Gingrich's Flat Tax - Not So Flat

[Bravus]

Romney pays 15% tax because most of his earnings are capital gains, taxed at that rate. Gingrich said 'I want to bring everyone down to that rate'. That's essentially his 'flat tax' proposal... but wait a minute. Part of his proposal is the *abolition* of the capital gains tax. Under that regime, Romney would pay close to 0% tax.

And, if we're using the (flawed) analogy between national finances and home finances: you don't balance the budget by cutting your income by more than half. Gingrish's tax proposal, if enacted, would utterly destroy the US economy and its superpower status.

He's ready to burn down the country: IMO that's far more important than who he slept with when...

[Dottie]

Bravus - -

What do you think about the fair tax?

[phkrause]

Great points Bravus

[bonnie]

Bravus - -

What do you think about the fair tax?

It is tough to beat the fairest system of all.Whether it be 10% or 15% God had it worked out pretty well.No deductions except the actual cost of business expense and deductions for charity.

Across the boad. If I earn 50,000 and pay 15% and someone else earns a 1,000,000 and pays 15% One pays far more for his increase. Even God did not excuse those making less and penalize those making more.

[Bravus]

I'd actually prefer a flat tax compared to a regressive system like now. It would be a step forward. But 15% wouldn't get it done: not if you want to maintain that military.

[Bravus]

But a progressive system is still fair: a poor person needs most of his/her paycheck to put food on the table and fuel in the car. A rich person is essentially just piling wealth on wealth, with every need already met.

I know that's an argument that will fall on deaf ears, but as I say, the system now is actually *regressive*, or at least odd, with those at the top and bottom paying least and the middle class paying most.

[Dr. Shane]

The graduated income tax system we have now is fair. Everyone pays the same on their income as they earn it. That means all things being equal (number of dependents, etc.) everyone pays the same on their first $10k of income. Everyone pays the same on their second $10k of income. Everyone pays the same on their thrid $10k of income. The system we have now is good. We adjust tax rates from time to time to either stimulate the economy, to reduce the government or to expand the government (i.e. during time of war).

I think I would lean toward a graduated capital gains tax. Consider the guy who makes $20K/year and retires. He sells his house and makes $100k in so doing. He has to pay the same 15% capital gains tax on the sale of his house as do millionaires living off from capital gains.

[Dr. Shane]

Romney pays 15% tax because most of his earnings are capital gains, taxed at that rate. Gingrich said 'I want to bring everyone down to that rate'. That's essentially his 'flat tax' proposal...

The capital gains tax needs to be lower than the earned income tax because it encourages investment. I certainly don't think it should be zero. In fact, I lean toward it being between 20% and 25%.

One doesn't have to be rich to earn capital gains. I have a small portfolio so I earn capital gains although it comes out to be less than $100/year. My point is that there are lots of people earning capital gains that are not rich. I think a graduated capital gains tax could be a good thing. Like 15% tax on the first 100K of capital gains. 20% on capital gains between $100K and $1 million. 25% on capital gains over $1 million.

[Dottie]

Are any of you at all familiar with "The Fair Tax" --the book?

[Woody]

Are any of you at all familiar with "The Fair Tax" --the book?

No. Do you remember the name of the author?

[Woody]

Steve Forbes?

[Bravus]

Here's a good primer: I'd heard the name before but couldn't recall the details: http://www.fairtax.org/site/PageServer?pagename=about_main

[Bravus]

It's not all that fair, though, for reasons already discussed in this thread: the poor - and increasingly the middle classes have to spend almost all of their income on food and services, while the wealthy accumulate wealth. Since the tax only taxes spending, it would fall disproportionately on those who have to spend all they get. It would have the advantage of encouraging saving, but IMO needs more work to earn its name.

[phkrause]

I do agree that the tax system does work, the problem that I see is all the loop holes. My wife used to work as a office manager for a eye doctor who had the money to pay lawyers to figure out how to get all the loop holes he could to avoid paying any taxes if possible. So my question is, is it fair that those that can afford to find those loops get away with paying less tax than the middle class? I think all the loops holes should be eliminated.

[Dr. Shane]

Loop holes are a way the government uses to control or influence behavior. For example, if the government wants people to buy hybrid cars they will offer a tax credit for anyone who buys a hybrid. Those that buy hybrids and take the tax credit are using the loop hole. If we eliminate loop holes the government would give up a lot of power and influence.

[Dr. Shane]

Typically Democrats want high tax rates with lots of loop holes and Republicans want low tax rates with no loop holes. Studies have shown tax revenue tends to be about the same ratio to the GDP either way.

[Dottie]

I haven't heard of any loopholes in the fair tax.

People are given a certain amount every month to pay for basic necessities. This does not come out of their paycheck.

The tax is not added on to the purchase price.

Companies are not required to pay taxes on their goods or profit, so costs of items are lower, so when the tax is added in, the cost to the consumer is the same as before.

There is no need for the IRS, I've heard.

The book was written by John Linder and Neal Boortz.