Flat Tax Question

I've always wondered the same thing. I've heard some speculate that the tax rate would be somewhere around 26-30%, but that doesn't count the hit that our economy would take if the whole system of accountants, IRS employees, tax agencies and advisors suddenly had a lack of clients.

 

That 26 - 30% rate would be if we went to a national sales tax or consumption tax. That would keep revenues at the same level. As far as a flat percentage on income it would depend on what you define as income (after any deductions ect). As you know under the current system with the EIC some people actually have negative income for tax purposes and receive refunds in excess of what they paid through deductions.

While there might be a short term increase in unemployment due to laying off all these people (and don't forget the tax lawyers) the final affect would be a boost to our economy not a hit. Remember that none of those people generate any real wealth. All they do is move it around a little and provide a service. Their net affect is a drain on our economy. They do not contribute anything. Imagine if all the thousands of accountants and tax lawyers in the United States began actually contibuiting to our economy instead of subtracting from it.

 

Here is a link to the Heritage Foundation Paper on a flat tax rate:

http://www.heritage.org/Research/Taxes/bg1866.cfm

As documented in the link this approach to taxation has been adopted by many formerly soviet and communist countries. The rates of some of these are:

Russia - 13%
Lithuania - 24%
Estonia - 20%
Ukraine - 13%
Serbia - 14%
Slovakia - 19%
Georgia - 12%
Romania - 16%

 

Instead of a flat tax, which, while fair, leaves the same loopholes for cheating, why not try the Fair Tax? It's a consumption tax, but since the middle taxes are removed, the cost of items will go up little, if at all.

Everyone pays the same rate, and the only exemption is the tax on the poverty level, in which every working person gets a prebate check in the amount of the tax of the poverty level. It eliminates most of the beauracracy. It eliminates most of the opportunities for cheating they system. It removes some disincentives that cause many people to buy luxury items in other countries.

Here's the link: http://www.fairtax.org

 

It seems the last figure I saw was about 23% for the flat tax. I think that assumed no tax on the income up to the poverty level. I have always wondered if states would follow the model if the federal government switched.

 

I certainly hope not.

I don't want my state to implement an income tax.

Or a sales tax, for that matter.