Flat Tax Benefits And Cons
A discussion of the benefits and cons of the flat tax, which has been proposed by business moguls like Dick Armey and Steve Forbes.
One of the most important tenets upon which this country was founded was the principle of fair taxation. In the days of the Revolution, the cry was "No taxation without representation". In today's United States nothing so egregious as that is happening today, many people across the country are upset with the way the current tax system is set up. Among the most vocal critics of the status quo are House Majority Leader Dick Armey and former presidential candidate Steve Forbes. Unlike many in Washington who complain but offer no alternatives, these two have both come up with their own versions of what they perceive to be the solution: a flat tax.
Before discussing the pros and cons of the flat tax, it is important to understand the system as it exists right now. The tax system in the United States is progressive, meaning the rate of taxation increases as income increases. Everyone that must pay taxes in this country falls into one of several tax brackets. Those with the lowest incomes pay about 14% of their income, while those in the highest bracket pay approximately 38%. But, as anyone who has filled out an income tax form knows very well, it is not as simple as that. There are countless loopholes and exemptions in the current tax code that usually end up benefiting the rich, who are in the higher brackets. It is with this part of the tax code with which proponents of the flat tax disagree. Their plan is to set one taxation rate, about 18%, that everyone would pay. This would change the tax system from a progressive to a proportional one. Along with changing the idea of different brackets, they would eliminate all loopholes and deductions in the tax code.
Their goal is to make taxes so easy that people mail them to the government on a postcard. Opponents of the flat tax say that reducing the rate that the higher brackets pay would drastically cut into government revenues. And considering the fact that 80% of the money that the government takes in comes from personal income taxes, the money lost would be significant. But flat tax supporters say that people in higher brackets pay higher rates only nominally; with all of the loopholes, they say, rich people pay no higher a percentage than the average taxpayer. Another version of the flat tax, although not as widely supported, is the idea of abolishing income taxes altogether and replacing them with a national sales tax.
The flat tax is a classic Republican issue, because it seems to reverse the redistribution of income that is a part of a progressive tax. Republicans disagree and say people will end up paying about the same amount as they do now because of the elimination of loopholes. This idea is in question, but there is no doubt that a flat tax would make paying income tax much simpler, and that in itself will garner the idea a good deal of support.