Should America Switch To A Flat Tax?
Over the past week, Republican presidential candidate Rick Perry (second only to Mitt Romney right now, but with Herman Cain close on his heels) has made quite a few headlines. For one thing, he actually was awake for his last debate, showing possibly a little too much personality and grit. Sidenote: Has anyone else noticed how insignificant Michele Bachmann has become? Thank God! The other thing he did was change the conversation about tax reform with two words: flat tax.
A flat tax, of course, is when the government sets one standard rate of taxation for everyone, regardless of how much money they make. So, if the tax rate was 19%, everyone from those making $30,000 a year to $1,000,000 plus a year would pay the same percentage. Sounds nice and equitable, doesn’t it?
Actually, flat taxes usually cause a much more dramatic impact on those in lower income bracket. Seriously, that 19% means more to a person making $15,000 a year than it does to someone making $500,000. Should they both really be taxed at the same rate when a much larger percent of the lower income household’s income goes to absolute necessities?
On the plus side, a flat tax sounds like a much easier and less complicated system, with drastically less rhetoric than the 9,000,000+ word document that is our current tax code. Ideally, there would be less loopholes in the new tax code. But doing anything besides lowering taxes would probably be the equivalent of political suicide.
While Perry’s proposal doesn’t necessarily seem feasible, it does bring tax reform back to center stage and that’s a good thing. No matter how much or little you make, or whether you align yourself on the political right or left, we all can probably agree that our current tax system is severely flawed. The question is, what will we do about it?
If you exempt the first…oh…$30k
It’s trivial to ensure the flat tax is regressive – merely exempt the first (say) $25,000 of income each year.
How about a new tax program? Scrap all fed taxes and write offs for a standard tax on all forms of income (wages, capital gains, profits) after a standard deduction of the median income for each income earner, both individual and corporate, with the exception of up to 10% income deduction for donations to charities. A tax rate that would COMPLETELY COVER THE FEDERAL BUDGET would be determined on the remainder of the income so there would NEVER BE ANOTHER DEFICIT. This model would lower the marginal tax rate on everyone making less than about $150K. We could choose to pay off the current national debt in 50 years by placing 1/50 of the current debt into the budget each year. If we want lower taxes, we just need to elect people who will reduce the size / cost of government but we will NEVER HAVE A DEFICIT AGAIN!! No budget ceilings or artificial financial crises.
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