Originally Posted By: xlt4me
Originally Posted By: Tempest
Quote:
A simplified rational tax system would really make the true costs of things much more apparent.
Indeed it would, but it's on the other hand. Since the tax code is so complex and no body understands it, it is very easy to say:"Look at those rich people with all of those loop holes!." We here it all the time in on the nightly propaganda and on this site.
Since the top 1% pay ~40% of the federal taxes, we know these tax loop holes amount to very little. And you would think that all these super rich people could afford better accountants to find all of these supposed loop holes, no? Since the bottom 50% pay about 3% of the income tax, it's apparent who has the better accountants....and I'm not talking about CPAs.
Having a simplified tax system would largely eliminate the evil boogeyman tax evaders and would cause more taxes on the lower wage earners. This is of course bad for politicians that depend upon class envy (since people would actually have to pay for tax increases which currently only burden the evil rich people) and wealth redistribution to get elected.
It’s just so unfair!!!
Let’s do a hypothetical example. We’ll look at two typical Americans. One is a fine upstanding corporate CEO making $30 million a year and the other a poor working slob making $30 thousand a year. We’ll look at the current tax plan and under a hypothetical consumption / federal sales tax system.
UNDER THE CURRENT PLAN:
The CEO may be paying a whopping 35% on that $30 million and that only leaves him $19.5 million to live on. Let’s say he spends $4.5 million a year to live on… You know pay the mortgage on the mansion, the car loan on the mayback, send the kids to Yale or Harvard, and maybe a few well deserved vacations to Hawaii and Europe. At the end of the year he’s left with $15 million to squirrel away for a rainy day or retirement.
The working slob may be paying an unfairly low 15% on his $30 thousand and that leaves him $25,500 to live on. He spends every dime he makes just trying to get by and if the kids plan on college, they are on their own. At the end of the year he’s left with $0 and hopefully no deeper in debt.
UNDER A HYPOTHETICAL CONSUMPTION / NATIONAL SALES TAX PLAN:
For this exercise let’s say the national consumption / sales tax is 25%.
The CEO still needs $4.5 million to support his life style so he spends $4.5 million a year and pays $1,125,000 a year in tax. FAR, FAR less than the $11.5 million he was paying per year. And now he’s left with $24,375,000 at the end of the year. A difference of +$9,375,000 left in his pocket.
The poor working slob still spends every dime he makes just trying to get by. But now he will pay 25% on his $30 thousand or $7500. Now he’s only left with $22,500 to live on… $3000 LESS than he had before and probably deeper in debt.
So you’re right! The low wage earner will finally be paying his fair share of taxes and the 1% club will get the break they deserve.
I just love static economics.
Remove taxes on the wealthy and they will invest (assuming gov. stays out of the way) and you get more jobs. This will reduce the need for additional taxes "required" for social programs and give away programs. Of course this is very bad for politicians that get elected via people addicted to free government money "provided" by the rich. The rich are being forced to subsidize the general population and also provide businesses for the rest of us to have jobs, yet they are considered the "greedy".
You are also stereotyping the "wealthy" as a fixed group that never changes which is strictly untrue. There is much movement up and down the economic scale so you are punishing and restricting those that are trying to move up.
You are also forgetting that many "rich" people have education to pay for which many "poor" people do not. Why invest heavily in an education if you are going to face confiscatory taxes to support others? This is how a progressive tax structure
discourages economic growth and education.