Saturday, October 29, 2011
Flat Tax Proposals Among Republican Candidates
Many of the republican candidates have come out with flat tax proposals to help simplify the tax code and create breaks for the wealthiest brackets. Among the most prominent are Herman Cain's 9-9-9 plan which calls for 9% business tax excluding capital investments, a 9% individual tax, and a 9% sales tax. Newt Gingrich proposed a 15% flat tax and Rick Perry a 20% flat tax. The benefit to these plans are simplicity and transparency. Paperwork would be vastly cut and it would be much easier to tell who was or wasn't paying their taxes. However, the costs outweigh the benefits here. These flat taxes are very regressive, and force cuts on the rich to be paid by the poor. Of the 47% of people who do not pay income taxes in the U.S, many are living below the poverty line. To ask them to contribute the same amount of their income as much wealthier Americans is absurd, and luckily most of America supports a progressive tax instead. It will be interesting to see how big of an impact tax debate has on the election and whose plan is most well received.
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The simplicity of these tax plans concern me. Federal taxes should not be a simple system, because it is not something that you can boil down into an easy catch phrase. I fear that if one of these candidates win with one of these catchy plans, they will receive backlash during implementation, because it won't work out as they planned because the whole system is much more complicated than they seem to expect.
ReplyDeleteThe question is what kind of country the US wants. Income inequality in the US is at its highest level since 1928.
ReplyDelete“There’s class warfare, all right,” Warren Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”
Is it more important to provide medical care to the poor or increased luxury consumption by the wealthy? Does ever greater rewards to investors do as much or more for US competitiveness than investments in education and infrastructure?
There’s a good argument to lower corporate income taxes to encourage business in the US. Low personal income taxes on upper income Americans is another matter. US personal income taxes as a percent of GDP are at their lowest level in half a century and are lower than in most other countries. Very few Americans will leave the US for lower taxes.
What the Republicans describe as fair is really a tax decrease for the rich and increase for the poor. Whether that is fair or not is up for debate. Mainly I think that lowering taxes on the rich, especially things like investment, will do less good than the people who espouse these plans say they will. I just hope that out of all of this comes a more efficient tax code, which in the end could both cut taxes and raise revenue, which is something everyone can get behind.
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