10% U.S. Flat Tax Accross the Board!

[Negotiableterms]

Uh oh... I'm a tax lawyer and CPA, so my view is probably a little off-center. That said, here goes:

A flat tax won't work for several reasons. The tax system performs three huge functions:

1. Raises revenue for the government.
2. Tool for economic policy.
3. Redistributes wealth.

Believe it or not, the #2 reason is the crucial one. Take the complex tax system away, and the government can't encourage things like building apartments and drilling for oil. Money would flow only to where the yield is highest, and that would leave a lot of folk without homes, and gas would be really, really expensive. In a flat tax, the rich are not encouraged to invest for the long term. Instead, day-trading pays as well as a 20-year commitment. There's no point in starting a business and re-investing for it to grow, so everyone just takes profits in cash where they can. Every time a business sells something at a gain in order to buy a bigger one, like a new plant or a big machine, the government takes its flat cut, so the business has to wait a lot longer before it can afford to grow. The government can't encourage companies to train new employees, or to provide pensions for older ones, or medical expenses. People have to pay the tax before they can afford medical expenses, making the cost of care prohibitive for all but the rich. These are just a few examples.

The flat tax won't work, and it's a long way from fair, for the reasons already stated. It sounds great until you apply the detail facts... then it really and truly sucks.

[kretinus]

Originally Posted by Negotiableterms

Uh oh... I'm a tax lawyer and CPA

And a flat tax would put you out of a job so...

Actually I would argue that the only Consitutionally legitimate function of taxation is to raise revenue to allow the government to perform the duties required under the consitution, the attempts to use it for other purposes are what cause the problems.

It's not the governments job to be architects of the economy, only to make sure those who engage in commerce operate lawfully and ethically. Instead they do the former and ignore the latter.

I understand your point, but i would point out that in making it all so complicated, the unintended consequences have been worse than they would be according to your argument against a flat tax.

This system, in Iowa at has resulted in a situation where the lowest 20% of wage earners pay a higher real tax rate than the top 20%.

There's only one solution to that problem, a flat tax of some form. Any attempt to correct it through alterations to the current tax code I assure you will result in even more complex rules and when it's all said and done, the situation will not have changed.