FAIRTAX, Let's ABOLISH THE I.R.S.

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Regressive taxation

Posted: Apr 21, 08 7:12am

A fixed-rate tax that only taxes earned income places more burden on the poor and middle class. It sounds like what you are proposing would not include capital gains or investment income, but only wages (as you mention payroll deductions). Your proposal, would cause a greater shift to taxes based on consumption, which, on a percentage basis, affect those who make less (and spend a greater portion of their income). Therefore, those who make money from investment and can afford to save more are NOT taxed at the same rate. This is why the income tax rate is progressive, to insure that no one is bearing more of the burden (considering all taxation) as a percentage of total income.

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politics, taxation, IRS

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2 Comments // 2 Members

dana-7

Posted: Apr 23, 08 11:44am

wdempster wrote:

A fixed-rate tax that only taxes earned income places more burden on the poor and middle class. It sounds like what you ...

How about this then:

Tax = (<total income> - <individual examption>) * <tax rate>

Make it revenue-neutral and adjust the two parameters to make is as close to the current system in terms of regressivity as possible.

I don't enjoy paying taxes, but the way in which they are collected is boneheaded. I just paid H&R Block $500 to do our taxes because they are so complicated.

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wdempster

Posted: Apr 25, 08 6:29am

dana-7 wrote:

How about this then:

Tax = (<total income> - <individual examption>) * <tax rate>

Make it revenue-neutral and adjust t...

That is certainly better than what has been suggested. I agree we shouldn't use the tax code to cure social ills or as an incentive to behave in certain ways. The secret IS making it revenue neutral, so as not to shift the burden to other forms of taxation that do affect those of different incomes in a manner that is surely NOT flat, such as sales or personal or real estate property taxes.

Also, as a country, we need to decide whether we are going to start living within our means (and this encompasses both "defense" spending and other government programs and entitlements).

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