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Source link: http://archive.mises.org/8849/the-flat-tax-is-still-not-flat/

The Flat Tax Is Still Not Flat

October 25, 2008 by

An expanded version for The New American of my recent article on the Flat Tax is now available online here.

{ 17 comments }

ari-freedom October 26, 2008 at 1:51 am

The flat tax may be an income tax but with an income tax (especially with no withholding), you know exactly what you’re paying the govt. “Wow! They want $5,000 from me? Damn those thugs!” That is why I like the idea of holding election day right after April 15, instead of a few days after trick or treating.

With a sales tax, the tax burden is hidden as the govt nickel and dimes you to death while it stealthily increases the rate.

Beta Hater October 26, 2008 at 3:57 am

It is impossible for a tax to be equal, or “flat”. Even if every person’s income is taxed at the same rate, some individuals in society will receive tax benefits. Such individuals will be net receivers of tax dollars. This effectively lowers their tax rate. Those tax payers who receive little or no tax benefits will have a higher effective tax rates. It is not possible for a tax to be equal. The phrase “equal tax” is a contradiction in terms.

redshirt October 26, 2008 at 9:46 am

Good info on the “flat tax” schemes.

Middle class tax breaks in light of current needs seem to make the most sense at the moment. It would put more money into the hands of those with mortgages and big credit card debt hopefully helping to tackle some of the credit problem. The businesses and people making the higher amounts do depend on that flow of money from the middle class to get that income as well. Can’t spend it if you don’t have it.

Nevertheless, this could only be an interim measure — government has to cut back on spending. The best way to put more money into our pockets is to stop taking it in the first place! (go Massachusetts electorate!)

Nader has proposed a small transaction tax in the stock market. (? not sure of the mechanics) I wonder if less gov spending and a few small taxes here and there could eliminate the need for income taxes altogether in the near future. (Actually taxing closer to the source?)

I Hate Taxes October 26, 2008 at 10:57 am

“It is not possible for a tax to be equal.”

Yes it IS possible, you just need to ajust the tax rate to ZERO PERCENT and everybody will pay the exact same amount of tax and receive the exact same amount of benefits…ZERO !!!!

Stanley Pinchak October 26, 2008 at 12:16 pm

I Hate Taxes,
Here is a new zen koan for you.

If a tax is set at zero percent is it still a tax?

I suggest that we empirically try to discover the answer to this with regards with all federal taxes, starting with the income tax, inheritance tax, and other capital gains taxes.

Lee Burrell October 26, 2008 at 2:57 pm

What all “experts” are saying is that the world economic engine’s fuel is US consumer spending. Ok- then allow the people to SPEND SPEND SPEND THEIR EARNINGS! Radical OLD IDEA-NO INCOME TAX! Just think what could happen if the worker becomes the “DECIDER” and purchases what he NEEDS and WANTS. Government agencies would have to go “out of business”!
Mal-investment would decline and over time WANTED goods and SERVICES would replace the useless, wasteful, ENSLAVING, purchase choices (ie: Military-Industrial-Congressional-Medical-Financial Complex) that political “DECIDERS” profit from. Radical NEW IDEA-IRS becomes ERS(External Revenue Stimulus) mission- to return all past taxes to owner.

Tor Langballe October 26, 2008 at 7:04 pm

Even calling a percentage “flat” is a misuse of the term. A “flat fee” or anything flat otherwise means a fixed amount. You don’t pay a percentage of your income to join a golf club, you pay a fixed fee.

To someone earning a million dollars and paying hundreds of thousands of dollars in tax, I bet it sure doesn’t seem flat. And they probably use less government “facilities” than anyone else.

Beta Hater October 26, 2008 at 7:14 pm

I Hate Taxes,

Although I like your solution, a zero percent tax is not a tax. This attitude towards taxation is dangerous because it assumes that the government owns all of society’s property. Your attitude implies that everything that is not currently taxed is taxable. Your attitude assumes government “kindly” sets the tax rate to zero on everything that is not currently taxed.

Lee Burrell,

I’m going to play devil’s advocate here. Some “experts” believe that higher tax rates will cause business cycles to be less violent. Here’s how they justify this belief:

In the Keynesian framework, aggregate expenditures/Income equals aggregate consumption plus aggregate invesment (Y=C+I). Consumption is the stable factor. Investment is not stable and subject to sudden changes. A sudden collapse in investment spending will cause aggregate income to fall (recession). Furthermore, such changes in investment are multiplied. Although Keynes didn’t include taxes in his computation of the multiplier, current “experts” do. Mores specifically, the multiplier is 1/((1-c)*(1-t)). This means that larger tax rates decrease the multiplier. Government officials trained in Keynesian economics sometimes prefer higher tax rates because a sudden collapse in investment spending will have a smaller impact on income. Translation, higher tax rates will cause business cycles to be less violent. Some Keynesians justify higher tax rates in this way.

Obviously, this argument for higher tax rates is absurd. Anyone who understands Say’s Law can see the flaw in the logic outlined above. My favorite refutation of the multiplier is Jeffrey Herbener’s chapter of “Dissent on Keynes” (chapter 4). This chapter is available on Mises.org for free.

I Hate Taxes October 26, 2008 at 7:31 pm

Stanley Pinchack,

“If a tax is set at zero percent is it still a tax?”

Is Zero a number, YES

My point is the ONLY fair tax is NO TAX !

maera October 26, 2008 at 8:05 pm

“My point is the ONLY fair tax is NO TAX !”

Let’s cut to the chase here. How do we pay for police and roads without taxes?

Russ November 19, 2010 at 10:23 am

“Let’s cut to the chase here. How do we pay for police and roads without taxes?”

When did the Federal government start paying for those?
Look to your respective States. Several of them manage quite well with no income tax.

I Hate Taxes October 26, 2008 at 8:06 pm

Beta Hater,

“because it assumes that the government owns all of society’s property”

Who owns your soul ?

When you think about it, the universe owns us all and taxes 100% of all our work.

We should all revolt and claim back our souls and counsciousness ?

To Own is not a verb.

To control is a verb.

And in order to control, you need power.

The 2nd amendment is the only way you will own your property. If you’re ready to back your property with your life you own it. Otherwhize you are the slave of the government.

And in the long term, you will die a broken and sick agonizing man anyways.

So why give in to tyrants, why not fight ?

I Hate Taxes October 26, 2008 at 8:21 pm

Beta Hater,

The government owns everything because the government has the deadly power to take it all away from us… and then some.

I Hate Taxes October 26, 2008 at 8:27 pm

Beta Hater,

Business cycle is not caused by taxes but by government printing money, inflating the money mass and by lowering interest rates.

The only way to significantly reduce the business cycle is to abolish fiat money and install the gold standard.

With sound money the business cycle of boom-bust would be quite over.

I Hate Taxes October 26, 2008 at 9:12 pm

Maera,

You pay for roads with your own hard earned money and you defend yourself with your own guns.

Besides, the police never arrive on time. And if everybody had a gun and was willing to use it to defend himself, well crooks and attackers would think twice before risking their lives.

Michael October 28, 2008 at 8:07 am

I Hate Taxes,

Although your argument for limited taxation resonates with me, the Constitution does allow the government to provide some services, namely those that are usually jointly consumable, like national defense.

Mike October 28, 2008 at 10:28 am

lol, the constitution. How quaint.

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