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A Kinder, Gentler Flat Tax (But with Tax-the-Rich Unlimited Payroll Tax)
Forbes.Com

Posted on 10/02/2005 9:51:56 PM PDT by indianrightwinger

A Kinder, Gentler Flat Tax John C. Goodman, 09.29.05, 12:07 PM ET

How to reform our tax system--and satisfy both the left and the right. Steve Forbes has done a commendable job spelling out why America's tax system must be simplified. Scrap the mind-numbingly complex, loophole-filled, savings-averse code, advises the editor-in-chief of this magazine, in favor of one elegant, clear rate. A flat tax is what America needs.

That all sounds good to me. But I think we can do even better. Under Steve Forbes' plan the flat rate would be 17%. All families would get generous personal exemptions, so that a family of four would not pay taxes until its income exceeded $46,000. To encourage growth, the Forbes plan exempts income that is saved and invested. Which means that the Forbes plan is really a consumption tax. It taxes people based on what they take out of the system, not on what they put in.

I would offer Americans an even lower flat tax rate--14% as opposed to 17%--and at the same time do more to help low-income people. Boston University economist Laurence Kotlikoff and I have put together a plan that works in the following way.

First we'd get rid of the across-the-board $9,000-per-person exemption in the Forbes plan. Why should billionaires like Bill Gates get an exemption? Forbes is giving too much money away to rich people. We'd save that exemption money and give it instead, in the form of a rebate, to the bottom third of earners, those who bring home roughly less than $25,000 for a family of four.

Second, Forbes ignores the 12.4% Social Security payroll tax (split between employer and employee). Currently, income over $90,000 a year is not subject to the tax. We don't think it's fair that a $50,000-a-year autoworker has to pay payroll taxes on all his income while a million-dollar-a-year auto executive does not. Under our proposal all wages would face the same income and payroll tax rates.

There is just no way Forbes' plan would ever fly in Congress. Politicians are not going to adopt a system that taxes the wages of the rich at a lower rate than the wages of blue-collar workers. Under our proposal all wages would face the same income and payroll tax rates. And these rates would be paid only once. After that all savings would accumulate tax free.

Our plan allows us to have a lower flat-tax rate and produces results that should appeal to conservatives as well as liberals. What conservatives most want is an uncomplicated system that taxes income only once (when it is earned) at one low rate. Liberals are more concerned about progressivity. They want the rich to bear more of a burden than the poor.

The left objects to most consumption tax proposals because they are not progressive. Low- and middle-income people would pay a greater share of what they earn than rich people. What we are proposing is more progressive than the Forbes flat tax. It's also more progressive than the current system. Using economic modeling, Kotlikoff and I found that under our flat tax the rich would bear more of the burden than they currently do.

We would also use the rebate of tax dollars to the bottom third of taxpayers to solve other social problems. For example, instead of people automatically getting the 14% rebate, we would require them to show that they have health insurance and a retirement pension as a condition. Specifically, to get one-half the rebate (7%), low-income families would have to produce proof of health insurance. This would encourage millions of people who qualify to enroll in Medicaid or in their employer's health plan. Barring that, families could apply the tax rebate to health insurance they purchase on their own. We propose making the other half (7%) contingent on proof of a pension, an IRA, a 401(k) or some other savings account.

So instead of national health insurance and more government spending on the elderly, we would use our flat-tax proposal to urge people to solve these problems on their own.

President Bush wants to reshape our tax system. Many in Congress agree on the need for change. The oft-repeated objection is that tax reform benefits high-income taxpayers at the expense of low-income taxpayers. That objection need not apply.


TOPICS: Business/Economy; News/Current Events
KEYWORDS: economy; flattax; forbes; payrolltax; taxation; taxreform

1 posted on 10/02/2005 9:52:00 PM PDT by indianrightwinger
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To: indianrightwinger

I always love the term "rebate" to people who dont pay taxes...


2 posted on 10/02/2005 9:54:52 PM PDT by WatchYourself
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To: indianrightwinger

Is there a link?


3 posted on 10/02/2005 10:03:27 PM PDT by Choose Ye This Day (I just stepped in a big pile of sassy.)
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To: ancient_geezer

tax ping


4 posted on 10/02/2005 10:03:40 PM PDT by FairOpinion
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To: indianrightwinger; Admin Moderator

AM -- could you please put the link to the article in. It seems like it wasn't included.

http://www.forbes.com/home/free_forbes/2005/1017/042.html

Thanks


5 posted on 10/02/2005 10:05:18 PM PDT by FairOpinion
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To: FairOpinion

Sorry, I missed it this time. Don't know how to edit the post.


6 posted on 10/02/2005 10:10:06 PM PDT by indianrightwinger
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To: indianrightwinger

Once you posted it, you can't edit it, only the Admin Moderator can, that's why I also sent him the post.


7 posted on 10/02/2005 10:14:01 PM PDT by FairOpinion
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To: indianrightwinger
Finally - a flat tax every one can love. And the pre-bate is geared towards making people responsible for securing their own future. And at 14% - its a heck a lot better than a tax that soaks up 50% of your income.

(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
8 posted on 10/02/2005 10:14:58 PM PDT by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives On In My Heart Forever)
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To: FairOpinion

Thanks!! I learn. Still fairly new here.


9 posted on 10/02/2005 10:15:49 PM PDT by indianrightwinger
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To: goldstategop

Not with an unlimited 12% payroll tax....

I will NEVER favor that idea, no matter what context.


10 posted on 10/02/2005 10:16:35 PM PDT by indianrightwinger
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To: indianrightwinger

No problem. The article is a good find, and you'll learn the posting methods.


11 posted on 10/02/2005 10:17:27 PM PDT by FairOpinion
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To: FairOpinion

Man! The Forbes site is just crawling with annoying pop-ups. Ugh! What makes them think people want to be annoyed like that?


12 posted on 10/02/2005 10:26:18 PM PDT by Choose Ye This Day (I just stepped in a big pile of sassy.)
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To: Choose Ye This Day

You need a firewall or set your IE to stop pop-ups.


13 posted on 10/02/2005 10:28:49 PM PDT by FairOpinion
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To: indianrightwinger

I agree.

Self employed people pay the full 12.5% in addition to all the other income taxes.

Social security is suppose to be for my own retirement. I don't get more back if I pay more in. That's wrong. Many state and federal employees have gotten to opt out of SS. They get a drastically better deal. What they pay in goes to what they actually get back.

I think you ought to be able to provide a bond or some other financial instrument to prove you won't need taken care of later and be able to opt out entirely.


14 posted on 10/02/2005 10:33:01 PM PDT by DB ()
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To: FairOpinion

I do have a firewall that stops most pop-ups. But Forbes has that annoying "Take This Survey" box that hovers in front of you wherever you scroll on their page. My firewall does nothing for that.


15 posted on 10/02/2005 10:33:45 PM PDT by Choose Ye This Day (I just stepped in a big pile of sassy.)
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To: indianrightwinger

IB4TZ?


16 posted on 10/02/2005 10:45:27 PM PDT by Turbopilot (Nothing in the above post is or should be construed as legal research, analysis, or advice.)
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To: Turbopilot

What is IB4TZ?


17 posted on 10/02/2005 10:48:44 PM PDT by indianrightwinger
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To: indianrightwinger; Admin Moderator
In (posted on the thread) before the Zot.

indianrightwinger Since Sep 4, 2005

Note: I initally misread the date as 10-04-05, not 9-04-05, so I could be wrong about you. But posting a vanity about liberal tax ideas after <30 days here is still awfully suspicious:

Why should billionaires like Bill Gates get an exemption? Forbes is giving too much money away to rich people.

We don't think it's fair that a $50,000-a-year autoworker has to pay payroll taxes on all his income while a million-dollar-a-year auto executive does not.

What we are proposing is more progressive than the Forbes flat tax. It's also more progressive than the current system.

We would also use the rebate of tax dollars to the bottom third of taxpayers to solve other social problems.


I pinged the Admin mod and will leave it in his/her capable hands.
18 posted on 10/02/2005 10:57:36 PM PDT by Turbopilot (Nothing in the above post is or should be construed as legal research, analysis, or advice.)
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To: indianrightwinger; Turbopilot

IB4TZ means "In before the ZOT." Turbopilot suspects you are a troll, presumably because your registration is so recent. You don't appear to be a troll to me. Welcome to FR.


19 posted on 10/02/2005 10:58:37 PM PDT by Huntress (Possession really is nine tenths of the law.)
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To: indianrightwinger
I've just looked at your post history, which is legit, and noticed that this was actually an article at Forbes.com with a bad link, and not a vanity. I hereby retract my previous accusation and apologize. Welcome to FR.

I will, however, note that the idea referenced in the above article is far inferior to the Fair Tax proposal currently before Congress. You should support that instead :-D
20 posted on 10/02/2005 11:02:33 PM PDT by Turbopilot (Nothing in the above post is or should be construed as legal research, analysis, or advice.)
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To: Turbopilot

I am new to FR.

On the post, it is from Forbes.Com. Forgot to add a link, which someone pointed out and thought the Admin will correct that.


21 posted on 10/02/2005 11:02:38 PM PDT by indianrightwinger
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To: goldstategop
Finally - a flat tax every one can love.

Not for those who want to get rid of the IRS and considering how well the "Fair Tax" book is selling, that is a LOT of the people.

22 posted on 10/02/2005 11:03:22 PM PDT by Paul C. Jesup
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To: Admin Moderator
Re: my #18: False alarm; I'm sorry.
23 posted on 10/02/2005 11:04:14 PM PDT by Turbopilot (Nothing in the above post is or should be construed as legal research, analysis, or advice.)
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To: Huntress

Thank You! Yes, I am new. Joined because I am true believer just like most here.


24 posted on 10/02/2005 11:04:40 PM PDT by indianrightwinger
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To: Turbopilot

Thanks!

The reason I posted this one is because of its "Liberalism" in Flat Tax clothing.

I am a big believed in Forbes' flat tax idea. That is the fairest and simplest tax.


25 posted on 10/02/2005 11:06:43 PM PDT by indianrightwinger
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To: indianrightwinger
I am a big believed in Forbes' flat tax idea. That is the fairest and simplest tax.

Have you checked out www.fairtax.org? Most who've seriously studied both it and the Forbes plan have concluded that the Fair Tax is fundamentally more efficient, more economically beneficial, and more conducive to freedom. The only legitimate argument I've seen for the flat tax over the Fair Tax is political expediency. The expediency argument, of course, has given us such "conservative" masterpieces as Justice Souter, McCain-Feingold, and Sen. Specter. :-p
26 posted on 10/02/2005 11:12:49 PM PDT by Turbopilot (Nothing in the above post is or should be construed as legal research, analysis, or advice.)
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To: Turbopilot

Reading it right now...


27 posted on 10/02/2005 11:14:39 PM PDT by indianrightwinger
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To: indianrightwinger
A Kinder, Gentler Flat Tax Wealth Redistribution Plan

There. I fixed it.

Ever notice that the terms of the debate are always couched in terms of that mythical "family of four"?
Lost in the fog of flim flam is the reality that everone else (except the "low income" non-producers, but voters nonetheless) are getting the massive royal shaft.

28 posted on 10/02/2005 11:24:11 PM PDT by Publius6961 (Liberal level playing field: If the Islamics win we are their slaves..if we win they are our equals.)
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To: Publius6961

LOL!!


29 posted on 10/02/2005 11:30:12 PM PDT by indianrightwinger
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To: DB
Social security is suppose to be for my own retirement.

Really? My wife and I who have paid the max over the last 35 years will probably never see a cent.

30 posted on 10/02/2005 11:45:09 PM PDT by Cobra64
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To: indianrightwinger

Uhm, I think there is a difference among/between Federal Income Taxes, State Income Taxes, and FICA. Some folks need to read their pay stubs, or talk to someone who can explain a 1040. IMOHO.


31 posted on 10/02/2005 11:48:31 PM PDT by Cobra64
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To: indianrightwinger
We don't think it's fair that a $50,000-a-year autoworker has to pay payroll taxes on all his income while a million-dollar-a-year auto executive does not.

1. No executive worth his salt will get paid a million dollar salary as normal 1040 income. They would try to launder it through various means, including stock, options, 1099 income, or (if she wants to be really sketchy) forgiven company loans.

2. Most [liberal?] rich people do not work, so the idea of income tax is a non-issue. They just like to make it that much harder for rest of us, Horatio Alger-inspired riff-raff from joining their country clubs.

32 posted on 10/03/2005 12:10:42 AM PDT by BamaGirl (The Framers Rule!)
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To: indianrightwinger; Taxman; pigdog; Principled; EternalVigilance; rwrcpa1; phil_will1; kevkrom; ...
A Taxreform bump for you all.

If you would like to be added to this ping list let me know.

John Linder in the House(HR25) & Saxby Chambliss Senate(S25) offer a comprehensive bill to kill all income and SS/Medicare payroll taxes outright and replace them with with a national retail sales tax administered by the states.

H.R.25,S.25
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.

Refer for additional information:


33 posted on 10/03/2005 12:51:26 AM PDT by ancient_geezer (Don't reform it, Replace it!!)
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To: indianrightwinger
Flat tax or whatever tax, if it is measured and paid on the basis of what one earns or receives as return on investment, it is a tax on one's productivity and contribution to the nation's economy.

One should be taxed on what one takes from the common pot not what one puts into it.

Government having a claim on your earnings, before you ever receive them, is contrary to any reasonable concept of a free society. First option on how one's income is to be used or allocated must go to the citizen not government.

 

Patrick Henry, Virginia Ratifying Convention June 12, 1788:

 

Federalist #12:

 

Federalist #21:

"Imposts, excises, and, in general, all duties upon articles of consumption, may be compared to a fluid, which will, in time, find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions. "

"It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess.

They prescribe their own limit, which cannot be exceeded without defeating the end proposed - that is, an extension of the revenue."


34 posted on 10/03/2005 12:52:34 AM PDT by ancient_geezer (Don't reform it, Replace it!!)
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To: indianrightwinger
Sorry but taxing "income" is taxing the wrong end of the spectrum in a free society! That is why Karl Marx and Frederick Engles love the income tax and endorse it in their Communist Manifesto!

I agree with virtually every one of our founding fathers that taxes should instead be on consumption!

35 posted on 10/03/2005 6:02:32 AM PDT by Bigun (IRS sucks @getridof it.com)
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To: goldstategop; Badray
"And the pre-bate is geared towards making people responsible for securing their own future."

The government has absolutely no business manipulating behavior in this manner. Real freedom means having the freedom to be stupid, to invest in an IRA, or to invest in a business, or to go without health insurance, etc.

This is more nanny-statism dressed up as personal responsibility. Nonsense.
36 posted on 10/03/2005 4:46:35 PM PDT by Conservative Goddess (Politiae legibus, non leges politiis, adaptandae)
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To: Publius6961; All
A Kinder, Gentler Flat Tax Wealth Income Distribution Plan

There, I fixed it even better.
 

PLEASE keep the difference between wealth and income straight.  
The INCOME tax hurts those still TRYING to get rich,
NOT the ALREADY-rich.


>>>>>>>>>>>

Find all 34 ways to listen to BOORtz over the web --
including evenings and weekends -- HERE:
http://FreedomKeys.com/boortzcast.htm

<<<<<<<<<<<

37 posted on 10/03/2005 7:29:08 PM PDT by FreeKeys ("There is NO better anti-poverty program ANYwhere than capitalism." -- Neal Boortz)
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To: Conservative Goddess

Bump.

I can make those decisions for myself, thank you. I don't need or want the government doing it for me.


38 posted on 10/04/2005 2:43:32 PM PDT by Badray
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To: indianrightwinger
Whether flat tax or fair tax, if there are exemptions or rebates or differing rates the effect on the economy will be the same as the current system in a very short time. The only system that will be an improvement is a flat tax with no exemptions at a low and universal rate, say 10% for an income tax, that % effective on the first and all dollars of income. A sales tax comes with its own perils, especially if that tax is not explicitly published to the taxpayer with each transaction. Even with a flat income tax that has no exemptions there should be no withholding. That can be accompanied by tax payment being quarterly or even monthly or at the very least, if there must be withholding the taxpayer should sign a government "check" or invoice of some sort specifically for the amount of tax he is sending to the government each payday. Anything other than a universal single rate with no exemptions or rebates will just be an excercise in feelgood politics that will waste resources in expenses of changing over.The government WILL NOT simply release all those IRS employees.
39 posted on 02/11/2006 11:27:55 AM PST by arthurus (Better to fight them OVER THERE than over here.)
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To: indianrightwinger

"We would also use the rebate of tax dollars to the bottom third of taxpayers to solve other social problems."

Pardon me, but where in the Constitution does it give politicians the right to tax me at all to "solve other social problems"?


40 posted on 02/11/2006 11:37:11 AM PST by anonsquared
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To: anonsquared

It does not. Only in liberals' mind.


41 posted on 02/11/2006 12:59:57 PM PST by indianrightwinger
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To: Turbopilot

Why?? The "Fair Tax Nazis" get away with it twice a week, 52 weeks a year....


42 posted on 10/03/2006 3:45:23 PM PDT by xcamel (Press to Test, Release to Detonate)
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To: Turbopilot

And they've hijacked this thread already... guess it's time to "flush it" to the SBR....


43 posted on 10/03/2006 3:47:51 PM PDT by xcamel (Press to Test, Release to Detonate)
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To: xcamel

Is there a specific reason you revived, and pinged me to, a year-old thread?


44 posted on 10/03/2006 4:12:20 PM PDT by Turbopilot (iumop ap!sdn w,I 'aw dlaH)
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To: Bigun

Yeah, but 23% the first year? Geez! Add the 8 to 9% of the state sales tax and it gets pretty spendy. Also, you know the swine in Washington are going to keep jacking it up. I do not like our current system, but I just don't trust the buggers.
Also, the cost of a house is going to go through the roof.


45 posted on 10/03/2006 4:41:09 PM PDT by Scotsman will be Free
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To: Scotsman will be Free
Yeah, but 23% the first year? Geez! Add the 8 to 9% of the state sales tax and it gets pretty spendy.

Are you aware that the 23% is on NEW goods and services only. Used goods are not taxed.

Are you aware that the 23% would also get rid of the social security and medicare payroll taxes? Meaning that there would be no more federal tax deductions of any kind from your paycheck?

Are you aware that states with sales taxes could conform their sales tax base to the fairtax base and drastically lower their rates without loosing any revenue at all?

Also, you know the swine in Washington are going to keep jacking it up. I do not like our current system, but I just don't trust the buggers.

Nor do I and when the income tax and the IRS, with all their records, are gone (the fairtax bill repeals the income tax, defunds the IRS and requires the destruction of all their records.) Joe Sixpack will then be, for the first time ever, acutely aware of what all this wonderful government is costing him! I somehow doubt that the rate will go up under that condition.

Also, the cost of a house is going to go through the roof.

Not at all as the embedded costs of the current tax system will be removed from every nail, 2x4, and brick used to construct it AND you won't have to first earn $500,000.00 in order to have the funds left over to buy that $250,000.00 home!

You REALLY should visit the fairtax website and do some serious learning!

46 posted on 10/03/2006 6:07:44 PM PDT by Bigun (IRS sucks @getridof it.com)
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To: Scotsman will be Free
Fairtax website
47 posted on 10/03/2006 6:09:56 PM PDT by Bigun (IRS sucks @getridof it.com)
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To: Bigun

Yes, I read the tax elimination section. I like that part of it. I'm fairly certain that no state will reduce any part of their taxes as a result of a federal fair tax.
You may be right about taxes not going up with Joe Six Pack realising the cost to him, but the pols will simply couch it in terms of how much Joe will get vs what he pays, and most will fall for it, just like they do now.
A $250,000 house will have an added cost of $57,500 in federal taxes. The current taxes on nails, lumber, etc. will remain in effect as they are taxed at the state level. Supposedly, the lowering of interest rates will offset the added cost of the tax, but that tax is an upfront cost as opposed to a cost spread out over 30 years. Folks will have to come up with a much larger down payment.
I've been called to dinner.
I will continue to read and ponder.
Thanks, again.


48 posted on 10/03/2006 6:42:33 PM PDT by Scotsman will be Free
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