And what is wrong with a flat tax? AS long as it is applied accross the board. At present we are paying what amounts to a flat tax only the rich and the poor are pretty much exempt, as exemplified in the statistic that 47% of Americans do not pay taxes and further that the rich are loaded with tax writeoffs that reduce their burden to very low taxes. The middle class pay what amounts to 28+% of their income in taxes. An unfair burden by any account.
The problem with a flat tax is that it really hits the middle and lower classes much harder than the upper classes. If you figure out that someone making 50k a year, 5k (at 10% right) would go to the tax, nets $45,000. I am assuming that you are removing all tax breaks because otherwise the wealthier that can afford good accountants will continue to get so many more breaks than the regular public.
But anyway, look at the amount left over. 90% of a middle class income will not stretch nearly as far as someone in the top tiers.
House Payments for the year figure about $12k (26% of net income), heat, electricity and water around $3800 a year (8% of net income), about $7,200 a year ($600 a month) in food (16%), 2 decent cars about $200 a month each (gas, insurance, costs, fixing it ect) is around $7,400 a year (16%), clothes what about $100 a month for a normal family(?) $1200 a year (2%).
So that should be good for the basic nessecities right? So that leaves about $13,400 a year left over or about 29% for anything else they wish to do or need, sounds pretty good right? But then you start to think about if they actually would like to do stuff or have anything extra in life that 13k shrinks pretty fast for a family of four. So lets say they spend almost nothing and have $10k left over at the end of the year to save and invest.
10k at 10% growth rate (Not too many investments that will do that for this little purchase power, but w/e) over 30 years: $1,725,880.
Ok so now lets look at household that makes $330k a year and nets $300k. House at $3000 a month, at 26% it would be $78k a year. Bills would jump a bit due to larger home, but not by a tremendous amount (especially when you look at innefficiencies of older homes): $5,000 (1.5%). Groceries too would be more since they may want better foods, but it is not like they would eat a heck of a lot more right, so about $10k a year (3%). 3 nice cars: $18,000/yr. (6%) clothes $6k a year that way it is the same percent as the middle income family. I will add $6k a month for school loans too since they would need a advanced college degree to be in this income bracket (or extremely lucky) and about 120k in school loans would cost around $500 month.
So for the same essentials adjusted for the things a higher income would want, someone at 300k would be around 177,000 spent or 59% of their net income. So you can see right there they are able to save 41% where the middle class person with the same basic needs only has 29% left over. Add in insurance, and other stuff and it becomes even more disproportionate.
But really the big thing is that the person making 300k a year can reinvest $123,000 and at 10% for the same 30 years and make: $21,228,300, meaning the middle class person can only earn up to about 8% of the money that someone at 300k can.
This is the problem with the flat tax, and why people argue against it say that it hurts the middle classes and really only benefits the wealthy. Everyday purchases are hit the pocket book far harder percentage wise as you move down the income levels. Things like going out to eat, $20 for the first household - .04%, $80 for the 2nd- .02%, almost half for something that costs 4x more.
Look at things like license plate renewals. They are more expensive for more expensive cars, but % wise it is less, you look at getting a permit, tolls, insurance, deductibles, tickets/fines, anything it is all the same, the more you make the less it affects your pocketbook.
And especially taxes on stuff we buy. The more money you make, the less % of your income you need to spend to buy the things you want, the less that the sales tax will be % wise to your income.
These are the things that the libertarian party really is out there on, I would actually love to be one, but there economic ideas are far worse than either the republicans or democrats, and mostly (except abortion issues for my views) are better in my views of our personal freedoms than the dems, and way better than the republicans. If you actually examine who benefits from this economically you will see it is almost exclusively the wealthy that wins out in the flat tax or sales tax schemes.
