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Thoughts On Flat Taxes

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    Without turning this into a political debate, I am curious of people's opinions here on switching the federal income tax code to a simple flat tax. Reason being, I have read several articles where it seems like a majority of Americans are in favor of a switch. One in particular being: 62 Percent of Americans Say They Favor a Flat Tax.

    On the surface, I think that are US tax system is waayyy to complicated, and I feel that we have created an entire cottage industry around having 'tax professionals' and 'tax lawyers' do our taxes for us. The reason they are usually needed is because the system we have created and tinkered with and amended and changed about a million times over is so complicated and nuanced that you literally need a professional to help you navigate all the ins and outs, to either ensure that you are filing correctly, or to take advantage of little known about loopholes, or whatever. They are needed.

    Imagine a system where all you need is two pieces of information to file your taxes (besides personal info): your income and the flat tax rate. How much did you make this year? $34,516? Just multiply that by whatever, say, 15% and you're done. No lawyer or pro needed.

    My argument for those that off the bat oppose this, citing that there are many other forms of deductions and credits and such that would go out the window for many that really need these 'convoluted' programs is this: think about all the corporations and rich people that get away with not paying millions or billions each and every year because of how complicated this system is.. I would much rather everyone just pay simply off of how much they make (which could be inclusive to other things like real estate, investments, capital gains, etc) and focus on fixing the parts of the economy in a separate conversation for those that fall through the cracks, than have this overly complicated tax code system that clearly is day in and day out benefiting only those (the most) that study it as a career, or are willing to pay a pro to take care of their taxes for them.

    Agree? If so, would it really be viable, all things considered? I sincerely hope it would be. But even as much as I want it to happen, I feel that I am maybe naive in my approach. Naive in the sense that I think this is a no-brainer common sense argument, where in fact it's anything but.
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    A flat tax system seems nice but, practically, would not work well. For starters, it would exacerbate the income inequality issue and stagnate if not collapse the American economy from the ground up. It would be a strain on many of the subsidies that drive America, such as food. Prices for grains such as wheat and corn would go up as well.

    Though, I am in favor of a greatly simplified tax system. The complexity of our current system is staggering. Though simplfying the system is a daunting task in itself and I have no idea where to start.
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    Terrath Wrote: A flat tax system seems nice but, practically, would not work well. For starters, it would exacerbate the income inequality issue and stagnate if not collapse the American economy from the ground up. It would be a strain on many of the subsidies that drive America, such as food. Prices for grains such as wheat and corn would go up as well.

    Though, I am in favor of a greatly simplified tax system. The complexity of our current system is staggering. Though simplfying the system is a daunting task in itself and I have no idea where to start.
    I agree that income inequality is getting out of control, but I'm not convinced that having a flat tax would exasperate the issue. It's already pretty bad with the status quo. But I do agree that a flat tax likely isn't the answer.

    Simplifying the tax code would be extremely difficult, but I do think it can be done. I believe can simplify it without necessarily resorting to a flat tax with zero deductions. There are a heck of a lot of factors at play though and there are more than a few people who are quite happy with the complicated system we have now.
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    Gets interesting when you combine the above conversation with this other thread on here:

    Understanding the Numbers of the 45% That Don't Pay Any Taxes At All

    So if 45% of us are either not filing, get a refund or come up completely square with no income tax debt come April, that would mean that a large chunk of that 45% would no longer be seeing a refund, under a flat tax system.

    I know that refunds are pretty notorious for being spent almost as soon as most people get them, therefore going straight back into the economy. Which is a good thing, overall. But if folks just saved that return that would likely be best for most people, but I understand that most cannot.

    But that doesn't mean that we can't do taxes smarter either. You get a refund because you ended up paying too much, when deductions are factored in, come April. The government is borrowing from you, then paying you back (interest free) over the course of every year.

    If there were to be a flat tax, there would almost never be a need to worry about filing taxes again. You would just pay whatever everyone else pays, by what you gross. Simple as that. It would just be a formality really to file, except for those that would have to file for investment deals, capital gains, stocks, etc.

    So seems a flat tax would effect two large groups of taxpayers first and foremost : 1) those in this 45% that make money and venn diagram with paying less than whatever a flat tax would end up being (what like 10-17%, somewhere in that range. I hear 12-15% quite a bit as proposals for the flat tax rate). Then 2) people that likely make tons of money, probably off of investments, capital gains, stocks, etc. that work in different tax codes than normal payroll and income tax rates.

    So the top and the bottom parts of our economy would both be changed, to have everyone in both of those groups paying considerably more, compared to their own gross income, than now. On the face of it at least. Keep in mind the folks getting refunds are still paying taxes, they just happened to get money back through deductions, which is right now our current 'economic stimulate' in practice, to my understanding.

    Consider also that the middle class would probably get much tax relief. Or at least be paying roughly the same, once it's all said and done.

    I think I tend to agree with the first poster. I know that's a complicated system, but no system should ever be so complicated that we fear to simplify it. If everyone just paid, say, 13.5% on all incomes made, no matter what from, that seems very reasonable to me. Right now you have a system of interpretation. What exactly constitutes a legit write-off? In my experience, truly it depends on who you ask.

    That alone screams to me that we have a seriously manipulable tax code.