The GOP debates have brought one of Republicans’ treasured ideas back into the forefront: the so-called “Flat Tax.” This happens every presidential election cycle and it takes up a lot of oxygen because, let’s face it, everyone hates filing their taxes. I get it, it’s a hassle, hell I don’t like devoting a couple days of my spring to the unpleasant task, but like death and stupid Republican ideas, it’s a fact of life in America, so I just suck it up and do it.
We all know that the Flat Tax is a dumb idea from a revenue perspective, that it ends up being a huge tax hike on the middle class and a tax cut on the wealthy. I don’t think Republicans care about that, they’ve been selling “trickle down” snake oil for decades. I think Fundiegelicals like the idea because it mirrors a tithe, and Fundiegelicals love to codify their religion in U.S. law as a way of maintaining some modicum of relevance for their dying brand.
But I think what really appeals to rank and file conservatives is this idea that when implemented, the Flat Tax will somehow be simpler. This is another piece of right-wing spin that has zero basis in reality. But it’s an attractive piece of propaganda, so it’s repeated ad nauseum. Republicans love to tell people what they want to hear, don’t they?
Here is why that’s utter bullshit. From the 2011 Memory Hole, I bring you former Federal Reserve vice chairman Alan Blinder:
Many useful steps could be taken to simplify the personal income tax. But, contrary to much misleading rhetoric, flattening the rate structure isn’t one of them. The truth is that 100% of the complexity inheres in the definition of taxable income, which takes up millions of words in the tax laws. None inheres in the progressive rate structure. If you don’t believe that, consider the fact that the corporate income tax is virtually flat once a corporation passes a paltry $75,000 in taxable income. Is it simple?
Back to the personal tax. Figuring out your taxable income can be quite an effort. But once that is done, most taxpayers just look up their tax bill on an IRS-provided table. Those with incomes above $100,000 must perform a simple calculation that involves multiplying two numbers together and adding a third. A flat tax with an exemption would require precisely the same sort of calculation. The net reduction in complexity? Zero.
Got that? The complexity comes from the multitude of deductions codified in the tax code, not the tax rate itself. And as Blinder points out, every single deduction is there because Congress voted for it. Every single deduction is there because some group lobbied for it. I wonder if right-wingers clamoring for the Flat Tax would be willing to give up their home mortgage interest deduction, their charitable giving deductions (including what they give their churches!), their deductions for their kids? Would they give up their deductions for property taxes, state and local taxes — or, as is the case here in Tennessee, sales taxes? As Blinder noted,
Every tax “gimmick” has an ingrained constituency. I shake my head in disbelief when I hear politicians claim to be able to raise huge amounts of revenue by closing loopholes. Arithmetically, that’s easy. Politically, it’s almost impossible.
Blinder goes on to make the mathematical case, showing that the Flat Tax is really a huge tax hike on the middle class and tax cut for the wealthy. Go to the link and read if you wish; I maintain nobody gives a shit about the math, the selling point is the simplicity. And it’s just not gonna happen. What you’re going to end up with is a tax cut for bazillionaires and tax increase for those who can least afford it.
Same as it ever was.
Southern Beale 
I am all in favor of a Flat Tax—for Social Security. Everyone pays 12.4% including those who currently make over $118,000.
And I want Sales tax on ALL transactions including stocks/bonds etc.
No, sorry, but while the cap SHOULD be raised, maybe doubled, it is still needed. Do you really want our current billionaires receiving a million dollars a month from the government because they paid that much in. (And remember, the rich can afford better health care and fitness and frequently have longer lives, so their payments would last even longer.)
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Sadly, the same ‘good idea but not thought through enough’ for your second suggestion. A form of transaction tax on stocks, etc might be a good idea — but remember how much money in the Stock Exchane comes from pension funds. (A transaction tax on those that involve financial instruments that have arisen from the financialists’ mad scientist laboratories is an exceptionally good idea if we have to put up with their existence.)
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But a Universal Sales Tax — the most regressive of all taxes — means on every bit of food, every diaper, every piece of clothing, every medicine. You SURE you want that?
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(Sorry for the harshness, it is tiredness, not grumpiness. 9-3 Mets wins are fun, but exhaustzzzzzzz….
You’re kidding, right? I think the basic idea is to cut off millionaires from receiving any SSA benefits whatsoever. They won’t receive any more than any other worker bee. They will simply pay in at a greater rate.
Does that make it immoral? Would FDR approve?
Junior, do you know anything about Social Security? It doesn’t pay the same amount to everybody, it returns what you put in. My wife’s SS(D) check is bigger than my SS check because she earned more than I did. This is the precise reason why SS is NOT welfare, does NOT impact the deficit, etc. And ‘means-testing’ it beyond what is done now changes the entire concept. Which means, drop the cap and the millionaires get a return on a share of the entire money they earned, even if it is a million dollar monthly check.
I am NOT in favor of a flat tax on income like the reichwingers propose.
I do favor elimination of most if not all corporate exemptions and tax dodges to make it more progressive. Exxon and Verizon need to pay taxes, not get refunds.
If Boeing can’t make ends meet without massive subsidies–go bankrupt-it’s basic capitalism right?
Sorry, Kosh, but “Huh!” We are discussing two types of tax here. None of us want the flat tax on incomes that the Right proposes.
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(I may be the only one who would go back to a revised version of the Eisenhower Era tax policies, with a very high top rate — maybe not 90% as it was then — but with a LOT of deductions. Only this time with a more middle-class and people-centered list. Deductions should go to people for housing for example — but limited to only two houses. Deductions for both people and corporations for their gifts to charities — and *sigh* even to religious ones — but the charities would need certification that at least X% is actually spent on the aim of the charity and not on ‘Administration.’ Corporations should get deductions for building schools, hospitals and the like, and maybe a deduction for hiring employees — not independent contractors in most cases — based on the original number of employees at the beginning of the year. But don’t nitpick on the details, I hadn’t even considered them when I typed the opening parenthesis, and have been ‘making them up as I type.’ That is usually how I write comments — which explains some things — but this time my computer seems to be dying slowly. Every line is skipping letters when I used to get only one or two.)
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But SS has always, for good reason, been a flat, capped, scheme for what is ‘forced savings.’ The employer and employee put In a certain amount, the same amount for each but only up to a certain amount of income, and then they get it back after they retire or after a certain age. The amount is figured based on the amount of money put into the system and is not means-tested — which is why the cap is a necessity. And I think every one of those factors makes sense, the question — other than details on how income is decided and a few more similar arguable details — is how high or low the cap should be. Now it is so low compared to average incomes that it could be doubled, or at least raised by 50%. Do that and the “SS is going broke, gotta fix it by privatizing it’ makes less than zero sense.
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But you have to keep the cap for reasons I discussed above.
Why have deductions for two houses? I think just one house. If you have two residences, pick one to be your primary residence and take your deduction on that. Cry me a river, snowbirds and bicoastals.
And I don’t know if boats still get the deduction but puh-leeze, just no.
I want the instatement of a FYDT Tàax*.
* Fuck You Donald Trump Tax
Although there is very little to recommend a flat rate income tax, some of the regressivity issue could be eliminated if the individual exemptions were much higher, say 20k per household member and indexed to inflation. That still fails to forestall the immense decrease in revenues needed to effectively run a modern state / country, but then I forgot the simpletons and snake oil vendors vying for the Repub nomination don’t care, so long as the $$$ keep flowing to the military inustrial overlords….bugger the rest of the populace..sucks to be us!
I did a back-of-the-envelope calculation a couple of years back and figured that an exclusion of around 50K per person and a tax rate of 35% would be approximately revenue neutral. I think I could get behind that.
According to this
http://time.com/money/3920675/social-security-maximum/
the maximum amount one can get per month is $2663.00 so eliminating the cap would not result in million dollar pay outs, but would bring in more money for the system to be solvent for years to come.
One house deduction is enough–just primary residence.