[southernmissouri2007]

A question for Republicans and other Right Wingers I always hear that after the tax cuts for the Wealthy by JFK Reagan and the Bush tax cuts that the Wealthy pay more money in taxes can any Conservative explain the reasons for this ? I don't understand how the Wealthy would pay most of the taxes if they are paying a lower tax rate. I also want to know if the economy is good and the government gets more revenue do the Wealthy pay more taxes ?

A Brief Guide to the Flat TaxBy Daniel Mitchell, Ph.D.
July 7, 2005

Frequently Asked Questions

Q: Should the rich pay more?

A: Under a flat tax, the rich do pay more than the poor. A wealthy taxpayer with 100 times more taxable income than his neighbor will pay 100 times more in taxes. However, a flat tax does not impose special penalties on those who contribute the most to the nation's prosperity by subjecting them to punitive and discriminatory tax rates. For those who think the "rich" should pay a higher percentage of their income, the generous family allowance effectively creates a modest level of "progressivity." For instance, a family with an annual income of $20,000 faces a tax rate of zero. Wealthy taxpayers also benefit from the family allowance, but the effective tax rate on an income of $1 million will be only a tiny fraction below the statutory tax rate.

This approach is much fairer than the current system, which penalizes investors, entrepreneurs, and others who create wealth for the American economy while simultaneously providing myriad deductions, credits, exemptions, and other preferences that are much more likely to be exploited by upper-income taxpayers. The flat tax eliminates these special-interest loopholes, ensuring that the rich play by the same rules as other taxpayers.

http://www.heritage.org/research/report ... e-flat-tax

[Bubba]

I don't understand how the Wealthy would pay most of the taxes if they are paying a lower tax rate. I also want to know if the economy is good and the government gets more revenue do the Wealthy pay more taxes?

I'm not a conservative but I can explain how the rich could pay a low tax rate and still pay most of the taxes. Say there are 10 rich people and 990 poor people in your country. Rich people make $1 million each, poor people make $1000 each. Rich people have a 10% tax rate, poor people have a 20% tax rate. Together the 10 rich people pay $1 million in taxes, the poor pay $198k in taxes. Whether this scenario means the economy is doing good, is not an easy question but I can tell you that the large income inequality situation I sketched above does have a few important drawbacks: poor people would have very little purchasing power because the rich drive up prices, the rich can easily buy many politicians, control the media, etc..., the poor would feel they have an unfair disadvantage and that leads to more crime.

[southernmissouri2007]

Thank you very much for your reply also would'nt 10% of a Million dollars be more then 10% of hundred dollars if we had a 10% flat tax ? Also would'nt the Government get more revenue from lower taxes if we had a flat tax therefor the Rich would pay more ? Should'nt the Rich/Wealthy paying more money in taxes under a Flat Tax make the Left happy ?

[Bubba]

Thank you very much for your reply also would'nt 10% of a Million dollars be more then 10% of hundred dollars if we had a 10% flat tax ?

Yes, but 20% of a million dollars is even more...

Also would'nt the Government get more revenue from lower taxes if we had a flat tax therefor the Rich would pay more ?

Who says the rich would pay more taxes under a flat tax? I would think those who avoid taxes now would still do it if taxes were lower. Why pay anything if you can pay nothing?

Should'nt the Rich/Wealthy paying more money in taxes under a Flat Tax make the Left happy ?

If that would actually happen then yes, but on the other hand the poor would also pay more and thus see their standard of living decreases and that would piss off the left.

[nucklepunche]

I'm not a conservative but I can explain how the rich could pay a low tax rate and still pay most of the taxes. Say there are 10 rich people and 990 poor people in your country. Rich people make $1 million each, poor people make $1000 each. Rich people have a 10% tax rate, poor people have a 20% tax rate. Together the 10 rich people pay $1 million in taxes, the poor pay $198k in taxes. Whether this scenario means the economy is doing good, is not an easy question but I can tell you that the large income inequality situation I sketched above does have a few important drawbacks: poor people would have very little purchasing power because the rich drive up prices, the rich can easily buy many politicians, control the media, etc..., the poor would feel they have an unfair disadvantage and that leads to more crime.

Under this scenario the top 10% controls 90% of the wealth but pays 83% of the taxes. So they actually pay LESS in accordance with how much wealth they have, and they still have more opportunities to accumulate MORE money than the poor do. The idea behind progressive taxes is that the rich would always pay less than their portion. Also there is the utilitarian argument that a poor man's $100 is worth more to him than a rich man's ten thousand is to him. Really people should pay how they afford.

[Bubba]

Under this scenario the top 10% controls 90% of the wealth but pays 83% of the taxes. So they actually pay LESS in accordance with how much wealth they have, and they still have more opportunities to accumulate MORE money than the poor do. The idea behind progressive taxes is that the rich would always pay less than their portion. Also there is the utilitarian argument that a poor man's $100 is worth more to him than a rich man's ten thousand is to him. Really people should pay how they afford.

I thought that was fairly obvious since in this scenario the rich pay 10% while everyone else pays 20%. Of course that means the rich pay a smaller share of their income: 10 < 20.

[nucklepunche]

I thought that was fairly obvious since in this scenario the rich pay 10% while everyone else pays 20%. Of course that means the rich pay a smaller share of their income: 10 < 20.

My point exactly. Flat taxes are not even flat in the sense that as a proportion of income the rich would pay less. They already do in the USA under our 15% top rate for capital gains. Really Obama is being foolish when he insisted on raising up the capital gains rate to "back during the Clinton era" because that would do nothing. Raising capital gains on the other hand would. I'd even say CUT the top wage rate to 30% no deductions, credits, etc. but tax capital gains at the SAME rate as wages. Republicans talk of picking winners and losers, well I can't think of anything more picking winners and losers than skewing our tax code toward financial services.

[Beal]

My point exactly. Flat taxes are not even flat in the sense that as a proportion of income the rich would pay less.

That makes no sense. The flat tax, by definition, means that higher income earners pay the same proportion of their income as lower income earners. (Ignoring the family exemption mentioned earlier, which still introduces a degree of progressively.) Liberals hate flat taxes for 2 very good reasons. 1. They prefer progressive taxation. 2. They hate getting in to any kind of discussion about flat taxes because it exposes their claim--that the current system is regressive--as the laughable fraud that it is.

They already do in the USA under our 15% top rate for capital gains. Really Obama is being foolish when he insisted on raising up the capital gains rate to "back during the Clinton era" because that would do nothing. Raising capital gains on the other hand would. I'd even say CUT the top wage rate to 30% no deductions, credits, etc. but tax capital gains at the SAME rate as wages. Republicans talk of picking winners and losers, well I can't think of anything more picking winners and losers than skewing our tax code toward financial services.

This all makes sense if you completely ignore corporate income taxes. In truth, owners pay the highest tax rates of all.

[Drlee]

1. They prefer progressive taxation. 2. They hate getting in to any kind of discussion about flat taxes because it exposes their claim--that the current system is regressive--as the laughable fraud that it is.

Well this statement is a bit incomplete. I am no liberal but I do not approve of a flat tax unless it is truely flat. That is to say that there are no exemptions whatsoever otherwise the wealthy will build in all kinds of breaks for themselves. They do own the country afterall. The problem with your argument is that you say the current system is regressive yet you are only arguing about a tax rate. Check it out.

If I earn $100,000 a year and the tax is 20% then that is what it is. What someone who earns $10,000 per year pays has no effect on me. The key to whether taxes are regressive or not depends on the individual investors use of the money he would otherwise have to spend. It is entirely possible that if the option is that an investor sits on his money as one form of cash or another taxing it and using the money for infrastructure projects or giving it to someone who will spend it would be progressive.

I am not compelled by the "fairness" of a flat tax either. Regardless of the amount they are taxed the wealthy still get a bigger piece of the American pie. I would eliminate the capital gains tax altogether and tax it all as income by the way.

Let me ask you a question. IF I were to concede that taxes are regressive by nature (and I don't) can you point out a tax that is not regressive? If not why did you claim that the current system is regressive. Wouldn't all taxes be regressive according to your logic?