Four Reasons Against the Flat Tax

Points of Opposition to a Uniform Rate of Levying Income

Jul 8, 2009

While the Flat Tax gains ground with passionate voters, it is important to understand why this system should be approached with caution.

The Flat Tax was a proposal most recently made by Senator Sam Brownback (KS) to reform the current federal income tax model by collecting money at a uniform rate of 15% for incomes over $25,000 for singles and $30,000 for families of four.

This is in opposition to the current tax system, which exacts a graduated tax beginning with 10% for citizens earning between nothing and $8,350, and ending with 39.6% for singles earning over $200,000 and families earning over $250,000.

Under the Flat Tax system, the lowest income earners in the United States would not be subject to income tax. The current tax system places a 10-15% burden upon them.

100,000 Federal Employees Would be out of Work With the Flat Tax

While there would be little love lost between many citizens and employees of the IRS, it should be noted that there are over 100,000 employees supporting their families who work there.

It is by no means in the best interest of the United States to support those who are in a system that is holding the country down, especially when a better system is available. However, when 100,000 families could be hurt by this change, it is best to make sure that the very best reform measure is put in its place.

Financially Irresponsible Politicians are not Likely to be Satisfied With 15%

Another matter of concern is that the US history of taxation on income is not one that has always worked in favor of the people. Robert Kiyosaki, best-selling author of Rich Dad, Poor Dad, explains in his book that taxes were initially proposed as a means to have the wealthiest Americans pay for the good of everyone else.

Since then it has led to all citizens paying taxes for earning money, spending money, and holding property. On top of the that, regressive systems of taxation, such as state education lotteries, have been enacted to draw more money into the system.

It is hard to fathom that the government would be satisfied with withholding a mere 15% of taxpayers' income when they could withhold 16% and still get re-elected, or 20%, especially when Lithuania is levying 24% from its citizens.

When it comes to the 15% rate proposed by Sen. Brownback, the number may simply be a fantasy.

The Resurrection of Double Taxation

Double taxation is the norm. The idea that capital gains should not be taxed is only agreed upon in situations such as home owners selling their primary residence.

When politicians have the money of the citizens, there is often waste. Rather than trim the fat, they will come up with ways to raise more money. Citizens earning $5 on their savings accounts will not think very much of it, and may even vote for an amendment that brings graduated taxes based on gain amounts.

Changes to the system will lead to other changes, and it will not be long before the Flat Tax was an idea that did not work.

Who is Currently Using the Flat Tax?

The last point of discouragement is that although the Flat Tax has been enacted in over 20 nations including Russia and Iceland, it has mostly been embraced by poorer nations such as Iraq, Kazakhstan, and Georgia. Most of the more powerful Asian and American nations have yet to find enough merit in the system to enact it, and neither has Australia.

When it comes to the Flat Tax, much caution should be exercised. Not only are the careers of over 100,000 people in the balance, but the very ideals that would bring this change to the tax system are also at risk.

While the 15% rate could be very profitable for the US, there is nothing that would stop a government that regularly approves unbalanced budgets from raising the rates, bringing new tax dollars in from other sources, or slowly creating a graduation of rates based on income.

Sources

The copyright of the article Four Reasons Against the Flat Tax in Taxes is owned by Christopher Pascale. Permission to republish Four Reasons Against the Flat Tax in print or online must be granted by the author in writing.

Aug 20, 2009 7:59 AM

Guest :

Very good article on the downside of the flat tax which acknowledges the predatory nature of Congress towards taxpayers.