Flat Tax

GOP candidates fight for flat tax

Advocates say plan is fair, would promote economic growth; opponents complain about lower taxes for the wealthy

By STEPHEN OHLEMACHER

   The Associated Press

   WASHINGTON — The flat tax is making a comeback among Republican presidential candidates.But it faces tough opposition in Congress because it tends to favor the rich at the expense of other taxpayers, renewing an old debate about “trickle-down economics.”

   Most of the top GOP contenders — Mitt Romney’s an exception — offer a variation of the tax plan in which everyone pays the same rate. Businessman Herman Cain has his 9-9-9 proposal, and Texas Gov. Rick Perry unveiled a 20 percent flat tax on income this week. Even Romney foresees a flatter tax system in the future, though he favors something closer to the current setup in the short term.

   The idea of a flat tax has long been c h a m p i o n e d by conservative politicians as being simple and fair. Publisher Steve Forbes made it a centerpiece of his Republican presidential campaigns in 1996 and 2000.    Forbes has endorsed Perry, calling his economic plan “the most exciting plan since (Ronald) Reagan’s.”

   “American families deserve a system that is low, flat and fair,” Perry wrote in his tax plan. “They should be able to file their taxes on a postcard instead of a massive novel-length document.”

   Conservative economists argue a flat tax would promote long-term economic growth by lowering taxes on the people who save and invest the greatest share of their income: the wealthy.

   Lowering taxes on the wealthy, however, could prove politically difficult, especially now, with protesters around the country occupying public spaces and calling for the rich to pay more. President Barack Obama and many Democrats in Congress also want higher taxes for the highest-income Americans.

   “It’s all about political rhetoric,” said William McBride, an economist the Tax Foundation, a conservative think tank. “The inevitable result of shifting the tax burden away from saving and investment is that you reduce the tax burden on the rich.”

   Liberals and many moderates complain that a flat tax is a giveaway to the rich, renewing an old debate over whether the benefits of tax cuts for those at the top trickle down to the rest of the population.

   “This idea of lowering taxes on high-income people and somehow middle class people will benefit has been there for a long time,” said Chuck Marr, director of federal tax policy at the left-leaning Center on Budget and Policy Priorities. “Obviously it hasn’t worked very well.”

   Flat tax plans by both Cain and Perry have provisions to protect low-income families from tax increases. But that raises questions about who will be left to pay the tab, said Roberton Williams, a senior fellow at the Tax Policy Center, a Washington think tank.

   “If you exempt the lowincome people from higher taxes, if you cut the taxes for the wealthy, getting the same amount of revenue means the middle class are going to pay more, a lot more,” Williams said.

   The federal income tax currently has six marginal tax rates, also known as tax brackets. The lowest rate is 10 percent, and it applies to taxable income up to $17,000, for a married couple filing jointly. The top tax rate is 35 percent, on taxable income above $379,150.

   “Taxable income” is income after deductions and exemptions, which can greatly reduce the amount that is taxed. There are also many tax credits that can further reduce tax bills.

   In all, nearly half of U.S. households pay no federal income tax because their incomes are so low or because they qualify for so many tax breaks, according to the Tax Policy Center. Households making between $50,000 and $75,000 pay, on average, 7.2 percent of their income in federal income taxes.

   By contrast, the top 10 percent of households, in terms of income, pay more than half of all federal taxes and more than 70 percent of federal income taxes, according to the nonpartisan Congressional Budget Office.


Okay, here we go again with the 'flat tax'.  At first, it sounds fair doesn't it?  Well, the short answer is the Flat Tax is anything but fair.  Let's do the math...


Wage                                           Tax                                      total
$14,000                                        $2,800                                $11,200
$65,000                                      $13,000                                $52,000
$1,000,000                                 $200,000                             $800,000


Do you see the problem?  You don't?  Let's say you are a working Poor Person.  You would only have 11.2 thousand dollars left to pay State and Local taxes which would leave your disposable income at about $9,000.  This means you would have $750 per month to pay all other expenses.  This means you would be working but out on the street with little or no money to feed yourself let alone your family.


Even the Middle Class person who would have 52 thousand to pay state and local taxes and would have about 47 thousand disposable income or 39 hundred to pay all expenses is still far from fair when you look at a person making 800 thousand with approximately 750 thousand left to pay expenses with.


Here's fair:


You make less than 25 thousand per year, you pay no federal income tax.  If you make 25 thousand to 40 thousand per year you pay 10% federal tax.  If you make 40 to 100 thousand per year you pay 15% federal tax and if you make 100 to 250 thousand per year you pay 20% federal tax.  But if you make above 250 thousand per year, you pay 50% federal income tax.  Within 20 years, the deficit would cease to exist under this tax plan.


But this won't happen folks, because the rich have too much power and are too greedy to let that happen.  It's a scam.  The rich get richer, the poor get poorer and more middle class folks get poorer.
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Study: Rich get a lot richer, outpace middle class

By THE ASSOCIATED PRESS

WASHINGTON — The richest 1 percent of Americans have been getting far richer over the last three decades while the middle class and poor have seen their after-tax household income only crawl up in comparison, according to a government study.

After-tax income for the top 1 percent of U.S. households almost tripled, up 275 percent, from 1979 to 2007, the Congressional Budget Office found. For people in the middle of the economic scale, after-tax income grew by just 40 percent. Those at the bottom experienced an 18 percent increase.

The report, based on IRS and Census Bureau data, comes as the Occupy Wall Street movement protests corporate bailouts and the gap between the haves and have-nots. Demonstrators call themselves “the 99 percent.”

“The distribution of after-tax income in the United States was substantially more unequal in 2007 than in 1979,” CBO Director Doug Elmendorf said in a blog post. “The share of income accruing to higher income households increased, whereas the share accruing to other households declined.”

The top 1 percent made $165,000 or more in 1979; that jumped to $347,000 in 2007, the study said. The income for the top fifth started at $51,289 in 1979 and rose to $70,578 in 2007. On the other end of the spectrum, those in the 20th percentile went from $12,823 in 1979 to $14,851 in 2007.

The report also found:

The top 20 percent of the population earned 53 percent of after-tax income in 2007, as opposed to 43 percent in 1979.

The top 1 percent reaped a 17 percent share of all income, up from 8 percent in 1979.

The bottom 20 percent reaped just 5 percent of after-tax income, versus 7 percent in 1979.

Lawmakers and presidential candidates are mulling overhauling the tax code — some propose a flat tax that critics say could magnify the income gap — and a congressional “super-committee” is weighing options to cut the deficit.

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