Flat Tax

Cute idea, sold like this: No deductions, everyone pays the same rate. Really simple – you write down your income, you calculate 15% (or whatever), you send it in. Easy as pie.

Suppose you own a corner grocery store. Suppose you buy $80,000 worth of stuff to sell, and sell it for $130,000. Do you pay taxes on $130,000? Or do you “deduct” the $80,000 you paid for the goods you sold, and only pay taxes on the remaining $50,000? If you are allowed to deduct the $80,000 we are right back where we started, with “deductions,” and we are back to arguing about what things we can or can not deduct. Tricky.

And another thing. I’m sure you have heard that a small percentage of taxpayers pay most of the taxes. (Never mind that they also get most of the income…) They pay a higher tax rate – at least on the amounts over $250,000 or so. (The pay NO taxes on most of their income, by the way, because it comes from dividends an capital gains… and NO Social Security taxes after about $87,000…) SO, if they pay most of the taxes now, but after this “reform” you pay the same tax rate as them, what does that say about what is going to happen to YOUR taxes?

(Also here.)