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What it means is taxing lower income folks more will hurt the economy much more than taxing high income folks. This "trickle down" economy is a myth. As someone posted above, look at what the top tax rates used to be, and compare that to the health of our nation then vs. now.
Revenues might've remained the same (I don't know) but the overall economy was much better.
if you tax someone that makes $20,000 @ 20%, they have $16,000 left to spend in the economy. this will probably be enough to buy necessities, and maybe a few things beyond that. now take $100,000...they have $80,000 left to spend. now take $1M, they have $800,000 left to spend. the point being, a progressive tax system helps fund the government fully by taxing those with more ability to pay without removing their ability to participate in the economy. virtually every advanced economy in the world right now, to my knowledge, is on some variation of the progressive tax system. if that's not correct, i'd love to read up on an example of one that is not.
as far as revenue, if you go back in time to the 50s or so, i believe that one of the statistics is that the highest tax bracket funded about 50% of the revenues, and today, it's somewhere around 25 or 30%. i know i'm messing the stat up, so i'll try and find it tonight. but the idea was that the burden has fallen for that group.
now, the progressive tax is not meant to be "fair" to everyone. here's a good thing to read as far as "arguments for" and "arguments against".
it's an interesting topic to discuss, no doubt. unfortunately, it often gets clouded by partisan opinions. but an intelligent conversation on the topic is a good one.
good post bardykp. I still think, and I use that term loosely, that if a fair tax was implemented that the tax rate would not be that high. It would of course have to be adjusted, but after all the illegal money is being taxed I think the rate would stay marginally low. Again, I am no finance person by any means. I wish I could find a study that analyzes this and takes into account illegal money (drugs, mob, laundering, prostitution).
if you tax someone that makes $20,000 @ 20%, they have $16,000 left to spend in the economy. this will probably be enough to buy necessities, and maybe a few things beyond that. now take $100,000...they have $80,000 left to spend. now take $1M, they have $800,000 left to spend. the point being, a progressive tax system helps fund the government fully by taxing those with more ability to pay without removing their ability to participate in the economy. virtually every advanced economy in the world right now, to my knowledge, is on some variation of the progressive tax system. if that's not correct, i'd love to read up on an example of one that is not.
I'm not sure you understand what a progressive tax system is, because your example is not of a progressive tax system, it's of a flat tax.
Here's the thing, take 10 people with incomes of $20,000. They will spend, if not taxed, basically all of their combined $200,000 income ($20,000 x 10). Most of it stays here in the US as well.
Now take ONE lawyer with an income of $200,000. They *might* spend $60,000 of it. And save the rest (what isn't taxed). A new Lexus, a nice home, good food, you'd be hard pressed to spend over $5k a month after tax in most areas of the country.
The 10 poor folks with a combined $200,000 spending contribute much more to the economy than the lawyer. Those 10 people create more jobs than that one lawyer does with direct spending of $60,000.
We're not talking about whose smarter here (ie saving), we're discussing who will have a greater impact.
Now, what sense does it make to tax the poor folks? All you will be doing is strangling the economy. The more you tend to make, the more you tend to hoard money wise.
good post bardykp. I still think, and I use that term loosely, that if a fair tax was implemented that the tax rate would not be that high. It would of course have to be adjusted, but after all the illegal money is being taxed I think the rate would stay marginally low. Again, I am no finance person by any means. I wish I could find a study that analyzes this and takes into account illegal money (drugs, mob, laundering, prostitution).
His flat tax would eliminate taxes on capital gains (stocks and dividends)
Persons making less than X dollars per year would be exempt.
I am sure Nevada taxes businesses that offer gaming and ladies of the night. And the states that have casinos, those businesses are highly taxed. People who buy $50,000 cars, boats, yachts, airplanes should pay a heavy tax, as should the wealthy. Unfortunately my income is under $14,000 a year and always will be, so I won't pay any tax the rest of my life. Unless I hit the lottery and the state's cash 5 only pays $100,000, so no millions for me that way.
good post bardykp. I still think, and I use that term loosely, that if a fair tax was implemented that the tax rate would not be that high. It would of course have to be adjusted, but after all the illegal money is being taxed I think the rate would stay marginally low. Again, I am no finance person by any means. I wish I could find a study that analyzes this and takes into account illegal money (drugs, mob, laundering, prostitution).
why would the illegal money all of a sudden be taxed by whatever you consider a "fair tax" though?
I'm not sure you understand what a progressive tax system is, because your example is not of a progressive tax system, it's of a flat tax.
Here's the thing, take 10 people with incomes of $20,000. They will spend, if not taxed, basically all of their combined $200,000 income ($20,000 x 10). Most of it stays here in the US as well.
Now take ONE lawyer with an income of $200,000. They *might* spend $60,000 of it. And save the rest (what isn't taxed). A new Lexus, a nice home, good food, you'd be hard pressed to spend over $5k a month after tax in most areas of the country.
The 10 poor folks with a combined $200,000 spending contribute much more to the economy than the lawyer. Those 10 people create more jobs than that one lawyer does with direct spending of $60,000.
We're not talking about whose smarter here (ie saving), we're discussing who will have a greater impact.
Now, what sense does it make to tax the poor folks? All you will be doing is strangling the economy. The more you tend to make, the more you tend to hoard money wise.
i was responding to someone talking about a flat tax...and then went on to talk about a progressive tax. sorry that wasn't clear.
i basically 100% agree with the point you make.
a "flat tax" is considered "fair" because everyone pays the same % of their income. a progressive tax helps drive a growing economy though. sorry my post was kind of a run-on thought.
illegal money would be taxed because the person who has the money would buy stuff with it - car/house/yacht etc. There is no federal income tax on drug money, but if there was a flat tax it would be applied to any purchase made with the money.
my quick example, tho it might be way wrong.. two different people, A & B, make $100k/yr. A is businessman and B is a drug-runner. Both people have to spend all their money. A gets 10% income tax and then a 7% sales tax, so has $83,700/year to spend. B only gets the 7% sales tax, so has $93k/year to spend. Gov ends up with $23,300. For the gov to make the same amt of money a flat tax rate of 11.65% would be needed. This would leave A with more money to spend, $88,350, and B would have the drug money taxed when B spend it.
illegal money would be taxed because the person who has the money would buy stuff with it - car/house/yacht etc. There is no federal income tax on drug money, but if there was a flat tax it would be applied to any purchase made with the money.
You're comingling two seperate items.
When people talk about a FLAT TAX, they are usually talking about continuing to tax income, but getting rid of the "tax bracket" system we currently have that calls for higher income earners to pay a higher percentage of that income in taxes, so that everyone pays the same tax rate.
You seem to be talking about a CONSUMPTION TAX. This would stop the taxation of income, letting people keep 100% of what they earn, and tax all SPENDING instead. This would result in all that illegal money being taxed eventually, as long as it is used to purchase goods on the legal market, and not other illegal products like guns & drugs.
I you want a flat tax we have one, it's the wage tax. Just remove the cap and let everyone pay in
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