Guy B. Meredith
More wondering what a flat rate of, say, 15% would look like. With that in place, what portion of the total tax would the top 1% be paying? Would it end up being more or less than the 34% of the overall they are currently paying?
Fifteen percent is fifteen percent and cannot be 34% or anything in between. The rich will pay more of the
total dollars gleaned because they purchase more things; and those things are more expensive than most of us buy. They buy $250,000 Bentleys, we buy $22,000 Toyotas. They buy $1,000/lb caviar and we buy $.50 tins of sardines. They heat and light 20,000 sq ft houses and we heat and light 1,500 sq ft houses.
The problem with a flat tax is that the poor will pay the same 15% everyone else does instead of the 0% they pay now.
What is truly needed is a consumption tax -- in concert with the
simultaneous repeal of the sixteenth amendment -- which would make everyone who spends money pay a fair tax. That tax would not have to be any higher than 7% because the ultimate taxation of
every dollar would preclude the necessity for anything higher.
If you don't want to be taxed, don't spend. People would have the incentive to place their money in savings. This would remove M1 -- the money in circulation which drives inflation -- out of circulation. The banks would have more money to lend at lower interest rates while being able to have higher rates on savings accounts. Interest earned from savings accounts would not be taxable until spent.
There would also be more incentive to invest in the stock market as earnings would not be taxable until spent.
There are, however, some major considerations to be addressed:
There must be exemptions from taxation for necessities of life including food, utilities, and shelter.
The law must be structured in such a way that it does not create a Value Added Tax (VAT) which is an economy killer. Under a VAT each leg of distribution adds a tax to their portion of the consumed product. The mine adds a tax for the ore. The smelter adds a tax for the steel. The supplier adds a tax to the vendor. The vendor adds a tax for the manufactured good. The distributor adds a tax to the seller. And they tax the consumer the consumption tax at point of sale.
The good parts of a consumption tax are:
Every dollar is
ultimately taxed. You buy your neighbor's used lawnmower, he gives the money to his wife who goes to Sam's Club and buys non-food items. She is taxed.
Drug money, which is now laundered to escape taxation, would be taxed if spent.
And here's the kicker. Every
tourist dollar will be taxed as though they are residents of our country. Right now -- exit fees excluded -- tourists pay no more than state sales tax when they spend in this country.
I saved the best for last. The IRS would need be no larger than California's Board of Equalization to operate. Thousands of IRS workers would be thrown out of work because the seller now becomes the holding agent for the tax monies just like they are now for state sales taxes.