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Shocker · 12-01-2006, 02:05 PM

I think there is probably a lot of misunderstanding between posters here about flat tax and how it will affect poverty, rich, etc. With a flat tax, let’s just arbitrarily pick 1% for example. Currently, we have a progressive tax system, which means the more you make, the more you get taxed. Tax rates vary from 10% for the lowest earners all the way up to 35% for top earners. Amazingly, and very few people ever realize this, but this as far as I know, the only government sanctioned discrimination written into our laws. They discriminate based on income. Now, to come up with taxable income we take all taxable earnings, and we make deductions. EVERYONE is eligible to do this regardless of how rich or poor they are. You can either itemize or take a standard deduction to find what your adjusted income would be. I mean, just by giving the option of choosing between the two, the government is allowing people right there to decide how much they can deduct to get the best benefit for the tax payer. Aliantha- you are concerned with the cost of healthcare in the U.S... Well just considering the tax consequences of healthcare, and not any of the social programs to supplement healthcare (because that is an unrelated topic), just know that because EVERYONE is eligible to make deductions, there is also a deduction for qualified healthcare expenses. So even the poor who need healthcare benefit from taking this deduction so they DO pay fewer taxes. Anyways, once you've gotten your adjusted income, you can take tax credits. These nifty little things are for lots of different things. Often, tax credits are given as a means to promote certain activities among taxpayers. There is a tax credit for driving a 'green' car, credits for teachers, for research, having children, going to college, etc. Tax credits are a dollar for dollar reduction in someone’s tax liability. Again, ANYONE who qualifies can take them, regardless of their income. Credits like the Earned Income Credit though, which is typically for lower income tax payers who meet certain criteria can actually even result in a refund for the taxpayer, which means they can get back more than what they paid into the tax system... its like welfare without the stigma! All of the 'loopholes' are not simply ways to get out of paying taxes, but if you know what you are doing and understand the tax code, you can use it to your advantage to minimize your tax liability. And I feel pretty confident that everyone who has posted here tries to find ways to minimize their liability, even if not consciously- because I am sure everyone takes all of the deductions and credits they qualify for to the limits allowed.

Now there are three alternatives that come to mind when there is talk about revamping the tax code. The first has already been talked about in detail here so I won't spend much time. It is the flat tax. Simply put- do away with all income tax withholding, sales tax, capital gains, etc. At the end of the year, you take ALL of your earnings and multiply by 15% for example. So a person who made $10000 pays $1500 in tax for the year. (Remember no sales taxes, so it isn't as bad as some may think) and a person who is a CEO making $1 million a year in salary and benefits pays $150000. Hell that’s way more than I make in a year! And there are no deductions or credits to get people out of paying. You just pay your fair share. The second option is a National sales tax. This approach is not based on income at all, but rather on consumption. In most proposals for this plan, food is considered a tax free item, so poor people are not hurt by this. However anything else spent with disposable income would be subject to a national sales tax. Again it would be a flat rate, say the 15% again. So it is still equal in that you pay your fair share, plus I'm sure we can all agree that the wealthy have more money therefore they spend more money so they pay more tax.

The third alternative and the one that I prescribe to is called the Fair Tax. I know I've rambled a lot on this one so I will just provide a handy link to a website dedicated to the Fair Tax so that you can also learn more about this plan. In short though it takes the best of the first two alternatives and combines them into one comprehensive plan. http://www.fairtax.org/fairtax/about.htm

12-01-2006, 02:05 PM	#146
Shocker Knight of the Oval-Shaped Conference Table Join Date: Apr 2006 Location: Your Mom's house Posts: 378	I think there is probably a lot of misunderstanding between posters here about flat tax and how it will affect poverty, rich, etc. With a flat tax, let’s just arbitrarily pick 1% for example. Currently, we have a progressive tax system, which means the more you make, the more you get taxed. Tax rates vary from 10% for the lowest earners all the way up to 35% for top earners. Amazingly, and very few people ever realize this, but this as far as I know, the only government sanctioned discrimination written into our laws. They discriminate based on income. Now, to come up with taxable income we take all taxable earnings, and we make deductions. EVERYONE is eligible to do this regardless of how rich or poor they are. You can either itemize or take a standard deduction to find what your adjusted income would be. I mean, just by giving the option of choosing between the two, the government is allowing people right there to decide how much they can deduct to get the best benefit for the tax payer. Aliantha- you are concerned with the cost of healthcare in the U.S... Well just considering the tax consequences of healthcare, and not any of the social programs to supplement healthcare (because that is an unrelated topic), just know that because EVERYONE is eligible to make deductions, there is also a deduction for qualified healthcare expenses. So even the poor who need healthcare benefit from taking this deduction so they DO pay fewer taxes. Anyways, once you've gotten your adjusted income, you can take tax credits. These nifty little things are for lots of different things. Often, tax credits are given as a means to promote certain activities among taxpayers. There is a tax credit for driving a 'green' car, credits for teachers, for research, having children, going to college, etc. Tax credits are a dollar for dollar reduction in someone’s tax liability. Again, ANYONE who qualifies can take them, regardless of their income. Credits like the Earned Income Credit though, which is typically for lower income tax payers who meet certain criteria can actually even result in a refund for the taxpayer, which means they can get back more than what they paid into the tax system... its like welfare without the stigma! All of the 'loopholes' are not simply ways to get out of paying taxes, but if you know what you are doing and understand the tax code, you can use it to your advantage to minimize your tax liability. And I feel pretty confident that everyone who has posted here tries to find ways to minimize their liability, even if not consciously- because I am sure everyone takes all of the deductions and credits they qualify for to the limits allowed. Now there are three alternatives that come to mind when there is talk about revamping the tax code. The first has already been talked about in detail here so I won't spend much time. It is the flat tax. Simply put- do away with all income tax withholding, sales tax, capital gains, etc. At the end of the year, you take ALL of your earnings and multiply by 15% for example. So a person who made $10000 pays $1500 in tax for the year. (Remember no sales taxes, so it isn't as bad as some may think) and a person who is a CEO making $1 million a year in salary and benefits pays $150000. Hell that’s way more than I make in a year! And there are no deductions or credits to get people out of paying. You just pay your fair share. The second option is a National sales tax. This approach is not based on income at all, but rather on consumption. In most proposals for this plan, food is considered a tax free item, so poor people are not hurt by this. However anything else spent with disposable income would be subject to a national sales tax. Again it would be a flat rate, say the 15% again. So it is still equal in that you pay your fair share, plus I'm sure we can all agree that the wealthy have more money therefore they spend more money so they pay more tax. The third alternative and the one that I prescribe to is called the Fair Tax. I know I've rambled a lot on this one so I will just provide a handy link to a website dedicated to the Fair Tax so that you can also learn more about this plan. In short though it takes the best of the first two alternatives and combines them into one comprehensive plan. http://www.fairtax.org/fairtax/about.htm __________________ “I live only for posterity. Death is nothing, but to live defeated and without glory is to die everyday." - Napolean Bonaparte