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The merits and impact of flat tax vs the current tax structure has been debated quite a bit on here.
What I would like to do hear instead of having the usual bickering that goes back and forth is look at the cold hard #'s and the various impacts and differences that would happen from the current tax structure to various flat tax proposals.
One thing many of the proponents of the flat tax suggest is that they would eliminate many if not all deductions, and have the taxes be paid on the entire income.
The current deductions vary, they can range from personal exemptions and exemptions per dependent (which is currently $3,650). A standard deduction of $5,700 for single or $11,400 for married also exists. You have that choice or itemized deductions which can range from something home related (property taxes, mortgage interest, mortgage insurance) to deductions from donations as well as a whole slew of other possible deductions. The wealthy often take advantage of some of the more obscure deductions. A child credit also exists of $1,000 per child under 17 and an $800 work credit also exists (these are income depending)
So the question for the flat tax crowd is this. What if any of these deductions would you allow? For the deductions you do allow what would the amounts be? Any income limits to those deductions? Also what would the flat tax % be?
Based off the info that is given, I will compare and contrast the tax amounts that are paid for a family of four from a flat tax to the current system for these following situations.
Combined income $35,000, pays rent
Combined income $50,000, owns home, $800 a month in mortgage interest, property taxes $3,500 a year
Combined income $75,000, owns home $1,150 a month in mortgage interest, property taxes $6,000 a year.
Combined income $115,000, owns home $1,600 a month in mortgage interest, property taxes $9,000 a year
Combined income $350,000, owns home $2,200 a month in mortgage interest, property taxes $15,000 a year, $35,000 in other deductions
Combined income $1,250,000, owns home $3,500 a month in mortgage interest, $35,000 in property taxes a years $275,000 in other deductions.
Each individual would pay a percentage of income, with no deduction, and no marriage penalties/benefits. You pay on what you receive as an indiivdual...
Each individual would pay a percentage of income, with no deduction, and no marriage penalties/benefits. You pay on what you receive as an indiivdual...
I've heard figures around 13-18% of gross revenues would be needed in order to maintain current income to the federal government. I'd support somewhere on the lower end of this figure.
I've heard figures around 13-18% of gross revenues would be needed in order to maintain current income to the federal government. I'd support somewhere on the lower end of this figure.
I'm pretty sure it would take more than that, but decided to run the #'s for 13%, 14% and 15%, with no deductions, credits, etc. I ran those numbers against the income levels, and deduction amounts listed above for no kids, one kid and two kids.
$35,000
Flat Tax 13% 4,550, 14% 4,900 15% 5,250
Current with no kids $833, with one kid $-552, with two kids $-1,897
Tax burden difference at 13% flat tax compared to current, +$3,717 with no kids, +$5,102 with one kid, +$6,447 with two kids. For every % above 13% you increase the flat tax the burden increase jumps $350.
$50,000 (using deduction amounts above)
Flat Tax 13% $6,500, 14% 7,000, 15% 7,500
Current $2,809 with no kids, $1,261 with one kid, -$286 with two kids
Tax burden difference at 13% flat tax compared to current. +$3,691 no kids, $5,239 with one kid, + $6,786 with two kids. For every % above 13% you increase the flat tax, burden jumps $500.
$75,000 (using deductions amounts above)
Flat tax, 13% $9,750, 14% 10,500, 15% $11,250
Current $5,554 with no kids, $4,006 with one kid, $2,459 with two kids
Tax burden difference at 13% flat tax compared to current. +$4,196 with no kids, +$5,744 with one kid, +$7,291 with two kids. For every % above 13% you increase the tax burden, the burden jumps $750.
$115,000 (using deduction amounts above)
Flat Tax, 13% $14,950, 14% $16,100, 15% $17,250
Current $11,456 no kids, $9,794 one kid, $7,881 two kids.
Tax burden difference at 13% flat tax compared to current, +$3,494 no kids, +$5,156 one kid, +$7,069 two kids. For every 1% above 13% in the flat tax, tax burden increases $1,150
$350,000 using deduction amounts above
Flat Tax, 13% $45,500, 14% $49,000, 15% $52,500
Current $67,144 for no kids, one kid and two kids
Tax burden difference at 13% compared to current with no kids, one kid, or two kids, -$21,644. For every 1% above 13% tax burden would increase by $3,500.
Current $286,750 for no kids, $285,899 for one kid, $285,047 for two kids
Tax burden difference at 13% compared to current, with no kids -$124,250, with one kid $123,399, -$122,547 with two kids. For every 1% above 13% tax burden increases by $12,500.
So as you can see this little fair tax would cause DRASTIC increases in taxes to the poor and middle class, and DRASTIC cuts in taxes to the very wealthy.
In order to arrive at the figures I did, I used a standard deduction in mt $35,000 example, in the examples for $50,000 and above I used itemized deductions, based off estimated mortgage interest and property taxes, for the $350,000 and $1.25 million amounts I also threw in increased deductions amounts the wealthy is able to take advantage of. When I get more time I will play around with the $50,00, $75,000 and $115,000 examples a little more (using smaller mortgage and property tax amounts, and perhaps seeing what the figures would be if standard deductions were used on those amounts, and how it would compare to the fair tax examples from above.
Each individual would pay a percentage of income, with no deduction, and no marriage penalties/benefits. You pay on what you receive as an indiivdual...
This is what I would do. And I would make it 1% of income. I would include businesses in this also. 1% of income.
I'm not sure what the percentage would actually be. I've seen stats that show it as high as 50%, and and slow as around 18.
No deductions, none. Everyone gets taxed at the exact same rate, period.
Believe me, if you make less than 20,000 a year, you'll get more in the way of government programs that would be paid for by the richest Americans, if their tax rate is as equal as yours.
I'm not sure what the percentage would actually be. I've seen stats that show it as high as 50%, and and slow as around 18.
No deductions, none. Everyone gets taxed at the exact same rate, period.
Believe me, if you make less than 20,000 a year, you'll get more in the way of government programs that would be paid for by the richest Americans, if their tax rate is as equal as yours.
So you are willing to pay ALL the costs of ALL goods and services???
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