Originally Posted by Rylan1
Lets look at the negatives...
It discourages spending and economy growth and encourages saving... If you have 3 people who make $50,000, $100,000, and $1million... and they all have the same budget... they all pay the same $ amount in taxes. Meaning guy#1 30% of income taxed....guy#2 19% of income taxed...Guy#3 2% of income taxed.
What about state taxes? There is no account for this.
Basically for those who can afford to save a large chunk of their income pay less, the burden of taxes in any given year likely shifts to lower earners.
So you're saying that saving your money is a negative? Well heck, go get those credit cards and max them out for the good of the national economy!
I myself am trying to figure out your logic on your scenario above. I think I know what you're trying to say, but you just didn't use a calculator to get your percentages. If you went with the flat tax system, then depending on how each of these individuals spend, their final 'income tax' would be different. Let's use your three examples. Each of these incomes spend $30,000 on goods in a year, at a sales tax rate of .23 on the dollar. So...
$30,000 X .23 = $6,900 of tax on those goods.
For the person who made $50,000/year that's a net tax on his income of - 6900/50000 = .138 or 13.8% 'income tax'.
Take that same $6,900 against a $100,000/year income -
6900/100000 = .069, or 6.9% 'income tax'.
The $1,000,000/year income -
6900/1000000 = .0069, .69% 'income tax'.
So if you go with a flat tax, the rich get richer as long as they spend the same AMOUNT as the lower income individual. As Noob stated, that won't happen. So theoretically, if each income bracket spent the same percentage of their income -
$50,000 income spent half their earnings on goods at the .23 tax rate --
$25,000 X .23 = $5750
5750/50000 = .115, or 11.5 % income tax
$100,000 income spent half their earnings on goods at the .23 tax rate --
$50,000 x .23 = $11,500
11500/100000 = .115, or 11.5 % income tax
$1,000,000 income spent half their earnings on goods at the .23 tax rate --
$500,000 x .23 = $115,000
115000/1000000 = .115, or 11.5 % income tax
So if every income bracket spent the same PERCENTAGE of their income, then a flat tax essentially would mean the same 'income tax' for all three income brackets.