Economy · Politics/Government

Would Americans benefit from a single tax rate that applies to all taxpayers?

Eric Ringham Oct 20, 2011
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Texas Gov. Rick Perry has announced that he will propose a national flat tax next week. One of the other candidates for the Republican presidential nomination, Herman Cain, has staked much of his own campaign on his “9-9-9” plan, which would tax business income, personal income and sales at a uniform rate of 9 percent. Today’s Question: Would Americans benefit from a single tax rate that applies to all taxpayers?

  • Clark

    I don’t know if a flat tax rate of 9% or 15% is the correct answer but I would agree it makes sense to simplify the tax code for both personal and business taxation. There is an entire industry of accountants and lawyers whose sole income is based on a complicated tax code so this will not be a quick process.

  • Christopher Correia

    I must completely concur with the first commentator. The government may have the right to tax us on income, but it’s insane (perhaps even unconstitutional, one wonders) to make people have to track and report their life circumstances in so much detail, and to essentially prove that they DON”T owe more taxes. Tax my income, but don’t make me have to take a day, or pay someone else, to report my finances.

    Is a sales tax regressive? Then raise the rate a couple of points and don’t tax grocery store food, or clothing items under $50 in value. Seems easy enough to do these days.

  • Emery

    So long as we fund our elections by open bribery, the tax system is going to stay as it is, and the tax code will only grow larger as favors to contributors accumulate. If Reagan had to scrap the idea of starting from scratch, does anyone imagine that Cain – or any other candidate of either party – would have the power to do it ?

  • reggie

    Depends on which “Americans” you’re talking about. A flat tax will be a huge benefit to the wealthy (lower marginal rate, plus less money spent on accountants and lawyers chasing loopholes). For those of us in the other 99%, not so much. The poor, the working class and the middle class will once again take a shot to the gut so the wealthy can continue to pillage.

  • Robert

    Redesigning tax and expenditure programs could promote faster economic growth in both the short run and long; increase equity and opportunity, and lower the national debt, and the debt/GDP ratio even more.

    The Cold War ended more than two decades ago, but we continue to spend tens of billions on weapons that don’t work against enemies that don’t exist. Fruitless wars have not increased our security and our military’s credibility. Rather, they have undermined both. We could have more security with less spending

    The health care reform bill did little to eliminate the trillion-dollar giveaway to the drug companies, resulting from restrictions on the ability of government (the largest buyer of drugs) to negotiate prices. In contrast to every other government in the world. While much more can, and should, be done to control health care costs, this little change would make a big difference.

    Eliminating corporate welfare, both that hidden in our tax systems and in the hidden give-aways of our country’s natural resources to oil and gas and mining companies; eliminating the unjustifiable and harmful tax breaks for speculators and companies that keep their money out of the country, and taxing activities that generate large negative externalities—whether the environmental pollution that threatens our health and our children’s future, or the financial transactions that brought out country and the world to the brink of ruin—could all easily generate trillions of dollars in revenues. At the same time, they could also create a fairer society, a cleaner environment, and a more stable economy.

    Deficit reduction is important. But it is a means to an end — not an end in itself. We need to think about what kind of economy, and what kind of society, we want to create; and how tax and expenditure programs can help achieve those goals.

  • Wade

    I would think so. It’s got to be better than what we have now anyway.

    Let’s not get worked up with “it’s harder on the poor” and whatnot. This would be a “needs of the society outweigh the needs of a few.”

  • rich

    Income side: Sorry, life ain’t fair.

    Tax side: Wait, that isn’t fair!

  • david

    If this idea is brain child of the gop, then I’m sure it would be very bad for me.

  • Zeke

    Just ask Steve Forbes…

  • Sal E

    Let’s see — if you have a relatively low income, especially if you have children at home, you pay no income tax. If you work and are really poor, you get a check back from the IRS. Middle income folks pay a middle tax rate and higher incomes are charged a higher rate. Who would a flat rate benefit? Who would benefit if we replaced a tax on income with a sales tax or VAT? I think we can all see the obvious answers!

    A flat rate income tax can only work if everyone in the country has an adequate income and nobody earns obscene amounts of money. Would that ever happen in the good old U S of A?

  • J Dre

    Simplicity is good, but we should move away from taxing things that we want to support, such as moderate incomes and basic needs like food, clothes, shelter education healthcare; and should instead tax what takes away from the public good, like pollution and unsustainable resource extraction.

  • The upside is that the IRS could be disbanded and all that brain-power could engage the world more productively.

    The downside is that the government wouldn’t be able to pull financial strings to herd the taxpayers into certain behaviors like home ownership over rent, marriage over cohabitation, saving for healthcare expenses over demanding insurance companies meet their contractual obligations.

  • Jesus

    Nope, they’d be better off to eliminate personal taxes and grow the wealth of the nation/world on Cannabis/hemp and other amazing renewables. Legalize nature, cultivate our friendship with it, it’ll be here long after money and politics are gone.

  • Chuck

    What an interesting question. Whether or not All Americans would benefit will, of course, depends upon the details.

    For example, would deductions for things like property taxes, mortgage interest, interest on large purchases be reduced on eliminated?

    Would credits for things like college loan interest or energy efficient doors and windows be reduced or eliminated?

    What would count as income? Would short term and long term capital gains be treated the same. What about income from tax free government bonds? And non taxable perks, such as houses, cars, and travel?

    Simplifying the tax code would be a good thing. Eliminating or reducing the number of exemptions, deductions, and credits would be a good thing. Increasing the things that are counted as income, for example, housing and travel allowances, would be a good thing.

    Stricter tax collection enforcement would be a good thing.

  • John O.

    As the old saying goes, the devil is always in the details.

    Clark raises a very important point regarding the livelihoods of accountants and lawyers. Sure, a flat tax with a simplified set of broad deductions and/or credits for individuals and corporations would (in theory, anyway) reduce the time and resources needed to prepare and file.

    Over time, the tax codes at the federal, state and local levels (where local income taxes exist) have accumulated a plethora of specialized deductions and credits that would presumably be pared way back, or eliminated altogether.

    One can be assured that those constituencies that had previously been able to take advantage of those credits or deductions would lobby very hard to retain or reinstate those tax breaks if a flat tax were adopted. The other major question (of course) is what impact a flat tax would have on revenues, compared to the current structure.

  • Larry M

    The country has always done better and planned for the future when the wealthy had a higher rate, it’s when we created our highway system, electrical grid and other infrastructure which are now all in the decline, American citizens need to invest now in our future or we will fall behind countries who are currently investing in themselves like China.

  • Philip

    Nope – a flat tax rate would hit hardest low income folks, who spend a greater percentage of their earnings daily than high income people. It needs to be relative to the amount a person makes.

  • James

    A flat tax is an alternative (that has never, anywhere proven to be a job creater) and its discussion is just another distraction from the issues at hand, which are:

    – our government is living beyond it means and needs to close the gap with some combination of less spending and more revenue (independent of how it is collected)

    – America is still a wonderful place to live and work, but unfortunately competition from the rest of the world is making it much harder (impossible) to maintain high levels of employment and our standard of living

    – an unfortunately large portion of our population doesn’t have enough money to eat, never mind enough to also pay the same tax rate as the more fortunate

    The discussion of a flat tax is much ado about nothing. This too will pass.

  • Joey

    I think it’s important to distinguish between simplifying the tax code and instituting a single flat tax. The former increases efficiency, the latter is probably unfair. If 80% of your income is disposable, should you really be taxed at the same rate as somebody with 2% disposable income? I think not.

  • Jeff

    I’m with J Dre.

    “Simplicity is good, but we should move away from taxing things that we want to support, such as moderate incomes and basic needs like food, clothes, shelter education healthcare; and should instead tax what takes away from the public good, like pollution and unsustainable resource extraction.”

  • Craig

    At the risk of merely echoing others, the rate (progressive vs. flat) is independent from the complexity.

    Tax complexity favors those who can afford dedicated attorneys (often former judges) able to predict the courts’ interpretation of our byzantine, seventy thousand page tax code, often exploiting the difference between a plain reading and strict legal interpretation. They even help write tax laws, delivering whole cloth to short-staffed congressional offices. By this strategy they are able to leave little ‘easter eggs’ in various nooks and crannies which they can later use to turn losing investments into winners and good investments into blockbusters.

  • kimMN

    The country knows now that any new tax plan endorsed by anyone other than Obama will be a welcome change from the pro-fascist style of government Obama has shown us that prefers. The Progressives and Obama using class warfare and playing the race card has run it’s course with America…no tax plan will solve the problem when the real problem is Obama’s continued excess spending and subsequent wasted billions on paying back his donors; Solyndra, Sun Power, unions, etc.

    No new tax plan will help as long as Obama is busy demonizing the private sector job creators by advocating job killing tax increases to fund more failed stimulus programs and by aligning himself with the Occupy Wall Street protesters and their leaders advocating collapse of the economic system ( collapse the banks and collapse the government’s social security net….their outcome is nothing more than what Francis Fox Piven has spoke of for decades and what George Soros has spoke of as his grand design for the Open Society ( one step removed from Communism is their goal).

    As long as Minnesotans get side tracked with mundane issues as the question directs, the far left radicals carry on under the radar of public scrutiny. Just as most MN’s don’t know that Obama was a member of the New Party ( a far far left radical Progressive type ideology) going back to the early 1990’s The media wouldn’t touch that either.

  • David

    A flat tax, when one considers disposable income, is simply another word for a regressive tax. That said, simplifying the tax code and implementing a truly progressive rate that taxes all net income (not just labor income) would be the fairest and most efficient manner to raise the funds necessary to provide for our governance. Using the tax code as a behavior modification tool can be quite effective – tax behaviors that are bad for society (smoking, polluting, etc) and reward behaviors that are good for society.

  • suestuben

    Americans are so egocentric. We think that we have all the answers to all the questions and so do not look around us to see who might have an answer that is working well for them. I would look to Europe to observe what countries have a tax system that is working well for them. There are several states there that tax their citizens according to what they can afford to pay and when polled, the populace professes great satisfaction with that system. Some, in fact, post ‘happiness’ rates that are far above anything Americans profess.

    In most of these countries, the citizenry enjoy lifestyles and wealth above the majority of Americans. They are able to pay for health care for all; their poverty rate is non-existant, they have jobs for all citizens who want one, they enjoy 1/100th of our crime rate, and a 6-week vacation is standard for all jobs, with a 12 to 18 month fully paid leave for new parents.

    Americans look at life from a limited-resource POV, in that we think there is only so much money and I must fight for my share or I (my family) will be forced to do without essential needs. Our government has instilled this fear in us so we will fight amoungst ourselves and overlook the billionaires and corporations who are obscenely and immorally wealthy.

    Our citizenry must grow up, stop attacking each other, and adopt a system that successful countries model. The life satisfaction those democracies exhibit is primarily due to providing basic needs for all their people. They distribute the wealth so that all may succeed and thereby remove most incentive for fear and anger. Can you imagine an America in which we feel safe, secure, and free from worry? Are we so far down the path to 3rd world poverty that we cannot turn this ship around? I think we can.

  • kimMN

    @suestuben

    Your comments about some fictional utopia in Europe is entertaining.

    The mantra of “we need redistribution of wealth” is a sentiment shared by at most, 10% of the population. Should we Tax more to those “evil” corporations such as Steven Jobs’ Apple that enjoys a profit margin three times above the 4% that oil companies have? Should we tax the Apple corporation as well as GM and Ford and Catipillar that have all had their newest manufacturing needs built over seas or in mexico?

    When corporations are taxed more as we tax them 35% today, they move over seas and_ they pass the tax burden onto the price of goods that we then pay for. Tax them more and they move more manufacturing out of the country and we pay more for their goods……so, what you are asking for is the doctrine of socialism where everyone lives in near poverty except for the few elite in charge of the economy. And people in the UK wonder why so many of their top financial mangers moved to Sweden? To avoid excess taxes levied by the socialist style of UK progressives.

    We don’t need more taxes, we need a president and Senate that will stop the excessive and wasteful spending..again, fact: Obama has signed away a four times increase in national spending in the past 34 months than all the other presidents have to date!!! More taxes won’t undo going from bush’s 8 trillion deficit to Obama’s 15.2 trillion dollar deficit.

    The problem with socialism is that sooner or later the money took from those who work and invested , it runs out.

  • Steve the Cynic

    I like the idea of simplifying the tax code to the point where H&R Block has to go out of business. Let the tax accountants find honest work.

    A straight flat tax would indeed harm the poor and middle clase compared to the tax system we have now (flawed though it is). There are ways to remedy that, however. Some combination of the following would do the trick:

    — Income up to the poverty level could be exempt.

    — There could be a guaranteed minimum income (even Richard Nixon thought that might be a good idea).

    — The regressivity of the taxes could be balanced by progressive benefits, such as a Canadian-style health care system and guaranteed access to however much education a young person is capable of achieving.

    But, of course, partisan politicians (especially the Guild Of Patricians) are too busy trying to make sure the other side loses than doing what would actually be good for America, so rational tax reform probably won’t happen any time soon.

  • Steve the Cynic

    KimMN:

    I used to believe ideological bullshit like what you wrote in your response to suestuben. Then I realized it wasn’t based on any real evidence. If we can’t learn from what’s working elsewhere in the world, eventually we won’t keep up.

  • Jesus of Nazareth

    From everyone to whom much has been given, much will be required; and from the one to whom much has been entrusted, even more will be demanded.

  • kimMN

    @Steve the cynic.. while I work from my “progressive” desk and see the comments come across,

    You say there is no evidence? Oh please__ your comment seeks to do one thing only_ denigrate whatever comment does not fit with your view. I thought all Progressives worshiped the ” embrace diversity” attitude…unless it disagrees with their view.

    Your comment is similar to Biden’s comment today accusing the Republicans will be responsible for increased rape and murder if they_ don’t pass Obama’s tax and job bill. Did he forget the evidence shows that the Dems didn’t all like the bill either? Or, that __not one__ Democrat voted for Obama’s prior budget.

    Any future tax changes have to be based upon accounting facts of current revenue and government expenditures with realistic forward projections, not some radical ideology that Obama clings to even in the face of repeated failures of all his policies…he needs to adapt before he ruins the reputation of all Democrats which will lead to a GOP run Senate, House and presidency after elections of 2012.

  • John

    No, I am not wealthy. Those with large incomes and capital gains would benefit.

    Why is it that only current Republicans’ tax simplification benefits the wealthy. Bring back the Eisenhower Progressive Taxes Rates that ere based on the ability to pay. They didn’t stifle production or economic expansion-greed was still able to be a driving force!

  • david

    There is absolutely nothing diverse about any of the bullshit you post on here kimMN. You just post right wing rhetoric with obviously no understanding of anything you are saying. Why don’t to take some time off of posting on here and where ever else you spew your BS and read a book or two about economics, American history, world history, critical thinking, and a self help book or two on how not to be a major jagoff. BTW those books need to be written by a reputable author, not some partisan propagandist with an agenda.

  • Steve the Cynic

    No, KimMN, I didn’t say, “there is no evidence.” I said the ideological bullshit you subscribe to is not based on “real evidence.” Ideologies of all sorts– right, left, or whatever– are not evidence-based ways of thinking. They start from a set of accepted principles and then try to figure out what should work, rather than observing what really does work. Your right-wing ideology is blinding you to the fact that, on average, citizens of some European countries are happier than Americans. Suestuben was merely pointing out that whatever they’re doing seems to work. According to your radical free-market ideology, it shouldn’t. So wich is correct: your ideology, or the evidence that refutes it?

  • Justin

    Clearly these flat tax plans are just another way for the ultra-wealthy politicians to get their ultra-wealthy friends to give them piles of cash to create laws to protect their stash.

    Take a look at this graph put together by The Atlantic, that shows how the lowest 80% of taxpayers would pay MORE, while the top cash-grabbers would pay thousands or even millions less:

    http://www.theatlantic.com/business/archive/2011/10/our-last-graph-about-9-9-9-and-the-only-one-you-need-to-see/246986/

  • kimMN

    @steve the cynic’s remark of

    “radical free-market ideology”

    Radical??? really? You use the term “radical” like Senator Reid had instructed his crew to speak to the press with adjectives of RADICAL and EXTEME when ever discussing the GOP plans…a cheap trick_such crap.

    Free market capitalism is America….so what do you want instead? a European socialism?

    oops, that is exactly what Obama preached f in his Fundamental Transformation of America campaign..redistribution of wealth except for his wealth, that is. So how did the tax rate in the USSR work out? Hmmm?

    The joke is that the Progressives rely upon the unwitting to accomplish their goals. Occupy Wall Street starts with college kids and then the unions show their face along with the infamous George-” I enjoy collapsing economies and over turning regimes”_ AKA: George Soros, you know, him __ the billionair who supports Obama and worked with SEIU to set up this stupid protest leaving garbage and feces in their wake..some protest of college kids camping out in the streets when they should be in school and /or looking for work. It is shameful but heck, even Democrat Nancy Pelosi and Obama all support their protests while hiding from the fact that it is they who manipulated Wall Street and ruined the economy..wow.

  • kimMN

    derp…

  • Steve the Cynic

    KimMN, you seem to be impervious to reason. Apparently you thought I was sayinhg free-market captialism per se is “radical.” You’re either not reading carefully, or deliberately misconstruing what I write. Free-market capitalism is demonstrably useful, and therefore a good thing in my opinion. It’s the extreme ideology that says markets should be absolutely free that I take issue with. (I also take issue with the extreme ideology that says no one should be allowed to get richer than anyone else, but that’s clearly not your bias.) Look around the world, Kim. The countries where the economy works best to promote widespread well-being are ones that have mostly free markets, with intelligent regulations to keep amoral corporations from runing amok, and a reliable social safety net to keep people from falling through the cracks. That’s not socialism or fascism. It’s what’s called a “mixed economy.” Your ideology says it shouldn’t work, but it clearly does. If we Americans weren’t too proud to learn from the experience of others, life here could be as good as it is in Canada, or Scandinavia, or Australia, or other places like that.

  • kimMN

    @steve..

    I agree with you on Canada as a good example, e.g., in 2008, they did not bail out the big ones, they let the economy adjust without huge government intervention and today they are fine!

    We all know that our own Government created the housing bubble and subsequent mortgage crisis with the stock market collapse in mid 2008. Wall Street benefitted from the government’s interference with usual regulations or else the banks would never have made such high risk loans.

    Obama’s best friend, George Soros was involved and he still has plans and it is not for the betterment of the USA yet, not even NPR will do a full investigative report on Soros’ history nor did they do a real take on Francis Fox Piven interview. They treated her as a poor meek old lady with no involvement with Bill Ayers and the SEIU..it was the most pathetic biased interview done from NPR that I have heard in decades.

    Today’s question on the flat tax is referenced to Perry’s idea without mentioning him. Maybe MPR will ask, ” what about Obama’s plans?” Oh yeah, there would be no reply because Obama has NO plan as he had none since 2008 either.

  • Steve the Cynic

    “I agree with you on Canada as a good example, e.g., in 2008, they did not bail out the big ones, they let the economy adjust without huge government intervention and today they are fine!”

    Actually, you’re not agreeing with me, KimMN. Canada didn’t bail out any big financial institutions, because there was no need to. They had good regulations in place that prevented the kind of reckless risk-taking that led to the collapse of Lehman, AIG, etc. We used to have good regulations like that, until the idolatrous worshipers of the Invisible Hand started pushing to undo the New Deal. Canada also has that single-payer health care system that keeps people from going bankrupt because of catastrophic illness and keeps businesses from going broke paying for insurance premiums, which also helped keep the crash from being quite as deep there as it was here. I’m sorry to disapoint you, but Canada’s system of smart regulations and a good social safety net (essentially, capitalism on a leash) works very well to steer the markets toward improving the common good. You only have to take off your ideological blinders to see the truth.

  • Jason

    To answer this you have to understand why we don’t have a flat tax already. Complexity in our tax laws is in reaction to the variety of our individual economic situations. A flat tax may sound simple, but simplicity does not directly translate into fair.

  • Mark G

    SOME Americans would benefit from a flat tax. However, MOST Americans would not benefit: the wealthiest people would pay a great deal less in taxes and therefore would greatly benefit; middle class people would pay approximately the same in taxes so they don’t benefit; the poorest people would have to pay taxes (remember, a true flat tax means that all have to pay the same percentage) and therefore would not benefit. Everyone, of all income levels, would see drastically decreased levels of public services, everything from Social Security to education to parks to defense spending…..everything we count on government to provide or support. And this benefits NO ONE!