Oh great, the Republicans want a FLAT TAX

[JohnT]

Originally posted by MrFun



Ok, so then the upper class will be paying unreasonably too low in taxes.

Can you explain how you drew that conclusion from the post you quoted?

[Bosh]

Originally posted by Darius871


What of an exemption for necessities such as food and clothing, like most state sales taxes have? That's virtually all the poorest of the poor pay for, while the rich would pay extravagant sales taxes on big-screen TV's, yachts, etc. Doesn't sound very regressive to me.

You make the mistake of assuming that there's an exemption for necessities built into American sales taxes. In most cases no such exemptions exist (at least not where I've lived).

[PLATO]

Originally posted by Geronimo

I'm pissed that they never said anything about the fact that the taxes also meant that non earned income would be taxed at a lower rate than earned income. this is in fact the first time I've seen that mentioned.

Not exactly true. If a corporation earns income and is taxed at 20%, then 100,000 in income would be 80,000 in after tax income. If it then distributes this income to its owners (stockholders) and they are then taxed 15% on this 80,000 then they will have 68,000. This is an effective tax rate of 32%.

The tax table shows that 100,000 in income is taxed at 28%.

This means that the same 100,000 in income is still taxed at a higher level for the investor than for the wage earner. Part of the "tax" on the investor is receiving a lower dividend because the money has already been taxed once by the government. This is the "double taxation" that we have been talking about and Bush's plan just made it more fair.

To spin it into saying the investor pays less than the wage earner is to simply not understand the truth.

[Bosh]

The problem is that conservatives have been using the "taxed twice" justification to lower both the taxes of investers AND corporations and adding in a lot more loophopes to both taxes. If they wanted to be consistent they'd just scrap one of those forms of taxation entirely (getting rid of corporate taxes would make more sense but would play worse politically), but I suspect that they would rather use the "taxed twice" justification to keep on lowering both types of taxes rather than actually solve the supposed problem and change the tax code so that said income is only taxed once.

[Darius871]

Originally posted by Boshko
You make the mistake of assuming that there's an exemption for necessities built into American sales taxes. In most cases no such exemptions exist (at least not where I've lived).

What assumption? I'm talking about the way a national sales tax should be, not what it will be.

Still, the only way it'd ever be politically feasible is if such exemptions (as well as increased rates on certain obvious luxuries) existed. If they would, it seems no more regressive than the current system.

[Bosh]

No, I was talking about this:

What of an exemption for necessities such as food and clothing, like most state sales taxes have?

I don't think I've ever seen that kind of exemption in the state sales tax of any American state I've ever been to.

[Dauphin]

Originally posted by PLATO


Not exactly true. If a corporation earns income and is taxed at 20%, then 100,000 in income would be 80,000 in after tax income. If it then distributes this income to its owners (stockholders) and they are then taxed 15% on this 80,000 then they will have 68,000. This is an effective tax rate of 32%.

The tax table shows that 100,000 in income is taxed at 28%.

This means that the same 100,000 in income is still taxed at a higher level for the investor than for the wage earner. Part of the "tax" on the investor is receiving a lower dividend because the money has already been taxed once by the government. This is the "double taxation" that we have been talking about and Bush's plan just made it more fair.

To spin it into saying the investor pays less than the wage earner is to simply not understand the truth.

You have forgotten that if a person was earning the $100,000 then not only would the company's profit then be zero (removing the corporate tax as you note) but an additional employer's payroll tax would be introduced.

I don't know the rate, but I think its what, 10% or so? That makes personal income tax a higher cost than the 28% you have listed by not a negligible degree.

[GePap]

To AnnC for making by far the most sense in this thread, and being the most concise.

I have no proble of switching form an income tax system to a consumption tax system- but obviously, a progressive one- for example, I would tax the buying of stocks or bonds.

[PLATO]

Originally posted by GePap
To AnnC for making by far the most sense in this thread, and being the most concise.

I have no proble of switching form an income tax system to a consumption tax system- but obviously, a progressive one- for example, I would tax the buying of stocks or bonds.

Have to agree that the post did seem to make sense and was concise.

It was, unfortunately, only part of the picture and therefore incorrect.

Nice slant on the issue though GePap.

[Kontiki]

So let's clarify:

Current taxation is unfair because high income earners pay both a higher percentage of their income and a greater net amount in taxes.

Introducing a flat tax with certain minimum starting point is more fair because high income earners pay both a higher percentage of their income and a greater net amount in taxes.

Sounds about right.

[chequita guevara]

My income is taxed twice. Once when I earn it, once when I spend it. Whah, whah, whah.

[Velociryx]

So how will the credits and exemptions be doled out? Fat check at the start of each year? Which means that the low income folks will still have to eek out an existence for that first year it is enacted?

That’s harsh.

But, IF it happens, I can see some upsides, too. Do not downplay the ingenuity of the American people.

One thing it will do is that savings/investment rates will increase. Nobody will spend more than is absolutely necessary in the low to mid income brackets. Another is that people will become net producers. Lots more home gardens, lots of informal community associations and barter going on behind the scenes. If it passes, I know that’s what I’ll be doing. I got a big back yard. Could easily set up a mini-orchard and a garden big enough to provide most of the veggies I get at the local Kroger right now. End result will be that I’ll have more money in my pocket (federal tax bite goes away, and I get it back in my paycheck), healthier, home-grown foods, and I have more money to invest in dividend-paying financial instruments, which are taxed at a lower rate!

-=Vel=-

[Darius871]

Originally posted by Boshko
No, I was talking about this:

What of an exemption for necessities such as food and clothing, like most state sales taxes have?

I don't think I've ever seen that kind of exemption in the state sales tax of any American state I've ever been to.

Well it's the case in Minnesota; replace "most" with "some" if you wish. Still nobody's addressed the point that a sales tax with such exemptions would indeed be no more regressive than our current tax code.

[Imran Siddiqui]

Originally posted by chegitz guevara
And Bush's plan is now law.

Only for a few years... which is why Bush is pushing for his cuts to be permanent. It was originally for 5 years, I think, just for recovery purposes.

[chequita guevara]

Originally posted by Darius871
Well it's the case in Minnesota; replace "most" with "some" if you wish. Still nobody's addressed the point that a sales tax with such exemptions would indeed be no more regressive than our current tax code.

It's very simple. Sales taxes takes a larger percentage of the money of the poor than it does the money of the rich. Thus is is a regressive tax. Even if you exempt necessities, people still have to buy a lot of things that aren't food.