What is the Flat Tax?
What is the flat tax rate plan for income taxes? It is a much more fair way of taxing people than the current progressive tax. It is a competing idea with the fair tax as a replacement for the current joke that is our tax code. The flat tax is a single percentage that everyone would have to pay. Under the proposal by former Congressman Dick Armey, that rate would be 17%.
4 keys to the Flat Tax
1. One low percentage that everyone pays.
The key to the flat tax is that it offers one tax rate for everyone. This encourages individuals to succeed by removing the current penalties the current tax code is based around. Currently, the more productive an individual is to society, the more he is taxed. If we change the system to a flat tax, we remove penalties for success and encourage everyone to be as productive as they can be.
One note, there would be a personal exemption for everyone, where you wouldn’t pay taxes under a certain amount of money. This is to protect those living at or below the poverty line. For a single that exemption would be around $13,000 and for a couple it would be around $26,000 under Armey’s plan. Each dependent would add around $5000. This means that a couple making $30,000 would only get taxed on $4,000 which would be $680. A couple making $200,000 would also get the exemption, taking their taxable income down to $174,000 and making their taxes owed 29,580. As you can see, the rich are still going to be paying the vast majority of the taxes as they do in the current system, but the system is much more fair in that everyone pays the same rate on the income that is taxed.
2. No double taxation.
The flat tax would remove all forms of double taxation. The death, capital gains, and dividends taxes would all be removed. None of these forms of taxes make any sense right now. They all cause income that has already been taxed to be taxed again. If we remove these, it encourages investment and it will create many jobs. Both of these things are very much needed currently.
3. Elimination of special preferences.
It is simpler, easier, and more fair. According to the IRS, taxpayers have to spend 6.6 billion hours each year on their tax returns. This time and money spent finding loopholes could be spent on much more productive activities. The rich have an advantage in this respect as they have more resources to spend on lawyers and accountants that help lower the taxes they pay. Tax evasion and avoidance is also much less likely because of the lowered rate and simplified methods. Without adding in 60,000 pages of complexity and loopholes, it is much harder for people to find ways around paying taxes.
4. Corporations and individuals pay the same amount of taxes.
Corporations and individuals should pay the same rate. This removes any loopholes gained by changing the status of a business. The lowered tax rate for corporations would attract companies from all over the world to do business in America. This would create many jobs and a large increase in the GDP. This would actually raise the revenue that the government would take in.
This tax plan makes a lot of sense to me. When intelligent adults have to pay people hundreds or thousands of dollars or spend many hours of their time just to do their taxes, something is seriously wrong. The form required for the flat tax would fit on a postcard, and most third graders could do the work required for the family’s taxes. This idea is so simple, maybe even an Obama appointee could figure out how to pay taxes.