Friday, February 22, 2013
On the Flat-Tax
There is a certain appeal to it; one flat rate, no deductions, and a tax form small enough to fit on a postcard. I mean, I know that the left probably wouldn't like it because it isn't progressive enough but if you did it in conjunction with a beefing up of the earned income tax credit for the poor and maybe a second rate (say, 20% for the $300,000 and then 25-30% on everything over it), I think that you could possibly sell it - especially if you could convince them that it'll probably raise more revenue than this Byzantine piece of garbage that our current tax system represents.
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16 comments:
There is no question that our tax system could be greatly simplified, but even with you titling this post "On the Flat Tax", you are in fact proposing a progressive tax, including effectively a negative tax for the lowest income earners.
The politicians should be way smarter than us. Why are people like us able to come up with these great solutions within 10-20 minutes, while the parties often take forever just to agree on a piece of legislation like tax reform? It really is an upside down world sometimes.
Jerry, I recognize that a flat tax will never fly with the left and that's exactly why I suggested a flatter tax instead. As for the negative income tax, that's a Milton Friedman idea that I initially proposed as a compromise toward junking the minimum wage (which is little more than another form of price fixing).......Roberto (and I think that Jerry mentioned this, too, in another thread), there are just too many special interests baked into the tax code for any meaningful reform to ever take place. If only it weren't the case, huh?
15% for everyone,no matter your income level......no deductions for anything.
Again the problem comes back to the way we finance our elections. Special interests contribute to the politicians who in turn write the special interest benefits into the tax laws. Get rid of the special interests and you will get rid of the special interest benefits.
I'm not sure what the magic number is, Russ. I would say whatever it is that can get us to that historical 18-20% of GDP.......Yeah, I'm with you, Jerry. Whatever it takes to drain the swamp.
Barlowe: Whenever people point out the problem of overtaxation, someone will always point out that European countries have a lot higher taxes.
With all due respect to the "jump off a cliff just because someone else did it" lemmings, what has made America great is doing things different than how they do it in Europe. Especially in 1776... and during the 1930's and 1940's.
I agree dmarks, we should not do things like Europe. Here is what austerity has done for them - made their debt worse!
There hasn't been much austerity to speak of in Europe, Jerry, and what there has been has largely been in the form of tax increases (http://www.usnews.com/opinion/articles/2012/06/01/the-myth-of-european-austerity). The fact is that when true austerity has been tried (Harding in 1921, Truman in 1946, Canada in the '90s, and the Baltic states just recently), it actually has worked.
Well, the facts are that the study referenced in the link I provided shows that the greater to austerity measures, the bigger the drop in GDP and the greater the increase in the debt-to-GDP ratio, hence making the economic condition of the country worse, not better.
Go to Eurostat, Jerry (that was the source for U.S. News and Cato - http://paranoiacstoogetalk.blogspot.com/2012/06/blog-post.html). England and France haven't cut spending at all and, while Spain, Italy, and Greece have to an extent, it's only been in the 1-3% range. I suspect that the economic downturn that the author of your source sites is probably due more to the oppressive tax increases than the measly spending cuts.
Will,
While I don't want to argue data sources with you, it appears that I sent you the wrong link in my earlier post. This is the one I meant to send:
http://jobmarketmonitor.com/2013/02/21/eurozone-panic-driven-austerity-the-more-intense-the-austerity-the-larger-is-the-subsequent-increase-in-the-debt-to-gdp-ratios-study-finds/
It is based on this study,
http://www.social-europe.eu/2013/02/panic-driven-austerity-in-the-eurozone-and-its-implications/
which shows for Greece, for example, that they applied austerity measures amounting to more than 10% of GDP per capita and have experienced an increase in the debt-to-GDP ratio of more than 35%.
Austerity measures will reduce GDP. If they don't reduce the debt also, but a comparable amount, the debt-to-GDP ratio goes up, and it is this ratio that it important in measuring the viability of an economy, i.e, its ability to service that debt.
Hopefully I have my references straight now.
This is directly from Eurostat (the official data source for Europe), Jerry. It show basically each country in Europe and I really don't see a lot of drastic cutting of government spending - http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tec00023&plugin=1 - Now, that 10% austerity measure for Greece, does it break it down between tax increases and spending cuts?
And I don't buy the premise that austerity de facto reduces GDP. Harding in 1921 cut federal spending by 50% and within 2 years the unemployment rate dipped from 12% to 2%.......And in 1946 all of the Keynesians were predicting another great depression if the government didn't enact yet another New Deal. But Truman (prompted by the Republicans) instead cut spending by 45% and 1946 was one of the greatest years in U.S. history.......And in the current climate, Estonia was one of the few European countries that actually cut spending dramatically and they were riding a 7% growth rate in its aftermath.
I don't think austerity includes tax increases. "Austerity refers to a policy of deficit-cutting by lowering spending via a reduction in the amount of benefits and public services provided. (From Wikipedia)
It can and in the European case apparently does (at least according to "U.S. News and World Report").
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