It is fair because it is taxing people more with greater resources and ability to pay. If you don't have any progressive system of taxation, you'd have people that are poor paying taxes they can't afford while the rich would not be taxed as heavily as they could afford to pay. How much income tax can a minimum age worker afford to pay if he is barely scraping by pre-tax?
The word "fair" is entirely subjective so I won't argue that point as we'll get nowhere. However I would say that if you had a flat tax while remaining revenue neutral, you'd obviously would have to tax poorer and middle class people much more than now and the wealthy much less. This would have obvious dire consequences for families scraping by that barely can afford to pay tax or pay little tax now. It makes no sense to me to tax 20% to a minimum wage family and then tax the same 20% to a billionaire.
The whole theory of progressive taxation rests on the theory of marginal utility. As you make more the marginal value of each dollar decreases. This is obvious. To a minimum wage worker, the last $100 of his income could literally be life or death. Without it he might not be able to afford his medicine or food or rent. To a multi-millionaire, that last $100 is not that critical. He could burn it in the fireplace and not miss a beat. Progressive taxation is fair because it is taxing income that has different marginal utilities at different rates. Flat tax is taxing all income as though they had equal utility. This is obviously not the case as can be clearly shown above.
lets say a family makes $20,000 at 20% they would be taxed $4000 and a millionaire (cause 1 billion is too many zeros for me to think about) would pay $200,000. on paper, that is as even as you get. but i'll agree with you, in practice a flat tax would work about as well as communism. eventually those $20,000 families would revolt. same for my ideas for a flat tax on purchases, or even a progressive tax on purchases. let's face it, our tax system is jacked. but it works.
Why would you think that it would work better economically to tax a family making $20000 the full 20% of $4000. These families wouldn't revolt they'd simply by driven into the streets homeless and sick, children would not be cared for adequately and might have no chance at a decent future and the family might just couldn't afford to pay and have to be jailed. You really think a family making $20,000 can afford to pay $4000 in taxes??? If instead you charged the $20000 family almost nothing (say $0) and charged the millionaire $204,000, that makes a whole lot more sense to me.
One thing that I should point out because some people are confused about how graduated progressive taxes work is that they do treat everybody the same. You don't pay a higher rate on all your income just on income that reaches a certain bracket. 10% ($0 — $7,550) 15% ($7,550 — $30,650) 25% ($30,650 — $74,200) 28% ($74,200 — $154,800) 33% ($154,800 — $366,550) 35% (Over $366,550) Whether you are a multi-billionaire or a minimum wage worker, the first $7550 of income is STILL charged at the SAME 10%. As the marginal utility of money decreases, people are charge higher rates for money over and above the previous bracket. But it is fair and equal because it is charging everyone the same rates. You are only charged the higher rate for money above the threshold. Since the first $7550 is charged the same 10% to everyone regardless of income, it is equal and fair and is treating everybody the same!
Answering the problems with the Fair Tax: The Fair Tax might would increase "black market" sales somewhat, but how is that different from contractors doing unreported work for cash to avoid paying income tax? That's what the authors slightly misrepresent. The IRS wouldn't go away, it would no longer be looking at end consumers. The rebate system would be a big deal, but because everyone (with the same size family) gets the same amount back, every month, it would be simpler than any other system.
I support a national sales tax on everything but food, discount clothes, and toiletries and then eliminate most or all of the income tax. The benefit here is that you'd actually encourage people to save by taxing consumption instead of income, and in my eyes it's the fairest system. If you want to pay less taxes, just spend less. No loopholes, no nothing. No tax shelters. You could give certain groups (like the elderly) special cards for tax discounts as well. And it will better for the economy as increased savings will drive increased investment and productivity - spurring economic growth and development.
Brain fart, I just checked. It's 6.1%, including Social Security and Medicare. It just looked like more on that graph.
And that's after the Iraq war started, prior to the war i believe it would be even less (and thus after the war it will be less). I don't think defense spending is what is driving all of our taxes up so high.
Not sure what is the percentage of tax revenue spent on defense. But as a percentage of GDP, we were 4.7% last year (not including the war expenses). So the percentage of tax revenue must be way higher than 4.7%. European countries typically spend only 2-3% of GDP on defense
Since there is no need to tax anyone since we borrow the money to run the government, why are we having this debate?
Actually I am fine with any simple tax system. Be it progressive or flat. The problem of our tax system is that it is too complicated. We will have a big economic boost if we simplify it.
So we collected 9.1 trillion tax on top of 12 trillion GDP? It doesn't seem to me if you add up all the items in your graph, it will be 9.1 trillion. It seems to me it is closer to 4 trillion.
You're correct, that's the debt. I need to either work or post, not try to do both. Find the total tax revenue and divide $590BB by that.
Thats exactly it. I'm always surprised people think a flat tax is somehow more simple. It's basic math to multiply income by a rate -- be it one rate,or a progressive rate. The complexity is defining income.
