Q.
Why do they call it a "flat tax"?
A.
"Flat" simply means "no graduation", or everybody pays the same rate. If
you graph income levels with tax rates, there is no rise -- it is "flat."
Q.
What is "graduation?"
A.
Graduation comes from the idea that another dollar added to a rich person's
income means less than another dollar to a poor person. In other
words, when poor people get another dollar, they might use it to eat better.
When rich people get another dollar, they will only increase their level
of luxury slightly, probably unnoticeably. So graduation makes a
rich person pay more per additional dollar than a poor person. Graduation
is part of the current US income tax system. Most other countries
use graduation as well.
Q.
Doesn't "flat" mean "no exemptions/deductions" as well?
A.
No. Some exemptions/deductions may be eliminated along with a flat tax bill,
but this will probably be a temporary compromise. The last time that
significant deductions were eliminated happened in the nineteen eighties,
but by now the tax system has returned to its former complexity.
Q.
Who would benefit from a flat tax?
A.
People with high incomes.
Q.
How could the tax code be simplified?
A.
At least ninety percent of the tax code refers to exemptions/deductions. If
deductions and exemptions were eliminated, your tax return could be only one line long.
If graduation were eliminated, your tax return would not shrink at all
-- even the tax tables would probably be retained.
Q.
Who would benefit from the elimination of exemptions/deductions?
A.
The middle class and the poor. Most exemptions/deductions come as favors to
industry or wealthy people. They can hire lawyers and tax accountants
to find and exploit the deductions. Many poor people don't even know
about the deductions they're eligible for.
Q.
Why do people associate "flat" with "no exemptions/deductions"?
A.
This is probably because proposals for a flat tax come with the promise
of the elimination of most exemptions/deductions. Without this additional simplification,
taxes on the middle class would skyrocket in a flat tax system.
Q.
What about the claim that some poor people will pay no tax at all under
a flat tax?
A.
If this provision is added to the flat tax package, then poor people will
live outside the income tax system. In many people's minds, they
will become second class citizens who contribute nothing to our country.
Graduation lets poor people do their small part to finance the government.
Without graduation, you could be paying no tax one year, and start paying
17% on your raise the next year.
Q.
What about a national sales tax?
A.
This would be an even bigger punishment for the poor. Rich people
spend only a tiny proportion of their incomes in stores. Poor people
spend most of their income buying necessities. To be fair, a national
sales tax would have to tax purchases of stocks, bonds, property, etc.
Nobody in Congress would dare make this proposal. Under a national
sales tax, local communities now using the sales tax would have to look
for a new tax (an income tax?), otherwise, the total sales tax would double.
Q.
What can I do to get a fairer tax code?
A.
Anyone who wants a simpler, fairer tax code, can write their congressman,
saying that they know the difference between "graduation" and "flat", and
that they want a graduated tax system
with no exemptions/deductions. What
is really needed is a constitutional amendment eliminating exemptions/deductions permanently.
As for a national sales tax, to make this proposal acceptable, no
purchases should be excluded, including securities, real property, and
services.
Please send your comments about this page to agihard at yahoo.com. Please change "at" to "@" before using the address Thanks!
Here's another copy of this page: http://www.geocities.com/CapitolHill/Lobby/7146/flattax.html
Why should we care about the poor: http://www.geocities.com/CapitolHill/Lobby/7146/incomedist.html
Here's a copy of a recent NY Times article on the flat tax: Flat Tax Goes From 'Snake Oil' to G.O.P. Tonic
Here's a web page on the growing income inequality in the US: Center on Budget and Policy Priorities
Here's a web page not beholden to the wealthy: Citizens for Tax Justice
Here's something from the New Republic: The New Repbulic
Here's something from the Rochester Business Journal: Rochester Business Journal
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