Absolutely false. A regressive tax is one where the average tax rate falls as income rises. If you plot taxes on the vertical axis and income on the horizontal axis, a regressive tax must have a positive intercept on the vertical axis. (The slope of a line from the origin to a point on the tax function measures the average tax rate.) A progressive tax rate must have an intercept on the horizontal axis. A true flat tax like I want to see, with no prebate, has the linear tax function that passes through the origin with a slope of .17 using Friedman's number, which means it has a constant average tax rate and, hence, cannot be regressive or progressive.
My problem with the prebate is that Congress would get to decide how it is determined and I don't trust them with such a decision. It will become political, just like it is now. Obozo bitches that the rich fat cats take advantage of tax loop holes. Really? Who the hell does he think wrote the tax code? Congress put those holes there with full knowledge of the political gains to be made for themselves by their existence. No, set a flat tax, teach the misinformed it's not regressive, and mail your tax form in on a postcard.
“My problem with the prebate is that Congress would get to decide how it is determined and I don’t trust them with such a decision. It will become political, just like it is now.”
Congress could mess with anything, including a flat tax. “17% is not sufficiently funding the entitlement programs, we are raising it to 25%...no, make that 30%.”
“Obozo bitches that the rich fat cats take advantage of tax loop holes. Really? Who the hell does he think wrote the tax code? Congress put those holes there with full knowledge of the political gains to be made for themselves by their existence.”
It’s the Golden Rule - “Those who have the gold make the rules.” It’s pretty much the way things have always worked, and it’s highly unlikely to change.
“No, set a flat tax, teach the misinformed it’s not regressive, and mail your tax form in on a postcard.”
It is more regressive, in that poor people spend a much higher percentage of their income on necessities. They can much less afford sending a full 17% of their income to the government. What you’re proposing would instantly send millions of people into poverty, and will never fly. Sorry about that.
You’d better learn to love the Fair Tax, which has the added advantage of eliminating IRS snooping into anyone’s life. Your proposal doesn’t do that.
Actually, Milton Friedman favored a negative income tax so his preferred tax function was linear with a negative vertical intercept. This, of course, makes the tax system “progressive” (the average tax rate rises with income) but much simpler than “progressive” tax system with nonlinear tax functions.
Most flat (income) tax systems I have read about over the years eliminate the corporate income tax altogether. In those schemes, income taxes are levied on individuals only, and that includes “business” income distributed in the form of salaries, capital gains, profits, bonuses, or dividends - all taxed at the same (flat) rate. Retained business income is not taxed until it is distributed to an individual.
Or, stated another way appropriate in a discussion of how the poor may be affected: A regressive tax is one where the effective tax rate rises as income falls.
Notwithstanding the in-the-weed average vs effective, the 17% flat tax does not include FICA. That seems dishonest - although I think sellers just need to include that "detail".
It sounds easy - just "fill out a postcard" but defining income - particularly for a business - is problematic. It's not easy. If it were so easily defined and simple, income would simply be re-arranged to avoid taxes and would introduce a black hole in the collection mechanism ... dividend or reinvest? stock-swap or country club membership donated? Incorporate your family unit to allow for business expenses? forever and ever... plus add some lobbyists and blech we're not on any freakin' postcard and it's no 17% marginal rate - it's 32.3%.