Introducing Flat Taxes?

[denacioust]

Ok, boring subject matter, but I figured a small bit of intelligent discussion here would be nice. Anyway, I'm in the middle of preparing a 'fantasy' budget, (I'm pretty sure that word is just there to make it sound 'fun') and I figured a bit of discussion on the matter wouldn't go amiss.

Anyways, upon discussing the various options my group had to raise revenue for the government and cut public spending, I started researching the 'flat tax.' Basically, a standard rate of tax on income, as opposed to the current systems of increasingly higher percentages for higher levels of wealth.

The interesting thing about these flat rates is that even at low rates of tax, they are capable of generating higher levels of revenue for the Government. What appears to happen is a Laffer Curve (http://en.wikipedia.org/wiki/Laffer_curve) effect, whereby a higher rate of tax does not necessarily imply a higher revenue for the government, insofar as it is a disincentive to work and/or declare total income.

The flat tax is something which is sweeping through the former Soviet Union countries (ironic in that Karl Marx was a supporter of progressive tax rates) and appears to be working quite well for them, although there may be a case of correlation not quite implying causation.

The flat tax appears to be perfect as it abides by the 4 canons of taxation set out by Adam Smith. The tax is equitable, as those earning more money still pay proportionately more money while those on lower incomes can be granted a generous tax threshold, it's efficient in that it provides no disincentive to work, as you will not be 'punished' for earning more money, there is certainty as people will be certain of how much of their income is liable to tax, and it does not represent any added costs of collection for the revenue commissioner. The tax would also prevent those on higher incomes from making use of accountants to arrange their finances in such a way to reducing their burden to tax.

So, do you think a flat tax rate system would be good for your country? If so, why? Could it be the type of radical fiscal policy to drag your country out of their recession (if they happen to be in one)?

[Tanktunker]

We have about half a million orthodox jews who don't work and collect thousands every month in child support, they are a massive drain on the economy and it makes no sense whatsoever that thy are allowed to do this.
So we should stop this.

[joe7777777]

I didn't take the time to read it, I thought you meant a new server called 'Flat Texas' lol.

[Liokae]

It only passes 'equitable' under a certain interpretation of the word. The problem that you run into is that, say a 10% tax (to pick a number at random) has a much bigger effect the further down you go on the ladder. If you've got a million dollars, a hundred thousand isn't that big a loss. If you've only got a thousand, a hundred is a big loss. If you've only got a hundred, ten bucks is a DEVASTATING loss.

I'll admit that progressive tax structures can cause problems by the disincentives, but that's a matter of implementation more than a matter of necessity. Having your tax rate jump at individual levels can cause a big problem if you're skirting right on the edge of that, but specific brackets aren't the only way to implement a progressive taxation.

[denacioust]

We have about half a million orthodox jews who don't work and collect thousands every month in child support, they are a massive drain on the economy and it makes no sense whatsoever that thy are allowed to do this.
So we should stop this.

Child support should be means tested. Loads of families claim it when they could easily support children on their own. Families should be given tax incentives when both parents work.

I didn't take the time to read it, I thought you meant a new server called 'Flat Texas' lol.

I'm glad my effort in typing was worth your effort in reading.
It only passes 'equitable' under a certain interpretation of the word. The problem that you run into is that, say a 10% tax (to pick a number at random) has a much bigger effect the further down you go on the ladder. If you've got a million dollars, a hundred thousand isn't that big a loss. If you've only got a thousand, a hundred is a big loss. If you've only got a hundred, ten bucks is a DEVASTATING loss.

.

I suggested the generous thresholds for low income families so as to prevent these devastating losses to people, so that people who would make devastating losses from the tax, would not be taxed.

[Tanktunker]

Child support should be means tested. Loads of families claim it when they could easily support children on their own. Families should be given tax incentives when both parents work.
Tell that to our over-pluralistic and unstable political system, every 3 years when the government here falls apart the left and the right political blocs each get roughly half the vote and neither are able to form a coalition, and so the religious parties ##### themselves out in order to secure more and more free money for people who don't work and will never contribute anything to the country.

EDIT:Oh right, all these families have about ten children each, and statistically, 0 of those children will work or serve in the military, they will all have ten children too and they will feed those children with food belonging to people who do work.

[Karl]

I'm not very knowledgeable on the subject, but maybe a mixture of the two systems? You could have a static tax rate for anyone above the poverty level, and then either no tax or a lowered tax rate for those that would be receiving tax money in any case.

It's essentially still a progressive rate tax system, but I imagine it may mitigate the progressive rate system's effect of being a disincentive.

Ultimately, I don't think it possible to judge with any certainty what will work until it's been tried and tested.

[denacioust]

Tell that to our over-pluralistic and unstable political system, every 3 years when the government here falls apart the left and the right political blocs each get roughly half the vote and neither are able to form a coalition, and so the religious parties ##### themselves out in order to secure more and more free money for people who don't work and will never contribute anything to the country.

EDIT:Oh right, all these families have about ten children each, and statistically, 0 of those children will work or serve in the military, they will all have ten children too and they will feed those children with food belonging to people who do work.

I can't say I know much about Israel (?) and their taxation, but I can see that being a problem in other countries too. There are so many freeloaders, who abuse the social welfare system and take it for all it's worth.

I'm not very knowledgeable on the subject, but maybe a mixture of the two systems? You could have a static tax rate for anyone above the poverty level, and then either no tax or a lowered tax rate for those that would be receiving tax money in any case.

It's essentially still a progressive rate tax system, but I imagine it may mitigate the progressive rate system's effect of being a disincentive.

Ultimately, I don't think it possible to judge with any certainty what will work until it's been tried and tested.

That's the thing though, unless there's reasonable support and belief it will work, then it won't be tried and tested.

Also, the original no tax for people already receiving state benefits would essentially be the tax threshold which I spoke of. Whereas if you're earning <10,000 per annum for example, you would not be liable to tax.

[DarkReality]

No. Nonono. Noooooo. Nonononono.

I hope that was abundantly clear.

A flat tax would effectively raise the relative taxation for lower classes while benefitting the upper class. It puts the strain on the impoverished. While this may be the majority of a population, the only way this could possibly raise total national income is if you raise the taxation for the lower class to "average out" the loss of cutting the tax rates for high income classes. A flat tax rate borders on exploitation. And the fact that it's being implemented in former soviet nations is because these nations are either dirt poor anyway and need to attract high earners (everyone but Russia) or they're completely corrupt and pretty much run by industry moguls (Russia). But for the semi-healthy distribution in western countries, a system like this would be catastrophic.

Even a generous cutoff would inevitably cause the people just above it to feel exploited. So what would happen? People would make sure not to earn more than the minimum required for taxation in order to be able to keep more. A fair taxation system would be one which regarded the net income after taxes and made sure that there were no sudden cutoffs which caused disincentive (this applies to write-offs which cause you to fall into a lower tax class and effectively lets you keep more as well).

And how is having to pay 500k off of your 1 million a disincentive? You've still got 500k left. How is that not an incentive? You probably don't "work" for that money anyway and instead sit in an office, make a few phone calls, some conferences, some decisions and enjoy a company paid vacation.

[Scornic]

I agree with the flat tax. As it stands now the harder I work the more I have to pay for other people.

In Sim city I always taxed the low-income people 13+%, middle income 10% and the high income people 5%. I ended up with more money and less crime and all the houses looked really nice instead of slimey and grimey.

It's kind of like saying free market is bad because some people are better off than others. These people fail to realize or choose to ignore the fact that the lowest of the low in today's free market society is far better off than the kings of a thousand years ago. The lowest of today is also far better off than the lowest of 50 years ago.

Even though there is a gap in the standard of living, everyone is better off than they would have been.

When I hear people complain about flat taxes or free markets all I hear is "Baww they have more than me." If we want to make everyone equal we may as well all live in caves again.

Edit:
I didn't take the time to read it, I thought you meant a new server called 'Flat Texas' lol.
Get out of Irrelevance.

Edit2:
And how is having to pay 500k off of your 1 million a disincentive? You've still got 500k left. How is that not an incentive? You probably don't "work" for that money anyway and instead sit in an office, make a few phone calls, some conferences, some decisions and enjoy a company paid vacation.
Are you trolling me or are you serious right now?

Let me describe my job experiences and then I will note the pay of each one.
I used to work in a convenience store. No education required. I restocked shelves when they were low, wrapped bagels in the morning, made coffee when it got low, and maned the cash register when there were customers. Other than that I sat around bored texting on my phone or talking to my coworkers. It was not hard work and anyone could do it.

Right now I'm working as a staff accountant in a CPA firm. This job requires some serious training after having taken some college level accounting courses. I go straight home after my morning class, change, and head off to work. When I get there I say good morning to my bosses, grab a binder, and sit down at the computer. For the next five hours I work diligently on the financials only getting up to get a cup of water once or twice. Once a month we have "Pie Day" which is a 15 minute break to eat a slice of pie or cake. The work I do here requires a good deal of understanding accounting and is NOT something that can be done by anyone. I don't spend any time sitting around talking and I don't text or browse the internet.

The store clerk job paid $7/hr and my current job pays $11/hr. I certainly do far more work that far less people are capable of, which accounts for my near double salary.

Looking at someone like my father who runs his own CPA firm we see not only constant diligent work but also dealing with difficult clients, working on complicated tax returns involving large corporations, solving huge and complicated problems, and many more tasks that very few people can manage. Work like this requires far more than a college degree. Someone in my father's position needs above average intelligence ontop of years of schooling and passing the rigorous CPA exam. He is certainly far more qualified than most of the working population and it's for this reason that he gets paid more.

He doesn't just "sit around and make a few phone calls then take paid vacations." He's working the full 40 hours a week plus additional unpaid overtime in order to make sure deadlines are met. He has to manage the operations and running of the company, making sure it's pulling in a profit. When a regular staff accountant such as myself can go home and forget about work until the next shift, my father has to be constantly concerned with work until everything that needs to be done is done. During tax season he sets up a cot in his office so he can sleep a few hours and get right back to work. He also gets less vacation time than any of his employees.

Assuming rich people work less is narrow minded and pathetic. Poor people who have extremely easy jobs somehow feel entitled to the fruits of other people's hard work.

I would go on but it's 5am and I have a paper due at my 9am class which I haven't started.

Edit3:
I forgot to mention that complaining some people don't have a chance to get the education needed to have a high-paying job is getting to a problem with the education system, not the taxes. This again affirms my notion that the entire system is flawed and we can't look at issues on a by-issue basis. We have to look at the system as a whole. Any reform that is based on a single issue is obviously going to have problems. Tunnel Vision is a bad thing.

[DarkReality]

It's kind of like saying free market is bad because some people are better off than others. These people fail to realize or choose to ignore the fact that the lowest of the low in today's free market society is far better off than the kings of a thousand years ago. The lowest of today is also far better off than the lowest of 50 years ago.

Fallacy number one: you assume the free market to be an infallible system while in reality it isn't. It has just as many flaws as a planned market, even if they may be other flaws. As with all good things, a healthy mixture of free market and social awareness for the general well-being of the populace/species is the right way to go.

Fallacy number two: You could just as well suggest we let children work in factories again. As long as they get breaks and only work for 6 hours a day instead of 16 (like they did "back then") they're better off than their intangible past counterparts so they have no right to complain. Might I remind you that the rich are better off than the rich "back then" and shouldn't complain if we demand their social awareness?

Are you trolling me or are you serious right now?

Yeah, I'm trolling you. But I'm glad to see it got to you :-p Your reaction time is remarkable.

Seriously though, do you take me for daft? Do you really sympathize with the people who feel overworked sitting at a freaking cash register but are too stupid to help themselves? I'm not for making everyone equal, I'm for giving everyone the chance to be equal. There will always be a gap between rich and poor, smart and stupid, competent and incompetent, but there is no need to reinforce that gap by modelling our society by the ill-conceived notion that working for 40 hours a week in an office is any more taxing than 40 hours in a factory. Sure, it might require different skills that not everyone possesses (seriously, 5 s's? What is wrong with your language?) but then again, you probably couldn't be a fireman. Or a factory worker for that.

Yes, our society puts more value on some skills than others but that doesn't mean we need to actively reinforce than and push the poor into even deeper poverty by imposing high taxes on them. The rich have a large surplus left while the poor need pretty much every penny just to survive. You may think you "deserve" more because you get paid more, but that should never be equated to "they deserve less than me because they're paid less".

I know that I fall on deaf ears as you seem to lack the social conscience I try to propagate, but I typed it anyway and I don't know why. I can't stop. It's kind of worrying. So deleting it would be a waste. I'm just saying, take an actual look at the situation of the poor and try to compare the effect of the rich paying a few percent more and the effect of the poor paying a bit more. It's "new lexus vs. food for the kids", essentially. Instead of concentrating on what you believe people "deserve", try to concentrate on the decent style of life everyone deserves.

And yea, I know that changing the taxation system won't make everyone happy, end crime and usher in an era of utopia. It's going to take more than just that. But we have to start somewhere. Putting everything off on account of having to fix the entire system is just a sorry excuse to not do anything. You can't fix everything at once. Unless we're talking all-out nuclear war. That would seriously shorten our list of problems.

[Scornic]

I would love to type a longer response but I have to leave in less than an hour and I'm not done with my essay.

but just for the record ontop of all of my government swindled tax that I pay I also put aside 10% of every paycheck into a separate account that can only be touched for charitable reasons. I have already started and I fully intend to keep putting aside 10% of all profits (note: BEFORE taxes) for charity, no matter how much profit I make or how much I get taxed.

Don't say I lack your social conscious. I feel very obligated to help those who can't help themselves. I just think your preferred method of doing so is inefficient and detrimental to progress as a society. Our government obviously doesn't know how to handle money, so I don't see why I should give 50% of my paycheck to them so THEY can take expensive paid vacations.

You're not pushing equality by taxing the rich 50% and the poor 4%. You're just discouraging progress because "it isn't fair that he has more than me".

Early Christians thought capitalism was bad because some people got more than others. The modern church understands that capitalism can be very good because more wealth can be generated. As in there isn't a fixed amount of wealth that is just redistributed around society, but new wealth actually created making everyone better off.

I seriously have to stop myself and finish this paper.

[Vagrant]

My biggest concern with flat taxes is that it tends to harm the poor moreso than a progressive tax rate. As Liokae pointed out, 10% is more devastating to a person who has only $100, as opposed to a person who has $1 million.

My family is middle class, and always has been. Unfortunately, the middle class has been shrinking, and there's where the entrepreneurship arises. Personally, if I could adjust the tax rate, I'd make it favorable to pushing people into the middle classes.

You're not pushing equality by taxing the rich 50% and the poor 4%. You're just discouraging progress because "it isn't fair that he has more than me".

My problem is that the richest of the rich stop being as involved with their work. They get benefits for doing almost nothing. For a multi-billionaire who earns... $300 million/year (just as a random number), ending up with $150 million of that money is not a bad deal, not by a long shot. Chances are, if you're earning that kind of money, you've stopped innovating and are more than likely spending it on yourself or charity to the poor (which is slightly counterproductive, considering that it shouldn't have to be that way). Part of the trouble is that the rich tend to remain rich and the poor tend to remain poor, which causes plenty of unrest.

The real innovation lies with the middle class, who still have the need and will to push towards wealth with entrepreneurship, as well as the faculty for higher education. The poor are too busy trying to survive to really risk innovation.

Either way, being a scientist, I rely on government money. So until revolution occurs I should be ok.

[Scornic]

Losing reason to be innovative is a good point.

All I can say is every insanely wealthy person I have met has never been satisfied with how much they have, and innovation or unethical actions are the only ways to become more wealthy. Unethical actions should never happen and again it is a completely different issue. It may seem easy to say "rich people have no motivation" but where is the line drawn that makes a person feel like they have enough money? I have yet to encounter anyone who has found it and isn't living a life of servitude in poverty.

Plus, someone trying to get rich has resulted in our ability to communicate today. Imagine, if bill gates wasn't being innovative I would have to walk 10 feet to your room to tell you this.

Edit: I also would have no problem if our government used money to provide "scholarships" for middle class entrepreneurs instead of spending our tax dollars on paid vacations and free money to lazy people. Anyone with an innovative idea and a strong moral and ethical plan to achieve this idea should have an equal opportunity to pursue the idea. One of my favorite sayings is "Help them to help themselves". Free handouts like bailouts are retarded and just temporarily mask the symptoms.

[Liokae]

I agree with the flat tax. As it stands now the harder I work the more I have to pay for other people.

In Sim city I always taxed the low-income people 13+%, middle income 10% and the high income people 5%. I ended up with more money and less crime and all the houses looked really nice instead of slimey and grimey.

Sim City: Realistic interpretations of the world.

Look, progressive taxation does cause a system of diminishing returns. But so long as you're not dumb enough to set up your system so that a higher gross income results in a lower NET income, there will ALWAYS be incentive to work harder and earn more. If you currently make 500 dollars and pay 50, you earned 450. If you up that to 600 but pay 70... well, you've got a higher tax rate, but you're still earning 530. You earn less on each succesive dollar than you would have, but you're still earning more.

It's not progressive taxation that causes disincentive to work, it's a poor system of tax brackets, where you have certain cusps at which having a higher income will actually result in having LOWER earnings. That's a fault in implementation, not in the basis of progressive taxation.

[Justin]

It's not progressive taxation that causes disincentive to work, it's a poor system of tax brackets, where you have certain cusps at which having a higher income will actually result in having LOWER earnings. That's a fault in implementation, not in the basis of progressive taxation.

That doesn't actually occur, though. At least not in the USA, Canada, or the UK. These countries all use the concept of marginal taxation. It's like this (completely fabricated numbers because I'm too lazy to look them up):

Income level - tax rate
0-5K: 0%
5K-15K: 5%
15K-30K: 10%
30K-75K: 20%
75K+: 40%

So if you were making $72,000, and got a raise to $76,000, you'd think "oh knoes, I've jumped to the 40% tax braket so I'll make less money (72,000-20%=$57,600, $76,000-40%=$45,600). However, with marginal tax rates, you only pay the higher tax on the fraction of your income OVER $75,000, or $1000 in this case. The rest of your income is taxed in it's resepctive tax brackets, so you'd pay:

@ $72,000
$5,000 x 0% (Your "Basic Exemption")
$10,000 x 5%
$15,000 x 10%
$42,000 x 20%
---------------
$10,400 (for a marginal tax rate of 14.44%)
Net Income: $61,600

@ $76,000
$5,000 x 0% (Your "Basic Exemption")
$10,000 x 5%
$15,000 x 10%
$45,000 x 20%
$1000 x 40%
---------------
$11,400 (for a marginal tax rate of 15%)
Net Income: $64,600

As you can see, you still take home more money. There is no 'disincentive' to get this raise.

[Scornic]

And then public accountants come in and use all the loopholes and oddities to classify certain income as not really income and manages to get your 76,000 stated as 50,000 as the other 16,000 was "office expenses" yada yada it gets complicated and in some rare cases making more money could result in less money.

It's really more of "I'm getting less and less money for my work and at the same time it's becoming more and more effort to make each additional dollar (because of factors unrelated to tax) so I may as well call it here and not work any more."


My biggest problem is that I hate my government and think it's retarded and has no concept of how to spend money. Thus, the more money I give to them to more money I feel is going to waste. If I had a good government I wouldn't care so much about paying taxes.

[Justin]

If it were up to me, I'd eliminate all deductions, loopholes, etc. But that's an entirely different issue and is immaterial to the way progressive taxation actually works.

[Scornic]

If it were up to me I would throw away the entire government and start from scratch. :<

[DarkReality]

You're not pushing equality by taxing the rich 50% and the poor 4%. You're just discouraging progress because "it isn't fair that he has more than me".

Would you please stop putting words into my mouth? I never said that it isn't "fair" that someone has more money than someone else. So quit claiming that. What I DID argue with is that the rich have more to give, meaning a higher tax rate doesn't strike them as painfully as it would the lower class.

but new wealth actually created making everyone better off.

Wealth can only exist if poverty exists. If everyone has the same amount of money, then no matter how much it is, everyone has an average amount. No one can buy expensive shit because expensive shit wouldn't exist. The concept of "Wealth" and "Luxury" are just the same as having more than the average. In order to be "wealthy", there has to be a counterpart that cannot afford the luxuries you can.

So in short: wealth cannot be created as it's only a relative concept. Sure, we can increase general living conditions with technology and all. That goes into the equation somehow. But on a purely financial basis, wealth can't be created.

What the #### does the church have to do with this anyway? o.O

I seriously have to stop myself and finish this paper.

No you don't. Shut up. It can't be more important than XGen.

I just think your preferred method of doing so is inefficient and detrimental to progress as a society. Our government obviously doesn't know how to handle money, so I don't see why I should give 50% of my paycheck to them so THEY can take expensive paid vacations.

My preferred method relies on a competent, socially oriented government. I'm not saying I have realistic short-term goals in mind, I'm just saying that it would be "better" (knowing that it's a subjective definition), in theory.

And I applaud you for putting aside so much to donate, even with the financial stress you're having (in reference to some other thread of yours about taking on a fourth job or something). But now we're just arguing about how to peel potatoes. Whether you know the government will invest it in education, decent roads, a competent emergency (police, fire, medical) force, etc. or donate it to charities and hope they won't skim too much off the top, it relies on the good will of others. I rely on the good will of elected officials, you rely on the good will of people who ask you for your money without being elected. Peeling potatoes.

[Liokae]

Would you please stop putting words into my mouth? I never said that it isn't "fair" that someone has more money than someone else. So quit claiming that. What I DID argue with is that the rich have more to give, meaning a higher tax rate doesn't strike them as painfully as it would the lower class.



Wealth can only exist if poverty exists. If everyone has the same amount of money, then no matter how much it is, everyone has an average amount. No one can buy expensive poop because expensive poop wouldn't exist. The concept of "Wealth" and "Luxury" are just the same as having more than the average. In order to be "wealthy", there has to be a counterpart that cannot afford the luxuries you can.

So in short: wealth cannot be created as it's only a relative concept. Sure, we can increase general living conditions with technology and all. That goes into the equation somehow. But on a purely financial basis, wealth can't be created.

What the #### does the church have to do with this anyway? o.O



No you don't. Shut up. It can't be more important than XGen.



My preferred method relies on a competent, socially oriented government. I'm not saying I have realistic short-term goals in mind, I'm just saying that it would be "better" (knowing that it's a subjective definition), in theory.

And I applaud you for putting aside so much to donate, even with the financial stress you're having (in reference to some other thread of yours about taking on a fourth job or something). But now we're just arguing about how to peel potatoes. Whether you know the government will invest it in education, decent roads, a competent emergency (police, fire, medical) force, etc. or donate it to charities and hope they won't skim too much off the top, it relies on the good will of others. I rely on the good will of elected officials, you rely on the good will of people who ask you for your money without being elected. Peeling potatoes.

I solve that potato peeling dilemma by having my charitable donations be of non-material goods. Blood, sweat, and time. Literally on all three; I'm nearing the 10-gallon mark for blood donation.

[DarkReality]

So you give your sweat to people so they won't dehydrate? Siiiiick.

>_>

Doing actual charity work gives more of a sense of achievement anyway.

[Scornic]

The reason I have a bank account for the funds and don't just send it off to charities is the same reason you would rather put your money in government. I don't trust em either.

But like, when I see something that needs help (such as a natural disaster that leaves people without power and thus with no ice to cool their medicine/baby formula etc) I can use these funds. The point is they are NOT for me, they are 100% for people in need. I just have more control over it so corrupt hands don't get a free ride.

[Liokae]

The reason I have a bank account for the funds and don't just send it off to charities is the same reason you would rather put your money in government. I don't trust em either.

But like, when I see something that needs help (such as a natural disaster that leaves people without power and thus with no ice to cool their medicine/baby formula etc) I can use these funds. The point is they are NOT for me, they are 100% for people in need. I just have more control over it so corrupt hands don't get a free ride.

I'd like to nudge you to donate blood regularly if you don't already. There's a constant need for that, not just during emergencies.

[DarkReality]

The reason I have a bank account for the funds and don't just send it off to charities is the same reason you would rather put your money in government. I don't trust em either.

... wait, so how do you donate? o.O I was under the impression that the only two options were charities and quarters in hobo hats... Wouldn't the money end up running over a charity during a catastrophe as well?

[denacioust]

A flat tax would effectively raise the relative taxation for lower classes while benefitting the upper class. It puts the strain on the impoverished. While this may be the majority of a population, the only way this could possibly raise total national income is if you raise the taxation for the lower class to "average out" the loss of cutting the tax rates for high income classes. A flat tax rate borders on exploitation. And the fact that it's being implemented in former soviet nations is because these nations are either dirt poor anyway and need to attract high earners (everyone but Russia) or they're completely corrupt and pretty much run by industry moguls (Russia). But for the semi-healthy distribution in western countries, a system like this would be catastrophic.


Do you understand the Laffer Curve effect which I referenced in my first post. It basically says that a cut in taxes can actually increase revenues. With a flat tax rate high earners are much less likely to engage in any attempt to lower their tax burden, thereby possibly increasing tax revenue.

It doesn't put the strain on the poorer people, they still pay the same or less tax than before. As I said the tax threshold would be extra generous, and in general countries with flat tax rates have low flat tax rates.

[Justin]

Not to mention you could have a high flat tax and then have some form of rebate/assistance/incentive programs for people with documented need. Like in Canada where there is a flat 6% tax on all purchases (the GST - similar to europes VAT), but anyone making under a certain amount gets quarterly refund payments.

[DarkReality]

Do you understand the Laffer Curve effect which I referenced in my first post. It basically says that a cut in taxes can actually increase revenues. With a flat tax rate high earners are much less likely to engage in any attempt to lower their tax burden, thereby possibly increasing tax revenue.

From what I understood, the Laffer Curve gives a relationship between tax rates and total revenue, not the advantages of a flat tax versus income-dependent tax rates. I have no doubt that there's a "sweet spot" and that taxing the rich for 75% of their income is, while alluring, complete nonsense.

You'll forgive me, but I only skimmed it :-/

[denacioust]

From what I understood, the Laffer Curve gives a relationship between tax rates and total revenue, not the advantages of a flat tax versus income-dependent tax rates. I have no doubt that there's a "sweet spot" and that taxing the rich for 75% of their income is, while alluring, complete nonsense.

You'll forgive me, but I only skimmed it :-/

The reason I said that was that you said the only way a flat tax rate would raise national revenue was if we raised the rate.

The Laffer curve says that lower tax rates can raise tax revenue. Basically, if you set taxes at 0%, you'll get no tax revenue. Similarly if you set taxes at 100% you'll also get zero revenue, since no-one will work. So, there's some point in-between where we achieve maximum revenue.

[Ace2cool]

pretty sure there's some way to find the equation of this curve.. just a few variabless to plug in.

after that it's just differentiating it and optimizing it

[denacioust]

pretty sure there's some way to find the equation of this curve.. just a few constants to plug in.

after that it's just differentiating it and optimizing it

Believe me, if there was a way, then this thread would be irrelevant.

It's an observation based on logic:

0%-Tax Rate, 0 revenue.


Some number in between %, Maximal revenue.


100% Tax, 0 revenue.

[Ace2cool]

whoa, did I really type constants? i meant variables.

such as incomes, current taxes, inflation, etc etc.

[denacioust]

whoa, did I really type constants? i meant variables.

such as incomes, current taxes, inflation, etc etc.

Still makes no difference, there's no equation to work out the perfect tax.

[Ace2cool]

which is why the governments of every country in the world experiment with it.

you can't seriously think that there aren't people who devote their lives to modeling these kinds of curves..

[Liokae]

Still makes no difference, there's no equation to work out the perfect tax.

Well, to be fair, there IS... we just don't know what it is, and even if we did, it would involve so many variables that change so constantly we'd have to be able to adjust our tax rates on something like an hourly basis to take advantage of it.

[denacioust]

Well, to be fair, there IS... we just don't know what it is, and even if we did, it would involve so many variables that change so constantly we'd have to be able to adjust our tax rates on something like an hourly basis to take advantage of it.

That's the same as saying there's an equation to work out what a certain person will do in a certain day. There really isn't. The basic principle is that if you cut taxes people are more inclined to declare their income/work harder and therefore revenue goes up.

[DarkReality]

The reason I said that was that you said the only way a flat tax rate would raise national revenue was if we raised the rate.

Again, that sweet spot. I was simply averaging out the losses by cutting the tax rate for the rich. You can't simply claim that putting everyone in the lowest tax class (effectively raising it for no one) would give the same revenue as the current system. Sure, it might, but it's highly unlikely. You're probably going to have to raise it a bit and the poor are the ones that suffer from that.

whoa, did I really type constants? i meant variables.

such as incomes, current taxes, inflation, etc etc.

My guess is that it's not so much a matter of plugging it in but even finding the right equation based on the dynamics of it all. I'm also guessing it's impossible to do so accurately.

That's the same as saying there's an equation to work out what a certain person will do in a certain day

Basic reaction probabilities based on personality. That might actually be more feasible than working out tax dynamics.

[denacioust]

Again, that sweet spot. I was simply averaging out the losses by cutting the tax rate for the rich. You can't simply claim that putting everyone in the lowest tax class (effectively raising it for no one) would give the same revenue as the current system. Sure, it might, but it's highly unlikely. You're probably going to have to raise it a bit and the poor are the ones that suffer from that.



The Capital Gains Tax in Ireland a few years ago was cut from a massive 50% down to about 25%. (those figures may be slightly inaccurate).
What happened? Revenue from the tax went up HUGELY. Why? Because people were now declaring their capital gains tax as they felt the tax didn't have as drastic an effect.