v'ܩ What is the Flat Tax?
Home > General Politics > What is the Flat Tax?

What is the Flat Tax?

March 8th, 2009

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.

Author: Derek Clark Categories: General Politics Tags: ,
  1. Jared
    March 9th, 2009 at 07:23 | #1

    Makes too much sense.. will never happen.

  2. Peter
    March 9th, 2009 at 07:31 | #2

    Unfortunatly like the Fairtax the Flattax takes all power away from Congress which they already use for favors and such. So we would be asking them to vote yes to give up there power. I unfortunatly dont see it politically happening until we demand it, by which we vote in people who are in this for themselves but for the people they represent. And believe me I am a huge Fairtax supporter and would love to see it happen soon.

  3. March 9th, 2009 at 08:03 | #3

    Excellent explanation! I like either the flat tax or the fair tax. Both are better than what we have now. The best part of either plan is that our economy would explode. The ability of everyone to generate wealth would increase exponentially. The U.S. would be an economic superpower within months. China would not be able to compete. We would clean their clock. Also, the tax revenues for the government would skyrocket. We would be able to pay off our debts sooner and free ourselves from China.


    Franklin’s Locke’s last blog post..Unrest! People have risen up!

  4. March 9th, 2009 at 09:00 | #4

    @Jared - yeah unfortunately you are probably right

    @Peter - It’s kinda like term limits. how do you get Congress to vote themselves out of power. Most of them are their because they like power. It is going to be very hard to take that away.

  5. March 9th, 2009 at 10:10 | #5

    @Franklin’s Locke - Thanks, I agree. The amount of money that would flow into our markets would be astounding.

  6. March 9th, 2009 at 17:46 | #6

    I only believe that individuals should be taxed so the tax on corporations should be done away with. The people that end up paying the tax is the shareholders and consumers of the products. If the corporation is able to due to lack of competition, then the corporation will pass on the tax they pay to the consumer and if not the investor suffers. Both the investor and consumer are double taxed because corporations are taxed. The investor is taxed when his corporation is taxed and again when he sells his shares in the corporation for a profit. The consumer is double taxed because the corporate tax is trickled down to him or her and the consumer pays for the tax with income that has already been taxed.

  7. Kevin
    March 9th, 2009 at 17:57 | #7

    I know it would never be passed but if you think about it a regressive income tax would be the best plan. Those that make less money have to pay more in taxes.

    As we have seen for many years, state governments have started to fund school and highways through sin taxes. They tax gambling, alcohol, and tobacco. There are even bills in a few state legislatures to tax marijuana, pornography, and prostitution. These taxes are social programs to do two things. The first is to tax things that are addictive and people don’t have a choice. The second is to create an incentive to get people to stop doing these activities. I personally quit smoking because I did not want to have to pay $1.10 per pack of cigarettes in Texas. (I wonder if high school would quit smoking if they knew that when they bought cigarettes that they were funding their school)

    Going in this direction we could easily see why a regressive income tax may be practical. It would punish those that do not make a lot of money and be an incentive for them to get better jobs. This program could be coupled with free education for low income earners to get a better education. I would also be repealed for those that choose employment for social service such as firefighters or teachers or those that are disabled or retired.

    You could even tie it to a flat tax and give people that make high incomes more deductions for the amount of children they have while the people with less money do not get these deductions if they have many children.

    I know it would never be legislation because we live in a culture that rewards bad behavior and lazy attitudes.

  8. Sue Cross
    July 25th, 2011 at 14:04 | #8

    I am far from lazy, but with a MasterÊ»s degree and teaching Special Education for 24 years I never made enough for my 5 children to get off free lunches–until only 2 were at home and they got reduced lunches; then finally with 1 left at home I no longer qualified–and was able to start saving some money in my 40Ê»s. True, I was a single parent since I chose to get away from an alcoholic who tried to kill me, then never helped me raise our children. Regressive has a lot of meanings.