Forum Post: The Truth About the Flat Tax - the Bottom 50% will see a huge tax increase
Posted 12 years ago on Nov. 7, 2011, 4:44 p.m. EST by rmmo
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Republicans are arguing for a "fairer" tax structure where "everyone" pays their fair share in taxes with a 22% flat tax.
Republicans first argue that 49% of the nation pays very little in taxes. The reason why the bottom 50% pay little in taxes, however, is that the bottom entire 50% now control less than 2.5% of the entire nation's wealth and the top 10% control 70% of the entire nation's wealth.
The 22% "flat tax" will greatly increase the tax burden on the bottom 50% and reduce it for the top quintile (the top 20%). The top quintile now pays an effective federal tax rate (the rate after all of their deductions and credits) of 25.8%. So the taxes on the wealthy will drop from 25.8% to 22% under a flat tax rate.
Meanwhile, the bottom 50% will see a tax a huge tax increase. The lowest quintile (the poorest 20%) will see their taxes raised by over 18%, the second lowest quintile will see their taxes raised by over 11%, and the middle quintile will see their taxes raised by over 8%. So the bottom 60% of Americans will see large tax increases.
When you break down the top 20% into top 10%, top 5%, and top 1%, you see that a 22% flat tax gives even bigger tax breaks to the few at the top. The current effective tax rate (after all deductions, credits, and loop holes) of the top 1% is 31.2%, the top 5% is 29%, and the top 10% is 27.5%. So a flat tax rate of 22% is a big tax cut for the top.
How is that fair? Making people that control 2.5% of the entire nation's wealth get a tax increase. So, unless you are in the top quintile (top 20%), you will get a big tax increase under the "fairer" flat tax plan. I thought Republicans were against raising taxes -- oh right, they are just against raising taxes on the wealthy.
To see the effective tax rate of each quintile (what rate people actually pay in taxes after deductions and credits) go here and you will see why a 22% flat tax will result in a huge tax increase for most of us and a tax cut for the wealthy:
http://www.cbo.gov/publications/collections/tax/2009/effective_rates.pdf
The bottom 50% will see a huge tax increase and the top will get a tax cut.
From one in the top 5%... my last paycheck I paid $2,335.83 in taxes. For that honor I worked twelve 12 hour night shifts... 6 PM to 6 AM. So what gives you the right to the spoils of my labor? Why should I pay a higher rate on my earnings?
The bottom 44% do not pay taxes now! Google it. Is that fair?
Not true! Myth. Here is the government collection data showing how much federal tax money is actually collected from each quintile (after all of the deductions and credits etc.)
http://www.cbo.gov/publications/collections/tax/2009/effective_rates.pdf
Not true -- right wing propaganda -- click here to see what every quintile pays -- this is from the federal government. http://www.cbo.gov/publications/collections/tax/2009/effective_rates.pdf
what is not fair is that the poor's pittance does not give them enough money to pay their fair share.
I'm sorry, 44% of Americans are not poor. I know there are poor folks, but not 44%. I am middle class and I pay a ton! Folks need to pay more. We need a new tax code.
It is not true that the bottom pays nothing. Here is the government collection data showing how much federal tax money is actually collected from each quintile -- the effective tax rate (after all of the deductions and credits etc.)
http://www.cbo.gov/publications/collections/tax/2009/effective_rates.pdf
correct!
It is not true that the bottom pays nothing. Here is the government collection data showing how much federal tax money is actually collected from each quintile -- the effective tax rate (after all of the deductions and credits etc.)
http://www.cbo.gov/publications/collections/tax/2009/effective_rates.pdf
omce again I second what you said, rmmo.
Look I make 50K a year, and my bracket doesn't pay enough in taxes. It really doesn't. However, due to the complexity of the tax code, paying such a little amount I think is good compensation for having to plan and figure taxes a whole year in advance.
I'll pay more if they make it flat. Happily. Because I'll know what's coming and that makes it easier to make more money to make up the difference.
In the bracket you will pay 12% more with that tax bracket -- so you want to pay 12% more to have it simple?
Here is what your effective tax rate (after deductions, credits, etc. is for your tax bracket -- how much they actually collect in your bracket). http://www.cbo.gov/publications/collections/tax/2009/effective_rates.pdf
I tend to view things in terms of both their dollar cost and their sanity cost. Yes, I can more than afford an additional 12% a year, if it means that A) everyone is paying. No more zero or negative income tax liabilities, and B) I know EXACTLY how much in taxes I'll be paying for every dollar I take in with no ambiguities.
If you want to give more of your money away then why not just do it? Instead of playing this stupid card to make yourself look good just do it. I for one would like to know where my money is going before I pay anything.
That's my point. I would happily pay more, and plan to pay more, if the government made it simpler.
For example. I have no problem paying higher tolls on highways using the EZpass, because it's easier than stopping at the booth.
Then why not donate it to charities if your itching to get rid of it? Youll know where its going at least.
The Fair Tax is much better than a flat tax
Explain the "Fair Tax."
What the Tea Party, and it's supporters want is for the government to stop taking their money and giving it to people who don't deserve it, like poor, hungry children.
Need your help. pl. click the link and sign the petition to send the message to politicians and fix our economic problems. Need millions of signatures to get politicians attention and make this work. Here is the link:
http://www.change.org/petitions/members-of-congress-and-senators-fix-the-economy-and-balance-the-budget-now?pe=d4e
The only fair tax is no tax. Taxation is theft, plain & simple.
Darren:
That really makes no sense unless you have enough money to:
1) hire your own police force, firemen, teachers, and can build your own roads;
2) hire people to make sure your drugs, food, and products are safe;
3) can build your own sewer and water system;
4) make sure that businesses are not polluting your air and water;
5) can negotiate trade with foreign nations;
6) protect your own property rights;
7) settle disputes you get in with others without violence;
8) can investigate and catch criminals who steal from you;
9) make sure that restaurants are clean and safe so you don't get ill;
10) purchase land so that you have parks and maintain them yourself;
11) have a safety net in case you become disabled or lose everything (do you right now have enough money to pay for care if you become severely disabled for the rest of your life or do you think you should just die?)
I could go on and on. No government is chaos. The problem is not government it is that government has become corrupted by the wealthy and big business and isn't doing its job correctly. We need to remove money from politics.
It amazes me -- do you really think it would be great with no government? It would be the state of nature -- where life is nasty, brutish, and short. Extremism is for the weak of mind.
I don't have time to educate you on anarchist theory. Suffice it to say that your vision of atomized individuals is way off base. We all don't need to do everything alone. The ideas is for companies & organizations to voluntarily work together to provide the things you mention. That way you avoid the abuses of govt. I'm sure you're not happy about your taxes paying for the police that oppress the OWS. I'm sure you're not happy about the taxes that pat for the wars.
If you'd really like to have an idea of what anarchism is about please read:
Law without the State
In this essay, I argue that the elimination of the state will not lead to lawless chaos. Voluntary institutions will emerge to effectively and peacefully[2] resolve the disputes arising in everyday life. Not only will market law be more efficient; it will also be more equitable than the government alternative.
Just as right-wing hawks embrace the Orwellian notion that War is Peace, left-wing egalitarians believe that Slavery is Freedom.[3] The hawks wage endless war to end war, while the social democrats engage in massive theft — or "taxation" as they call it — to eliminate crime.
It is high time to abandon such monstrous paradoxes. It took no king to produce language, money, or science, and it takes no government to produce a just legal system.
http://mises.org/daily/5646/Law-without-the-State
Good luck on getting anyone to "voluntarily" do anything -- unfortunately human nature is working against you. But, I do appreciate your thoughts -- I agree that government is too easily corrupted. I'll think about what you have said.
The truth about the Bush tax cuts: The 99% by far got the biggest tax cuts. In fact if they were all left to expire it would be a massive tax increase on everyone.
I personally think they should all expire until our budget is balanced with the proviso that the money and other spending CANNOT BE USED for ANYTHING EXPECT DEFICIET AND THEN DEBT REDUCTION.
So someone who pays no taxes at all votes for a candidate that supports a huge military budget; the war on drugs; and other programs and someone else gets to pay for it. That is the author's idea of fairness.
You mean the bottom 50% who current pay NOTHING? Yes...they would have to pay their "fair share"
Look here at the effective tax rates (what is actually collected for each quintile) It is not true that they pay nothing in taxes that is just what the wealthy and big business want you to think to redirect your anger away from them.
http://www.cbo.gov/publications/collections/tax/2009/effective_rates.pdf
The bottom does not pay nothing that is a myth. Pay roll and SS taxes have gotten higher and higher on the worker and make up a larger share of collected taxes. Anyway, the bottom 50% combined only have 2.5% of the ENTIRE nation's wealth -- even if you took everything they have, it would not make a dent in the deficit.
So, how much should the people who have nothing have to pay. What is fair to you -- make them homeless and not be able to afford any food -- is that fair to you.
Why not make the top 10% who have redistributed all of the middle class wealth to themselves and now have a staggering 70% of the entire nation's wealth pay more? Wall street has record profits and is only taxed at 12% -- how is that fair? Most of the bottom 50% pays more than 12% in taxes, why not make the wealthy pay?
If you took EVERYTHING that the rich have, all of their money, cars homes, investments and on and on, it might cover the deficit for a year or so.
That is not just taxing them, it is taking it all. We are spending more money then we have and taxing the rich alone won't solve it.
Everyone should pay some federal tax, even if it 5 bucks. Something at all. The stakes are such that people not only pay no federal income tax, but they get "refunds" in the thousands of dollars every year.
Who will people vote for? Those that say we are broke and ALL need to pay or those that say we are broke - tax the rich?
You get the second guy every time. Of course since most people don't vote my argument is mostly moot.
Its called a FLAT tax because it smashes the lower classes FLAT. The rich get to laugh about that all the way to the banks they own.
Agreed!
Preach on, brother.
These flat taxes are a big scam.
Paperwork elimination is great. But burdening the lower income people while cutting taxes for the upper is not.
Yes, they sell it to the average person by using the fact that it is simple. Everyone likes the idea of a simple tax structure, so people are unwittingly drawn to it even though it will mean a huge tax increase on the bottom.
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I must say, I used to hate flat taxes but after a few days on this forum I am starting to think that may be there is merit in it.
You must be in the top 20% because otherwise it will be a huge tax increase for you.
I am. And I believe that I should pay higher taxes to support the poor. I give handily to charities and to Dem candidates. But after a few days on this forum, I am shocked at the entitled attitude of the poor and the middle class. There is a general sentiment that just being born in the USA should give one a key to the kingdom. No one is willing to do what it takes, everyone wants protectionism, unions, higher taxes on the wealthy not to invest in social safety nets but as a punitive measure. Jee-sus! So I am frustrated.
Now, I will always be a Dem, but it is frustrating to see how entitled the blues are.
I'm sorry to hear that. I do not know how my post made you feel like the bottom is entitled. I am actually in the top 1% -- not the bottom. So, my post is not from someone at the bottom feeling entitled.
I know not all of the posts are great on this site -- it is an open forum so any nut can post. I thought I was doing a service of explaining to the average person the true meaning of a flat tax.
I think that some people will be drawn to the flat tax because it is simple not realizing that it will mean a tax increase on them and a tax cut on the wealthy like me. Anyway, I am really sorry to hear how frustrated you are.
No, your post was fine. It was spot on. I have forever been against the flat tax. It was the incessant, I am therefore I deserve a second house on the beach nonsense that was getting to me. I am in the 1% myself. But I work hard just to stay here.
Think like a parent and like a psychologist when reading posts, oh and add in a bit of negotiator for flavor.
You are becoming frustrated yet others are voicing years of frustration and yes, a goodly number of them 'go over the top'. However, when seeking a negotiating position, one usually puts out the outrageous first, for consideration, one also attempts to manipulate the negotiation, 'testing the waters' on the off chance that the first offering is accepted.
I understand a flat tax is also a foolish tax, it will do nothing to change anything that is (wrong is too strong a word), excepting to reduce the funds that are fluid in our society.
In some ways the current economy reminds me of the Water Wars raged in the last century...streams and rivers flowing through lands 'owned' by individuals were blocked, dammed to prevent the water from flowing onto the land of others, even when the origin of the waters were not on that land.
Those who were affected negatively by the actions of others were angry that a commodity that was in abundance was now in short supply, while their needs remained the same.
The negatively affected attempted negotiation, they attempted to secure water sources for themselves, yet the stream or river was the most practical solution to the situation, so opening that stream/river became the solution to the issue.
The river/stream wasn't a fast river/stream, it moved sluggishly yet provided adequately for all...once choked that provision ended...and the fluid movement of goods and services did also.
Our economy is usually sluggish like that river/stream...occasionally it raged, but for the most part it was adequate to provide for all...however, it too has been dammed and the small portion that falls over the spill way is too little and not often enough to provide for the common good.
Thirty plus years of frustration translates into what appears to be a sense of entitlement, but when taken in the context of the river/stream, it's merely 30 cups of water that has been withheld in one form or a another.
"Those who were affected negatively by the actions of others were angry that a commodity that was in abundance was now in short supply, while their needs remained the same."
You mean - their wants stayed the same or increased?
Not wants, needs. Human beings have basic needs, food, shelter, companionship...wants will always change, sometimes less, sometimes more.
The Govt provides food and shelter in the USA.
Really? Where?
The Dems are just as guilty on the handouts. The notion that a flat tax isn't fair because the lower income would now actually have to pay taxes is appalling. The lower income brackets get tremendous use of state/federal welfare programs that the higher income brackets have no access to, yet feel they should be taxed less? Bullshit.
I would double the minimum wage to $14.50 an hour. No one pays taxes on anything under $30,000 a year. $30,000-$100,000 would pay 20%. $100,000-$500,000 at 35%, Everything over $500,000 a year would be taxed at a rate of 50%.
About 80 million Americans take home $26,000 a year and support families on this amount. Paying any taxes would do nothing but take food out of their kid's mouths.
Under this plan none of those people would pay taxes.
And, don't give me any crap about doubling the minimum wage. The MW right now is 6 times what it was when I was in High School.
A ton of people would get laid off even it was only a buck or two more.
I agree that the minimum wage should be raised. Taxing $30-$100k at a flat tax of 20% would mean a tax increase for many people $30-50k. The rest would be an increase on higher earners if it is a flat tax.
I was estimating. I'm no economist. I was thinking a lot of folks in this tax bracket are families who have children. Once you give the deductions for kids, this bracket would be very reasonable. There would be no deductions on the top rate. The US had instituted an alternative minimum tax, which was a tax on the rich years ago, but it has been amended so many times it's completely meaningless now.
No one in my country should go to bed hungry. No one. If you work 40 hours a week you should be able to eat health and stay healthy, and have opportunities to move up. Everyone should have these opportunities.
I agree -- I didn't know you would have deductions for the lower wages. Sounds good.
How about anyone making less than 100thousand per year pays only 5percent. Over 100thousand you pay 22percent.?
Unfortunately, that would mean a tax cut. For tax purposes, the top 10% start at about about a $100k year and pay an effective rate of 27.5%. When you break down the top 20% into top 10%, 5%, and 1%, you get even bigger tax breaks for the wealthy with the flat tax. The top 5% pay an effective rate of 27.5% and the top 1% pay an effective rate of 31.2%. So, a flat tax of 22% will be a big tax break for those making over $100k.
And it wouldn't raise nearly enough revenue.
Yes but no capital gains and no mortgage deduxtions etc.
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I thought liberals like more taxes. Taxes, the smell of body odor and pepper spray, and the feeling of a night stick across your head. Don't go changin.
I thought Republicans liked to cut taxes -- they just show their true colors with the flat tax. They only care about reducing taxes on the wealthy. Big tax increases on you and me they are all for.
Oh yea, but that's the whole pt. isn't it? The way the wealthy 1% view the Federal Gov't is they own it and the rest of us are going to have to pay them for its use. Just another service of USA INC. a subsidiary of EXXON/MOBIL et al. Pay up suckers or else!
It's time for EVERYONE to join in on supporting the poor. Not just the rich.
Right. So it isn't that Democrats like Taxes for themselves, just other people. Got it.Thanks for the memo
Do you ever engage in intelligent debate. I have seen your posts and have noticed that they are always rhetoric without any thought or information. This is the problem today. We could actually have an intelligent debate if your head was not filled with the propaganda of big business and the wealthy.
Was there something untrue about my post? You want taxes raised, do you not? You don't want your taxes raised, but you want taxes raised. You also don't want your benefits cut. How many ways are there to see that?
I am in the top 1% and want a tax increase on the top 1% and not on the bottom.
Of course! You are in the top 1%. Wouldn't that make this really a protest of.....
you?
I agree -- it is and I support it.
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Awesome post!