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Old 08-26-2005, 10:36 PM
tread tread is offline
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Join Date: Sep 2004
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Default Re: \"Fair Tax\"-a better alternative than \"Flat Tax\"

The biggest problem is that people endorse it before fully understanding it. I love the comments that the current system unfairly punishes those who dare to achieve and rewards underachievers. If I understand correctly, the basis for that claim comes from the fact that those who earn more are taxed at a higher percentage of income.

Well, by that same line of logic, then the rich are unfairly rewarded by the system of LIFE because they get to use such a comparatively small percentage of income to purchase the basic needs (food/housing, etc) and the poor are unfairly punished there.

Like it or not, there is a cost to running this federal government (although the current administration and congress doesn't seem to fully grasp the concept with the massive continual debts they run up from the reduced revenue streams resulting from their current tax breaks).

The evaluation of any alternative taxation plan is simple, you start with the baseline of the current system and ask yourself, will the new system continue to bring in the same revenue stream as the current system? I believe Boortz calls this concept "revenue-neutrality".

So question one is, what is the required flat-tax rate required to keep us revenue neutral? I'm not sure if the book defines this or not, I haven't read it. But whatever it is, we have to assume the system is revenue neutral because not taking in as much money as we do currently would add to even larger debts than are currently projected and hopefully no one would find that acceptable (although you would may have a hard time convincing Republicans on this point).

So once you have determined it is revenue neutral, now you need to ask yourself, what is the current breakdown of % of revenue paid into the system by each quadrant of taxpayers? What % of tax revenue do the top 20% of earners pay? What do the bottom 20% currently pay?

Now the million dollar question, how do those percentages change with this new system? Again, I have not read the book, but my understanding of any flat/fair tax scheme is that they are designed to allow rich people to pay less in taxes. If we have revenue neutrality, then if someone is paying less, then someone else must be paying more.

This is the inherient flaw in flat tax schemes. You presumably have done nothing to change the percentage of money that the poor need to spend on essentials yet you are now asking them to pay a higher percentage of their income in taxes.
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