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We were discussing why flat-taxes don't work. I think you're trying to argue something that isn't be proposed. Proportional taxes only makes sense if you were to have proportional costs. But because we don't have proportional costs, and we apply proportional taxes, you can see what happens. (Which is what the reverse-proportional cost showed--the .38 gallon of milk, $500 car, etc)...
Exactly.
I only brought up proportional costs of products to illustrate a point:
Taxing lower income earners the same amount as someone making much more money hurts the lower income earner a whole lot more.
Going back to my water example:
One person has a gallon of water.
Another person has a whole olympic sized swimming pool of water.
The person with only a gallon of water has very little they can contribute to a "tax" and still keep themselves hydrated, keep themselves clean, keep their clothes clean, etc... if they can even do that much with only a gallon.
The person with an olympic sized swimming pool of water can contribute SO MUCH MORE water, as an absolute number and as a percentage, to a "tax" and still have more than enough to meet daily needs, extra wants (swimming, for example), and save some for later.
A flat tax sounds nice, but it hoses the people at the bottom, and it only gets better the higher up the salary ladder you go.
Even with a high progressive tax on the wealthy and very wealthy, the people at the top are still better off overall than the people at the bottom with a lower tax rate.
For all the proponents of a flat tax, let me ask you this:
Would you rather make $15,000 a year and be taxed 1%, and take home $14,850 a year?
OR
Would you rather make $1,000,000 a year and be taxed 90%, and take home $100,000 a year?
Even with a high progressive tax on the rich, and super rich, that group still comes out way ahead than the people making very little and being taxed very little.
For all the proponents of a flat tax, let me ask you this:
Would you rather make $15,000 a year and be taxed 1%, and take home $14,850 a year?
OR
Would you rather make $1,000,000 a year and be taxed 90%, and take home $100,000 a year?
Even with a high progressive tax on the rich, and super rich, that group still comes out way ahead than the people making very little and being taxed very little.
Let's say Federal tax is 90%, how much more would state, local, property and every other tax erode that dandy 100k? How about a mortgage and a car, maybe some food and electricity? How much of that 100k would be eroded by those things? That tax bracket would make it tough for someone making a million dollars afford college for their kids or save for retirement. But, hey that's just the price they'll pay for success.
Let's say Federal tax is 90%, how much more would state, local, property and every other tax erode that dandy 100k? How about a mortgage and a car, maybe some food and electricity? How much of that 100k would be eroded by those things?
Good, now take that line of thinking and apply it to a flat tax system where everyone pays 10%.
How does the person making $15,000 a year even live their life?
That's why a flat tax doesn't work "fairly" for everyone.
...That tax bracket would make it tough for someone making a million dollars afford college for their kids or save for retirement. But, hey that's just the price they'll pay for success.
And people making $15, $20, $30,000 a year don't have to deal with those issues too?
And people making $15, $20, $30,000 a year don't have to deal with those issues too?
Yes, they do. But, at that low an income many qualify for grants and aid for college. No such help would be available to a high earner regardless of tax burden.
Some on this board see no issue with someone earning $ 1,000,000 paying 90% of their income to Federal taxes leaving them with $ 100,000 after tax income. Sound pretty good, huh? Well, where I live, State income tax is 7.75% for earnings over about 60k. So that 100k that the million dollar earner gets to keep, just became $ 22,500 after State income taxes. Earn a million, keep $ 22,500. Sounds completely fair.
I don't favor a flat tax without substantial credits for those at the lower end of the earnings scale. I also don't favor the sort of tax rates some are fine with for higher earners. I do favor a system that simplifies filing taxes and where everyone pays at least some tax. I don't care if it's only $1 a year for some.
I mean, everyone pays an equal percentage of their wages towards taxes and that would be fair, right?
I like to think in analogies and metaphors, so I will put my thoughts out there in such a fashion:
Money is like water.
People need money to survive in today's world (barring the very extreme instances of very few people).
People need water to live. In fact, a person needs about 2 liters (about .5 gallons) of water a day to live. That is bare bones, surviving day-to-day CONSUMPTION.
If we pretend that water is currency, you could make a case that 2 liters, or .5 gallons, of water is the "poverty" level. That is, the absolute minimum that a person needs to continue to live. Hydration needs | European Hydration Institute
There are plenty of people in America that make less than poverty level, equal level, or just above poverty level wages. And then there are many, many more people that make much more.
So we can assume that many people would make 0.5 - 2 gallons of water per day in "wages". Many would make 2-10 gallons of water per day in "wages". Some 10-100 gallons of water per day in "wages". And others 100+ gallons of water per day in "wages". And very few people would make 1,000+ gallons of water in "wages" a day.
Now it comes time to "tax" the water. And we're going to be "fair" about it; we're going to charge everyone an equal percentage of their water (money)... let's say 10%.
The person who makes 2 gallons a day has 256 cups of water, but after 10% tax only has 230 cups of water.
The person who makes 10 gallons a day has 1,280 cups of water, but after 10% tax has 1,152 cups of water.
The person who makes 100 gallons a day has 12,800 cups of water, but after 10% tax has 11,520 cups of water.
The person who makes 1,000 gallons a day has 128,000 cups of water, but after 10% tax has 115,200 cups of water.
So the people that give up the most water in absolute terms are paying their fair share in a flat tax right?
Mathematically, yes. Realistically, no.
That 2 liters (0.5 gallons) I stated earlier for a person to live was just that... only enough that a (one) person could continue to survive.
What about kids? They need 1-2 liters a day, per child, just to live.
What about bathing/washing? That takes water.
What about cleaning clothes? That takes water.
What about cooking dinner? That takes water.
What about keeping your car engine cool? That takes water.
What about watering plants/gardens? That takes water.
What about pets? They require water.
If someone was "paid" poverty level wages of water (2 liters, 0.5 gallons) a day that would be the equivalent of getting paid $30.60 seven days a week, 365 days a year for a total of 182.5 gallons, or $11,170 a year.
If someone was "paid" 100 gallons of water a day that would be the equivalent of getting paid $6,120 seven days a week, 365 days a year for a total of 36,500 gallons, or $2,233,800 a year.
If someone was "paid" 1,000 gallons of water a day that would be the equivalent of getting paid $61,200 a day seven days a week, 365 days a year for a total of 365,000 gallons, or $22,338,000 a year.
That 100 gallons of water a day is enough to SUSTAIN 200 lives.
That 1,000 gallons of water a day is enough to SUSTAIN 2,000 lives.
************************************
I would be willing to vote for a flat tax... but only under one condition:
That condition is that there is a flat "price" for goods and services. Whatever percentage of income it costs a person making poverty level wages to buy a good or service would be applied to people making more money.
Currently it costs (low end) $3 to buy a gallon of milk.
That means a person making poverty level wages ($11,170 a year) pays 0.0027% of their income towards a gallon of milk.
Someone making $1,000,000 a year would pay 0.0027% of their (yearly) income towards a gallon of milk, or $270
If it costs $50 dollars to heat a home of someone in poverty, then that person pays 0.048% of their (yearly) income for heat.
Someone making $1,000,000 a year would pay 0.0048% of their income towards heat, or $4,800
If rent on a house/apartment cost a person in poverty $250 a month, then that person pays 27% of their (yearly) income on rent.
Someone making $1,000,000 a year would pay 27% of their yearly income on rent, or $270,000 a year.
But you know what?
Let's flip this around.
Maybe there should be a flat price... but base it on a millionaire's yearly income.
A $3 gallon of milk for a millionaire is 0.00003% of their yearly income.
Maybe a gallon of milk for someone at the poverty line should be 0.00003% of their yearly income too, or $0.34
A brand new $50,000 car for a millionaire is 5% of their yearly income.
Maybe a brand new car for someone at the poverty line should be 5% of their income as well, or $558.50
If you don't think it would be a good idea for everyone to pay a flat "price" for goods/services then you already know why it would be a bad idea for there to be a flat "tax", but you may or may not have realized it.
The richer you are, the more a flat tax benefits you. The poorer you are, the more a flat tax hurts you. Some people can afford to give more and still live "life". Others can't afford to give anymore and realistically remain alive, functional, and productive in society.
You have the basic problem with the flat tax down.
The reality is that even for most people who advocate it, they'd see huge tax increases, while the wealthy would see huge tax decreases.
The average tax payer on income taxes is not paying that much relative to how much they make, when you add up all of the deductions.
A flat tax would eliminate those deductions, and the average person would see their income tax bill increase significantly.
Also, does the flat tax pay for social security and medicare? Or will those still be separate taxes?
Reading the OP, I see a demand for equal outcomes no matter what the effort one puts into their life. Equal opportunity means nothing, it's equal outcomes that define "fair".
I grew up in a two-bedroom shotgun house, close to a mill, and felt the vibrations every time the trains came by. It made me work that much harder to rise above it and get to where I am now.
My wife arrived in this country in 1996 with an overnight bag and $50 in her pocket. She now holds graduate degrees in Engineering and makes well over six figures on her own.
Different people require different motivations. Some are never motivated to better themselves and are quite content to allow others to provide for them.
I believe in the outcome which one makes for oneself. This country offers more opportunity than anywhere else on Earth. I believe in pulling my own weight and ask the same of others. I do not feel obligated to provide in any way for those who do not try. To me, a flat tax is quite fair. If you want more in your pocket, then work harder, or work smarter.
Rule #1: Life's Not Fair.
Get Over It and Move On.
Or Stay Stuck.
I Don't Care Either Way.
Reading the OP, I see a demand for equal outcomes no matter what the effort one puts into their life. Equal opportunity means nothing, it's equal outcomes that define "fair".
I grew up in a two-bedroom shotgun house, close to a mill, and felt the vibrations every time the trains came by. It made me work that much harder to rise above it and get to where I am now.
My wife arrived in this country in 1996 with an overnight bag and $50 in her pocket. She now holds graduate degrees in Engineering and makes well over six figures on her own.
Different people require different motivations. Some are never motivated to better themselves and are quite content to allow others to provide for them.
I believe in the outcome which one makes for oneself. This country offers more opportunity than anywhere else on Earth. I believe in pulling my own weight and ask the same of others. I do not feel obligated to provide in any way for those who do not try. To me, a flat tax is quite fair. If you want more in your pocket, then work harder, or work smarter.
Rule #1: Life's Not Fair.
Get Over It and Move On.
Or Stay Stuck.
I Don't Care Either Way.
Thank you for this. It is on the money.
People's behavior should not factor into the tax code.
The tax code should not be used to equalize outcomes.
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