.

 

[yoshi121374]

Personally, I think the concept of the income tax is so engrained at this point that we are stuck with it. Because of that, I wouldn't support a VAT/consumption/fair tax because eventually, the government will just stick it to us at both ends. In theory though, a consumption-only tax with that tax waived on basic needs could make sense.

Corporate taxes are more difficult. I honestly don't know enough to intelligently comment. Big companies shouldn't be able to hide profits overseas and pay nothing in the US though, so things like that should be shut down.

I wish we had some individual states that would try different tax plans on a trial basis so we could test it out. It's difficult to compare the US to other countries since we have such a different make-up than most countries.

 

[Mac Tiger]

I didn't fully answer,but it also may give pause to spending. Do I buy that new car if I have to pay and additional 10% on top of the price? Do I just save money instead of spending?

Spending is what drives the economy.

Should the U.S. Switch to a Flat Tax?

Some countries have begun charging a flat tax rate instead of the gradual tax system of the Western world. Review the reasons why the U.S. should and should not switch.

www.investopedia.com

This explains the pros and cons pretty well.

I guess my idea of "flat tax" is a flat rate on income, not applying it to purchases.

 

[Mac Tiger]

I would love to have this. As I've stated a few times,I wish all Americans had incentive to care. We have created a toxic charity situation with many in the US. I'm all for helping people and giving assistance to rise up, but you have to actually want to achieve more.

Another benefit of a consumption tax is that nobody gets away without paying taxes. Even illegal aliens are paying taxes. It should create a lot of revenue.

How would you handle corporate taxes? I would be fine with lower rates with no loopholes,but I would want a much higher minimum wage to eliminate my tax dollars subsidizing corporations not paying enough.

I like that also! I too like a standard corporate rate with no loopholes. Your last statement about our tax dollars subsidizing corporations for not paying enough, explain that. In my head, if there is a flat rate for corporations with no loopholes, how are they then not paying enough? Who gets to determine what "enough" is? Doesn't increasing the minimum wage then de-incentivize corporations from creating more jobs? Is it really the governments job to tell corporations what to do with their earnings? Seems like a catch 22. We also have to make sure that minimum wage doesn't become a toxic charity situation also.

 

[yoshi121374]

I like that also! I too like a standard corporate rate with no loopholes. Your last statement about our tax dollars subsidizing corporations for not paying enough, explain that. In my head, if there is a flat rate for corporations with no loopholes, how are they then not paying enough? Who gets to determine what "enough" is? Doesn't increasing the minimum wage then de-incentivize corporations from creating more jobs? Is it really the governments job to tell corporations what to do with their earnings? Seems like a catch 22. We also have to make sure that minimum wage doesn't become a toxic charity situation also.

I was referring more to our current situation where corporations can pay low wages, and the US government(our taxes) pay for welfare.

I firmly believe if you paid an actual living wage more people would be encouraged to work.