The World is Flattening: CNN article regarding flat taxes

[Trek]

Some may enjoy reading this:

The World Is Flattening

 

[chinaco]

Flat tax is a controversial issue in the US. It seems like a reasonable alternative. However, I think that wages should be taxed at a different flat rate than equity investments. There should be a risk premium (reward) for taking the risk of losing one's money... This incentive give tome boost for entrepreneurs and investors to fund new businesses.

 

[retire@40]

...I think that wages should be taxed at a different flat rate than equity investments. There should be a risk premium (reward) for taking the risk of losing one's money... This incentive give tome boost for entrepreneurs and investors to fund new businesses.

There is. It's the ability to deduct one's capital losses.

 

[ERD50]

Interesting. Maybe a little more balance, here:

Also note: Estonia may have a 22% flat tax, but they also have an 18% VAT. And of course, the devil is in the details. Are there deductions, or exemptions?

Personally, I am in favor of a moderately progressive tax (a flat tax or sales tax with a standard deduction or 'pre-bate' approximates that).


Country Corp Inc tax Pers Inc tax VAT

Estonia 22% 22% 18%

-ERD50

 

[REWahoo]

Those of you who weren't around the Forum prior to 2006 might want to check out some past history on "Flat Tax" threads.

http://www.early-retirement.org/forums/f28/new-national-sales-tax-15380.html
http://www.early-retirement.org/forums/f28/fairtax-gaining-steam-17556.html

 

[CybrMike]

If anyone, it should be the retirees who vehemently oppose the flat tax. If you have money in taxable accounts that is. Take for instance someone who sold their business and paid taxes on the lump sum.

Enter the flat tax, that person is forced to pay taxes on money that has already been taxed. Fix that and maybe we are talking. Otherwise, it will never get my vote.

 

[Zathras]

CybrMike, I don't quite follow.
My understanding is that the money which you paid taxes on would not be taxed again. The interest on those savings may be, but not the savings themselves.
Personally, I like the idea of a flat tax. Sure, there are lots of details to work out. I think the added compliance and added simplicity are both very good things.

 

[CybrMike]

One of the proposals flying around is the no income tax, 23% tax on everything you buy flat-tax.

 

[Rustic23]

I am not sure either the flat or a national sales tax would benefit me. When I retired I set my spreadsheets based on current tax law. Give a percent or two one way or the other I have a fairly good idea where I stand.

Flat tax... If it is set at 15% or higher, then I think I'l pay more. Given the marginal set up of the current tax system, I pay $0 on some of my income, 10% on other and 15% on other. Right now it all adds up to about a 12% rate.

Sales tax. I have heard anywhere from 17-23%. I would assume my mortgage would drop out, but depending on weather they exclude medical/food and booze then I am looking an an increase tax.

The devil will be in the details, and as congress tries to please the most voters, I fear that most who post on this board will be means tested into a higher tax bracket. With a joint SS check around 28K and savings and pensions bringing in another 30k, that places me about the top 25% of tax payers. I doubt they will lower my taxes.

 

[FinanceGeek]

There's simply no way that a so-called national sales tax would completely replace an income tax in the US. Due to the fact that lower to middle income people (who by the way are how you win elections) have little to no "disposable" income, this would wind up being a very regressive system and is politically impossible. The only reason these Eastern European places are able to put together such a system is that the political infrastructure for special interest groups over there isn't sophisticated enough to oppose it.

The scary thing to me about talk of a national sales tax is that we'll likely wind up adding it as a new tax and not getting rid of any other taxes.

The big thing the founding fathers missed was a way to limit the growth of government.

 

[ERD50]

There's simply no way that a so-called national sales tax would completely replace an income tax in the US. .....

this would wind up being a very regressive system

F-Geek - see the threads that REWahoo provided. A flat tax or National Sales Tax CAN be made to be 'progressive'. See 'pre-bate'.

Those of you who weren't around the Forum prior to 2006 might want to check out some past history on "Flat Tax" threads.

http://www.early-retirement.org/forums/f28/new-national-sales-tax-15380.html
http://www.early-retirement.org/forums/f28/fairtax-gaining-steam-17556.html

and is politically impossible.

I agree, which is why I'm going to try to stay out of this discussion. See the other threads.

-ERD50

 

[Texas Proud]

One of the proposals flying around is the no income tax, 23% tax on everything you buy flat-tax.

Yes.. that is the problem with the descriptions that people use...

They went to a flat INCOME tax... what is being proposed by the Flat people here is a flat VAT tax and no income tax...

I think a progressive tax is good... but I would like to see the deductions reduced or eliminated... and get rid of the robbery of the SS tax... and make everybody pay at least something... ie, the lowest tax rate being 5% or 10% on all wages..

Also, remember if you have a flat tax on ALL wages without deductions, you can take it out of the paycheck without someone 'cheating' by claiming a huge number of deductions as there aren't any!!!

 

[retire@40]

Also, remember if you have a flat tax on ALL wages without deductions, you can take it out of the paycheck without someone 'cheating' by claiming a huge number of deductions as there aren't any!!!

And for those that don't get a paycheck, like the self-employed, landlords, investors?

 

[jnojr]

Income taxes are stupid. Why would you want to penalize success, profit, initiative, and wealth creation?

I believe in a flat consumption tax, but there's simply no way to have one that's "revenue neutral"... a 23% sales tax would simply create an enormous black market. What we really need is a small consumption tax combined with a drastic reduction in the size and scope of government. Get back to the powers that were specifically delegated to it in the Constitution. Get rid of most of the Departments. Get rid of the massive bureaucracies. The private sector can do almost everything the government does far more efficiently and economically.

 

[MasterBlaster]

What we really need is a small consumption tax combined with a drastic reduction in the size and scope of government.

Yeah that's going to happen !

I talked to Al Sharpton about this, and he didn't think it was such a great idea after all and that he would resist such a policy.

Imagine that !

 

[chinaco]

I suspect that our tax system will not change significantly in our lifetime... The only change will be increase taxes using the same system.

 

[barbarus]

One of the proposals flying around is the no income tax, 23% tax on everything you buy flat-tax.

Sounds great to me and should to others who LBTM (live BENEATH their means) i.e. live lives akin to bumatude.

The gvmt would soon keep the high sales tax and re-institute an income tax though.

 

[ziggy29]

There's simply no way that a so-called national sales tax would completely replace an income tax in the US. Due to the fact that lower to middle income people (who by the way are how you win elections) have little to no "disposable" income, this would wind up being a very regressive system and is politically impossible.

Not necessarily.

First of all, it's possible that some types of items could be tax-exempt (such as food and medicine). Since this takes up a disproportionate share of the lower-income budget, they pay taxes on much less of their spending.

Secondly, many "national sales tax" proposals call for a baseline "cash rebate" of $X for everyone. This could be (for example) the amount of sales tax someone at the poverty line would expect to pay. Someone below that point could conceivably pay a negative tax rate if the amount they receive exceeded the sales taxes they paid.

I'm neither for nor against a national sales tax in principle; like the health care issue, my opinion depends on the implementation. The devil truly is in the details.

 

[Jay_Gatsby]

The scary thing to me about talk of a national sales tax is that we'll likely wind up adding it as a new tax and not getting rid of any other taxes.

Sounds like the rationale they used for initiating state lotteries, the purpose of which was to provide funding for schools. Funny thing is, the states put the lottery money towards schools, and then simply reallocated the previous school money (generated by property taxes) into other projects. While the lottery isn't a tax per se, and old boss of mine once called it a "tax on the stupid". I just consider it state-sponsored gambling with the odds much more favorable to the house than even casinos can get.