Should America adopt a flat tax system?

Yes

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by Jeg Brown

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A flat tax system?

Currently the U.S. has a progressive tax system with reams and reams of regulations, loopholes, and supporting 'instructions'. According to the IRS, it should take the average person approx. 2.4 hours to prepare a 1040EZ form. The industry that has formed around this legislation is massive employing hundreds of thousands in the private sector alone.

This system allows for the wealthy to keep most of their earnings by hiring the best account teams and taking advantage of all the myriad (and mostly legal) tax shelters both on-shore and off-shore. The middle class is hit very hard with a very high tax level, but not enough resources to take advantage of the loopholes and tax shelters. The 'poor' have a minimum tax level and can also take advantage of government aid programs. The fact that some of the richer people ALSO take advantage of these programs is unfortunate and shows a lack of common sense. An example was reported in Reader's Digest and several network news outlets that John Kerry and John Edwards receive government farm subsidies, even though they are both millionaires.

So our current structure mostly receives tax income from the poor and middle class, which is also the majority of the population.

If your taxable income is between $5-15$ your tax is $1 which is equal to 20%. (These are based on Single income according to the 2006 IRS instructions.)

$18,00 0 you are taxed at 13%, leaving $15,660 for Social Security, Medicare, state tax, to live on, etc.
$40,000 you are taxed at 16%, leaving $33,600 for Social Security, Medicare, state tax, to live on, etc.
$70,000 you are taxed at 20%, leaving $56,000 for Social Security, Medicare, state tax, to live on, etc.
$100,000 you are taxed at 22%, leaving $78,000 for Social Security, Medicare, state tax, to live on, etc.
$500,000 you are taxed at 30%, leaving $ 350,000 for Social Security, Medicare, state tax, to live on, etc.
$1,000,000 you are taxed at 32%, leaving $680,000 for Social Security, Medicare, state tax, to live on, etc.

Assuming that with a flat tax we would do away with any tax shelters, loopholes, exemptions and the like we could apply a substantially LOWER tax rate on the populace and continue to gather the same funds for the government. Let's ignore the $5-15 tax bracket for this example, the lowest tax bracket currently is 13%. We could lower this to 10% across the board.

$18,000 would have to pay only $1,800, leaving $16,200 out of which would also come Social Security, Medicare, state taxes, etc. This person(s) would STILL be able to file and hopefully get financial assistance from the government.

$40,000 would pay $4,000 leaving $36,000
$70,000 would pay $7,000 leaving $63,000
$100,000 would pay $10,000 leaving $90,000
$500,000 would pay $50,000 leaving $450,000
$1,000,000 would pay $100,000 leaving $900,000

By eliminating the tax shelters and loopholes the government would be collecting on a much larger base of income. Instead of the person making $100,00 and only having a 'taxable income' of $50,000, they would be paying 10% on $100,000. In order to also bring government spending under control only people who really NEED assistance should get it. There is no real reason for millionaires to get farm subsidies to raise their horses. This is simply a waste of the income the government gets.

The major pitfalls to creating a flat-tax system have to be taken into account though and planned for, and I believe are the main reason government has not already enacted this switch:

1) The amount of people who would be out of work because the tax code is now a single page versus the thousands of pages currently. Since we are talking about hundreds of thousands of people who would now be looking for jobs, what do we do to protect the hit to the economy?

2) The 'rich' will no longer want to have their income here in the U.S., since they will now be taxed on ALL of their income. There will be a marked increase in wealthy people hiding their income in off-shore corporations and dummy accounts. This may also cause a slowdown in the stock exchanges since now all this income will have to be paid on. Since most of our 'representatives' fall into this category it is AGAINST their interests to pass a flat tax with no exemptions. Those with power usually will do anything to hold onto it. Unfortunately for us masses, they have.

With care we could implement a flat INCOME tax. Let's leave the CORPORATE tax structure alone for a while. For one reason it helps to take care of the first obstacle. Now all the HR Block people could go to work on corporate taxes.

However the benefits of the flat tax system are too many to ignore, and the boost to the economy by putting MORE money into the majority of the people outweighs the two potential risks.

1) Simpler tax code allows more people to understand and file CORRECTLY!

2) Flat tax with no exemptions allows for a LARGER tax base, and thus MORE government income.

3) Stimulate the majority of the populace by allowing them to keep MORE of their money.

4) EQUAL tax burden on the populace. The poor would still get government assistance.

As envisioned by the Founding Fathers however, it is up to us the populace, to educate ourselves on this, and then VOTE for who we want in office. This is the way to ensure that we have the changes made we want.

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