Flat rate taxation?

A true flat rate tax is a system of taxation where one tax rate is applied to all personal income with no deductions.

Thoughts? Opinions? Is a flat tax more just? Or is taxing the rich higher than the middle class a better idea?

I think finance regulations (like taxation) in theory are to promote, shape and direct economic activity into areas deemed important by government. Taxation being generally based on the assumption that increased business activity means increased complexity and risk (to the activity) and therefore requires a greater output per unit of effort to manage - in regards to taxation drain to promote increased business activity as beneficial for the economy.

I think an upside down bell curve might be best, to promote wealth creation to get people out of lower and middle class, but hit the very top end harder who are flush enough and established enough in the systems to be leveraged for maximum benefit. Clearly the very top seems to be exorbitantly capable of wealth growth. I guess the fundamental problem is that money makes money, and it always will... so increased wealth will always equal increased capacity for wealth, and there will always be a top...

Though I do wonder if the concept of nation and government are really misunderstood these days, and instead they are just apparatus of commerce within a corporate global reality... because of the transnational global nature of business competition is outside of taxation as we all experience it. The downside of this being whomever is willing to be the most productive (per unit cost) fits the system best which, given human nature, can tend toward rewarding systems which incur suffering on the human's involved in that production. The only counter to that in those system terms seems to be stifled creativity and weaker security, but given the transnational nature of globalisation these too can be circumvented and outsourced.
:S

I was once told, that if we took all the money every single person had in the world, and then split it up exactly even between everyone, that those that were rich would still end up rich again, and the poor would stay poor.

Some people are money minded people, others not. But shouldn't it be a moral right that the wealthy individual would recognize this in himself, and do what he can to help those that are unable to help themselves? Shouldn't we promote that and reject opposing arguments? Or are the selfish an area of tolerance? A good post sir!

A flat tax would not only encourage people to pay what they owe due to it being a perceived level playing field but it would also be allow for easier collection due to a simpler tax code. The rich would still pay more as a flat tax is a set percentage thus those that make more will technically pay more but still the same percentage of what they make.

Quite a few countries have flat income tax regimes: https://en.wikipedia.org/wiki/Flat_tax#Countries_that_have_flat_tax_systems

Its almost impossible to operate a tax regime without any deductions though.
Take corporation tax - unless deductions are made from revenue, low margin businesses get penalised (they can end up with a bigger tax bill than their profit).

It makes alot of sense to simplify tax codes (the UK's tax code is approx 17,000 pages long) as simple taxes are cheaper to implement, and create fewer loop holes - but a flat tax isn't the only way to achieve that.

Besides, the majority of rich people do pay their taxes and are willing (if not necessarily happy) to pay a higher tax rate on their higher earnings. Whilst this is a hugely unfashionable thing to say - the numbers, in aggregate, don't lie: The top 1% of US earners earn 17% of income and pay 46% of Federal Income taxes (http://www.cnbc.com/2015/04/13/top-1-pay-nearly-half-of-federal-income-taxes.html). That doesn't seem unfair to me.

The issue bigger than income taxation, however, is wealth taxation. As Thomas Picketty demonstrates in his " Capital in the 21st Century " capital grows faster than income. Wealth taxes and Inheritance taxes are hugely unpopular but they are one of the few ways to redistribute wealth (rather than income).

Unless we also promote flat rate pricing of all products and services (ie earn less? Groceries cost less), this doesn't make sense. Necessities cost the same for the rich and the poor.

For me this comes down to one of my Jedi beliefs in balance, and in never excluding or turning one's back on those in need. In terms of tax, those who can live comfortably and still pay more, should pay more. That money provides for everyone, not just those who can afford it. It raises the baseline for those who would otherwise be in need. It is, for me, A Good Thing.

And, however you cut it, moving from a curved tax rate to a flat one will penalise the already-poor, and liberate the already-rich. No thanks.

The question is, I guess, what do we hope to accomplish by instituting a flat tax rate?

With the tax system not being a global system, many large companies have found ways of not paying taxes at all by sheltering in other countries and different holes in the current system. So if we’re trying to reduce the deficit, then finding ways of closing holes would be a good start. But that would take a global effort.

Taxing the money someone earns due to their efforts or ingenuity is like penalizing someone for working or being smart, in my opinion.

Taxing purchases, or moneys spent, seems more to what taxes should be for. Some would say that because you live in a place you should pay taxes for that. And in my opinion that is crazy. You already contribute by working, sustaining the local economy; and, by buying things needed to live, sustaining the local economy. Then they want to tax you for your earning while sustaining the local economy? Sounds like extortion to me. A state, governing body, taxing trade that occurs in that state is still like punishing the locals for stimulating the local economy. Taxing trade that extends beyond the states borders is recovering losses to the support of the local economy. So, anything purchased that was not made there, in that local economy, could be taxed to recover lost local stimulus.

A flat tax on that would increase revenue by freeing more moneys to be spent by local peoples. And it would promote new growth as local construction by local workers would not fall under that category. Growth creates jobs and then an export of goods could be sent that would be taxed in another area for their reclamation of lost revenue. But, local economic growth would be stimulated by the increase of local jobs and income streams.

The only issue with this line of thought is that it is based on the possibility of sustainable growth. But as we all know, we live on a finite resource, the Earth. So to continue this model we would have to expand future avenues of resources. IE, the future expansion into and colonization of space.

I despise taxes. For far to many reasons.
I give to Caesar what's his. My hope is to one day be in a place where my time and effort on vote and choice is directly personal. Till then I make due with the little we got. The individual holds a lot more power than they think. For now I see taxes as a bad thing. I can focus on the idea and ideas that can change, turn, or even make difference but until then I do my part. What is my part? I haven't quite found it perfectly yet, but im currently looking and it changes from time to time. rather than focus on the taxes it self some cities and village's focus on the reason for the taxes.
We have a federal protected wildlife reserve here in Illinois. Due to the what ever ...not blaming or labeling, our state doesn't have the budget for and can not come to a decision for the year. A lot of state parks and funds have been closed and put on pause...not this place. The city and stated asked questions to find the park ranger himself snf s few others sat and thought and did the necessary paperwork and found that its federal and independent now...so they don't have to pay state only federal, what does that mean, hes open and so long as he does his own....budget and pass it and such hes in open country while the others are closed.
Its the individual that CAN hold the power if they so choose to make the necessary time and effort.

Marc wrote: Some people are money minded people, others not. But shouldn't it be a moral right that the wealthy individual would recognize this in himself, and do what he can to help those that are unable to help themselves?

Some people might argue that as long as you keep helping out people who won't help themselves, they will have no incentive to help themselves, and will continue to rely on handouts.

Loudzoo wrote: The issue bigger than income taxation, however, is wealth taxation. As Thomas Picketty demonstrates in his "Capital in the 21st Century" capital grows faster than income. Wealth taxes and Inheritance taxes are hugely unpopular but they are one of the few ways to redistribute wealth (rather than income).

I do think there is a huge problem with interests, as they continue to generate more capital for already rich people while contributing nothing to society. Capital growing without the equivalent growth in production can lead to inflation, and is the reason why some people advocate for heavily taxing hoarded wealth (wealth that is not actively invested in production). It is hugely unpopular however, to redistribute wealth through wealth and inheritance taxes, because it feels like flat out theft to some, an incentive to not invest to others, and to others a reason to just take money to other countries regarded as tax havens. What to do, what to do? :dry:

tzb wrote: Unless we also promote flat rate pricing of all products and services (ie earn less? Groceries cost less), this doesn't make sense. Necessities cost the same for the rich and the poor.

But a rich person will still pay more than someone in middle class, because a flat rate is a percentage, not an absolute value. I would suggest that we draw a poverty line, based on basic neccesities, and those at or below the poverty line should simply pay no taxes.

Wescli Wardest wrote: Taxing purchases, or moneys spent, seems more to what taxes should be for. Some would say that because you live in a place you should pay taxes for that. And in my opinion that is crazy. You already contribute by working, sustaining the local economy; and, by buying things needed to live, sustaining the local economy. Then they want to tax you for your earning while sustaining the local economy? Sounds like extortion to me. A state, governing body, taxing trade that occurs in that state is still like punishing the locals for stimulating the local economy. Taxing trade that extends beyond the states borders is recovering losses to the support of the local economy. So, anything purchased that was not made there, in that local economy, could be taxed to recover lost local stimulus.

It sounds like a good idea, though this protectionist model might hurt productivity, as local companies will have less incentive to turn out quality products at a lower price if their outside competition is naturally higher-priced. It might also hurt smaller states, that might not be able to compete with the prices of higher states that can have lower prices (even with tax added) due to scalability of costs.

carlos.martinez3 wrote: I despise taxes. For far to many reasons.

I suppose anyone would. Until they are using something like, say, free public education.

Manu wrote:

tzb wrote: Unless we also promote flat rate pricing of all products and services (ie earn less? Groceries cost less), this doesn't make sense. Necessities cost the same for the rich and the poor.

But a rich person will still pay more than someone in middle class, because a flat rate is a percentage, not an absolute value. I would suggest that we draw a poverty line, based on basic neccesities, and those at or below the poverty line should simply pay no taxes.

Then you are proposing a two tier tax rate, not a flat one.

I understand the notion of a percentage; however how our personal wealth is "applied" is an absolute value. This is why the percentage in only one half of that equation makes no sense to me. You're arguing for a system which negatively impacts the lives of the poorest more than the richest, compared with our current system. Is it the position of taxation reform to do that? To make things worst for those at the bottom? If you're going to write in concessions to the even-poorer, why are you slamming the person earning £1 more than a state you deem poverty, whilst simultaneously putting millions back into the pockets of the super rich?

This seems, to me, the reason for progressive taxation. If you earn more, you pay an incrementally slightly higher percentage. The rich still have proportionally more against the absolutely necessary expenses of life, because whilst the percentage increases, it doesn't become 1:1 (or more). The poorest above the poverty threshold pay the least because they're less able to do so and still have enough to live reasonably decent lives. Having "just enough for the basic necessities" doesn't imply much of a life - meanwhile, the billionaire is off buying their third island.

Another element... if we set the threshold at, say, £12,000 per year, why would I not cap my earnings at £11,999 and keep the presumably fairly large proportion of my earnings I would otherwise have paid in tax? Given the huge number of people living at or around the poverty line, the significance of that sort of loss in taxation revenue starts to become a real issue... and now you're not getting so much back from the richest, either.

And that's the other side of this - if you have a flat rate the rate must be relatively low, to avoid destroying the lives of the poorest who are just above the threshold. This means the net revenue from taxation would necessarily decrease, as unlike the progressive system where the billionaire can be expected to pay a high percentage of tax and the government can derive big revenue from that, they can't tax the person just over the poverty line to anything like that level, without forcing them back below the poverty line (where they'd probably be careful to remain anyway).

Flat rate taxation can only ever serve to make the rich richer, and the poor poorer, whilst simultaneously destroying revenues essential to provide both rich and poor with public services. I don't understand why we would want any of that. At a surface level it sounds fairer, but as soon as you remember we're talking about human lives... that at its most fundamental level, this is about taking the same sized slab from someone who has only just enough to be deemed above the poverty line as the richest man on earth, and then asking them both to go get on with their lives. For me it's a simple thing to see that one of those people will have far more difficulty in doing so than the other, and that's because we live in an economy of absolute values; far more difficulty than they currently would, too - and that's not fairer at all.