Oh no’s, quotes, Bloomberg, CNBC, Librul propaganda, Teahadist brains fibrillating! LOL
"The flat-taxers like to run around with Lake Wobegon economics where we are all going to pay less and still have the same amount of money, but the world doesn't work that way," according to Dean Baker, co-founder of the Center for Economic and Policy Research, in a U.S. News & World Report blog post.
http://www.bloomberg.com/bw/magazine/bloomber...72011.html
Bloomberg View: Why a Flat Tax Won’t Work
October 27, 2011
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The Charms and Deficiencies of Flat-Tax Schemes
The number of Republican Presidential candidates backing some form of flat tax stands at three and a half. A 9 percent flat tax is one of the nines in Herman Cain’s 9-9-9 Plan. Newt Gingrich supports an optional flat tax, meaning taxpayers could opt for a flat tax or file their taxes under the current system, which is what Rick Perry has in mind, as well.
The half supporter is Mitt Romney, who characteristically says he wants a “flatter” tax but has avoided being pinned down on what that means.
People want their taxes simpler, fairer, and lower. A flat tax promises all three— and would deliver on none.
Let’s start with “lower.” Taxes cannot be lower for everyone and still raise the same amount of money. For each dollar your taxes are lower, someone else’s must be a dollar higher. Yes, we know the argument that cutting taxes may cause people to work harder and thus substantially increase government revenue.
This theory has dominated conservative economic thinking for three decades with scant evidence to support it. If you want to give everyone a tax cut—under the current system, under a flat tax, or under any other arrangement—all you have to do is lower the tax rate. This has nothing to do with flatness.
Would a flat tax be “fairer” than the current system? Perry plans to call for a rate of 20 percent, which is lower than today’s top rate of 35 percent and higher than the lowest rate (which is zero). If your income currently puts you in a bracket higher than 20 percent, a 20 percent flat tax constitutes a tax cut.
If you’re in a bracket lower than 20 percent, a flat tax will constitute an increase, unless it comes with lots of deductions, in which case it’s no longer flat. If lowering taxes on high incomes and raising taxes on low incomes would be an improvement, then a flat tax is fairer than the current code. Otherwise, it isn’t.
Finally, would a flat tax make paying taxes “simpler”? Under Gingrich’s and Perry’s “optional” arrangement, people will have to calculate their taxes twice in order to decide which system to pay them under. That’s not simpler.
Even if the flat tax were the only option, this wouldn’t make the tax code much simpler. Multiple brackets add one line and one simple calculation to the chore of computing your taxes. What causes the tremendous complexity of the tax code is defining taxable income. Some complexity is unavoidable in a complex economy.
Some of it represents the hard work of lobbyists for special interests. None of it has anything to do with tax rates or how many brackets there are.
No one is opposed to reform that cuts loopholes, ends subsidies, and lowers tax rates. But any reform must make the tax code more progressive, not less.
GOP 'simple' flat tax proposals simply don't add up
John W. Schoen | @johnwschoen
Thursday, 12 Nov 2015 | 12:04 PM ETCNBC.com
It's such a simple idea: A single tax rate for individuals, rich and poor, and companies, big and small.
"Everybody should pay the same proportion of what they make," said Republican presidential hopeful Ben Carson in Tuesday's latest candidate debate. "You make $10 billion, you pay a billion. You make $10, you pay one."
But like everything else in the sprawling, $18 trillion U.S. economy, the math isn't quite that simple. And, while the idea is hardly new, the current round of proposals simply don't add up.
Aside from their obvious simplicity, the latest flat tax proposals are being pitched as a broad tax cut for the middle class. But, in fact, most Americans would end up paying a greater share of their income — except the very rich.
That's because — under the current system — those at the bottom of the income ladder pay a much smaller share of their income than those at the top.
A 2011 Congressional Budget Office study, for example, found that American households in the lowest fifth of the income ladder paid about 2 percent of their income in federal taxes. The top fifth paid 21 percent of their total income and the top 1 percent paid 29 percent.
http://www.cnbc.com/2015/11/11/gop-simple-fla...dd-up.html
So if a flat tax hit all households with, say, a 15 percent rate that would mean taxes on the bottom fifth would increase more than sevenfold, while the top 1 percent would see their taxes cut almost in half.
To get around that, some flat tax proposals would boost the threshold a household could earn tax-free. GOP candidate Sen. Ted Cruz has proposed leaving the first $36,000 untaxed and fellow Republican hopeful Sen. Rand Paul wants to leave the first $50,000 untaxed. But that would still represent a huge tax cut for those on higher rungs of the income ladder.
"The flat-taxers like to run around with Lake Wobegon economics where we are all going to pay less and still have the same amount of money, but the world doesn't work that way," according to Dean Baker, co-founder of the Center for Economic and Policy Research, in a U.S. News & World Report blog post.
That's one of the main criticisms of the flat tax proposals: They wouldn't bring in nearly enough money to pay the government's bills, swelling the national debt with huge budget deficits that most of the GOP candidates have pledged to eliminate.
Read MoreGOP debate comes up short on tax, budget solutions
So far, four of the GOP candidates have proposed flattening the tax system to a single rate, all of which would eliminate trillions of dollars in tax revenue needed to balance the federal budget. Carson, who originally proposed a flat 10 percent on personal and business income, has recently upped that to 15 percent.
But, as CNBC's Becky Quick noted in the Oct 28 debate, the proposal would leave a roughly $1 trillion hole in the federal budget, an analysis confirmed by Politifact, a website devoted to fact-checking candidate claims.
The math underpinning the other candidates' flat tax proposals are equally problematic, according to the Tax Foundation analysis.
Cruz, for example, has called for a 10 percent flat tax on personal income and a 16 percent tax on businesses.
"The revenue loss under this plan, using reasonable rather than insane estimating assumptions, would be absolutely staggering," according to a blog post by New York University law professor Dan Shaviro, who has written about tax policy.
Other researchers agree. An analysis by the Tax Foundation, which Cruz has cited, found that his flat tax proposal would create a $3.6 trillion shortfall over the next decade.
Paul wants a flat 14.5 percent tax on personal and business income, a plan that would lose $1.8 trillion over 10 years, the Tax Foundation found. Even at a 20 percent flat tax rate, former Pennsylvania U.S. Sen. Rick Santorum's tax plan would come up short by $1 trillion, according to the research group.
The candidates argue that the deep losses in revenue would be offset because tax cuts would spur growth and create more jobs which, in turn, would generate more taxes.
But that assumption doesn't take into account the impact of larger federal budget deficits or potential spending cuts on the overall economy. (Widening deficits would almost certainly increase pressure to cut government spending, which would create a drag on economic growth.)
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