Flat Tax Rate. (3 Viewers)

[Not-That-Bright]

Who here supports a flat tax rate? why?

 

[Xayma]

No. The sliding scale works well.

The lower income earners will bitch about how their taxed is increased, while the high income earners have their tax lowered.

 

[Not-That-Bright]

The idea of a flat tax rate would be lower tax for EVERYONE, including lower income earners..

http://www.issues2000.org/Celeb/Steve_Forbes_Tax_Reform.htm
http://www.neopolitique.org/Np2000/Pages/Essays/Articles/feb98-tax.html

 

[absolution*]

The idea of a flat tax rate would be lower tax for EVERYONE, including lower income earners..

Theoretically that doesnt make sense. Explain. I dont want to read links.

 

[Not-That-Bright]

The flat rate tax will increase fairness because it will establish a much greater degree of horizontal equity (equal treatment of people with equal income). In addition, it will restore an authentic, just version of vertical equity (people with higher income pay more taxes). [5] Everyone, regardless of income, will have the same personal allowances and child allowances, and will pay the same flat rate on their income. All businesses, regardless of size, will pay the same flat rate on their profits. Those with higher incomes will pay more than those with lower incomes, but they will do so at the same percentage tax rate. In some cases they will pay significantly more, simply because they have a much higher income. This is fair, for although their total tax bill is higher, their tax rate is the same. This model of "fairness" differs significantly from the modern "progressive" definition that demands not just the paying of higher taxes but requires the paying of higher tax rates. The dictionary defines fair as "just and honest; impartial; unprejudiced." [6] Those who promote the "progressive" income tax as being "fair" are obligated to give new meanings to a variety of words in order to reinforce their ideologically motivated re-definition of "fairness." By most definitions and standards of fairness the flat rate tax is fair.

 

[SashatheMan]

tell me if i am wrong , but low income earners only pay about 10% tax or soemtihng. yuor saying that if there was a flattax rate , this would make it better for the low income earners. i say Noway is the government gonna lower their taxes to a point where its lower then the current lowest rate, where woudl they get the money from then?

I am gussing and i havent read any articles they want to make the tax somewhere in the middle , so like the guy above me said, high earners get less tax why low earners get more tax. i see no benefits in this

 

[Vahl]

The idea of a flat tax rate would be lower tax for EVERYONE, including lower income earners..

A flat tax rate would be regressive because it taxes unfairly. As BASIC economics will show, a poor persons marginal propensity to consume will be higher than someone on a higher income. Ie a poorer person needs a higher proportion of their income to meet their basic needs than does a wealthy person. Therefore through regressive taxation the rich become richer very quickly whilst the poor remain static. This is because as a richer person needs less money to meet their basic needs they therefore have a greater amount of money available to save and therefore can accrue interest/rent/dividends etc that contribute to their wealth and increase their income. Thus a flat rate of taxation for everyone is unjust and clearly a poorer person will be taxed at a far higher functional rate than would a wealthier person. Therefore a progressive taxation system is necessary to ensure greater equality across the community and to better maintain the balance that is the ideal in any society.

.......................

 

[Not-That-Bright]

Where would their money come from?

The current progressive income tax system diminishes motivation to work hard and succeed, discourages ambitious initiative and productivity, and is a disincentive to make extra sacrifices of time and energy to achieve career promotions and higher living standards. A flat rate tax would have just the opposite effect on incentive and motivation to work and succeed.

The progressive income tax system also inhibits entrepreneurial ventures by minimizing the rewards that are a primary motivation for taking risks with capital. A flat rate tax, on the other hand, promises to allow the entrepreneur to keep all profits beyond the uniform flat rate, regardless of the degree of profitability. Entrepreneurial adventures will increase in direct proportion to the rising productivity and income (which in turn is the result of increased incentive to work hard and succeed). As incomes rise there will likely be a proportionate growth in savings and investments. There are two reasons to expect this result: 1) Individuals will have more discretionary income to manage--some of which will be spent, some given away and some saved and invested; and 2) The removal of double taxation on income generated from savings and investments will increase the motivation to use resources for cultivation and conservation purposes rather than consumption purposes. This growth in investment capital in conjunction with a probable lowering of interest rates will be a catalyst for entrepreneurial pursuits.

Investment cannot always be measured in economic terms, nor can the principle of cultivation always be measured in monetary terms and financial return. A considerable amount of cultivation of human capital occurs when resources are given away to religious and educational institutions. Likewise, human capital blossoms when money is "invested" (contributed) in the development of the arts and sciences. Wherever these "non-economic" facets of culture are nurtured and cultivated economic pursuits also tend to flourish.

 

[absolution*]

Nice logic.

Few problems.

1. Stimulating growth leads to inflationary pressures which leads to the RBA and government being forced to enforce contractionary monetary policy. Through monetary policy this would involve raising interest rates which would effectively offset any tax cut margin.

2. Stimulating growth would also lead to a further discrepancy between exports and imports as well as the terms of trade index (higher demand for imports = higher import prices), creating a larger current account deficit. The only way to stop this is to produce more goods and services locally which requires funding which will obviously be lower under a flat-tax rate.

3. Lower tax revenues would lead to less public savings, leading to a larger current account deficit which as you know, is already at the highest it has ever been at approx 7% of GDP. By OECD standards a 5.5% of GDP deficit in the current account is "unsustainable".

If i could be bothered, id think of more.

 

[Not-That-Bright]

A flat tax rate would be regressive because it taxes unfairly. As BASIC economics will show, a poor persons marginal propensity to consume will be higher than someone on a higher income. Ie a poorer person needs a higher proportion of their income to meet their basic needs than does a wealthy person. Therefore through regressive taxation the rich become richer very quickly whilst the poor remain static. This is because as a richer person needs less money to meet their basic needs they therefore have a greater amount of money available to save and therefore can accrue interest/rent/dividends etc that contribute to their wealth and increase their income. Thus a flat rate of taxation for everyone is unjust and clearly a poorer person will be taxed at a far higher functional rate than would a wealthier person. Therefore a progressive taxation system is necessary to ensure greater equality across the community and to better maintain the balance that is the ideal in any society.

.......................

A flat tax rate lowers interest rates, allows you to keep more of what you earn and therefore you have more with which to buy a house.
It helps the poor, not just the rich.

 

[absolution*]

Where would their money come from?

The current progressive income tax system diminishes motivation to work hard and succeed, discourages ambitious initiative and productivity, and is a disincentive to make extra sacrifices of time and energy to achieve career promotions and higher living standards. A flat rate tax would have just the opposite effect on incentive and motivation to work and succeed.

The progressive income tax system also inhibits entrepreneurial ventures by minimizing the rewards that are a primary motivation for taking risks with capital. A flat rate tax, on the other hand, promises to allow the entrepreneur to keep all profits beyond the uniform flat rate, regardless of the degree of profitability. Entrepreneurial adventures will increase in direct proportion to the rising productivity and income (which in turn is the result of increased incentive to work hard and succeed). As incomes rise there will likely be a proportionate growth in savings and investments. There are two reasons to expect this result: 1) Individuals will have more discretionary income to manage--some of which will be spent, some given away and some saved and invested; and 2) The removal of double taxation on income generated from savings and investments will increase the motivation to use resources for cultivation and conservation purposes rather than consumption purposes. This growth in investment capital in conjunction with a probable lowering of interest rates will be a catalyst for entrepreneurial pursuits.

Investment cannot always be measured in economic terms, nor can the principle of cultivation always be measured in monetary terms and financial return. A considerable amount of cultivation of human capital occurs when resources are given away to religious and educational institutions. Likewise, human capital blossoms when money is "invested" (contributed) in the development of the arts and sciences. Wherever these "non-economic" facets of culture are nurtured and cultivated economic pursuits also tend to flourish.

This is one of the more idiotic things i have ever read.

 

[Vahl]

The flat rate tax will increase fairness because it will establish a much greater degree of horizontal equity (equal treatment of people with equal income). In addition, it will restore an authentic, just version of vertical equity (people with higher income pay more taxes). [5] Everyone, regardless of income, will have the same personal allowances and child allowances, and will pay the same flat rate on their income. All businesses, regardless of size, will pay the same flat rate on their profits. Those with higher incomes will pay more than those with lower incomes, but they will do so at the same percentage tax rate. In some cases they will pay significantly more, simply because they have a much higher income. This is fair, for although their total tax bill is higher, their tax rate is the same. This model of "fairness" differs significantly from the modern "progressive" definition that demands not just the paying of higher taxes but requires the paying of higher tax rates. The dictionary defines fair as "just and honest; impartial; unprejudiced." [6] Those who promote the "progressive" income tax as being "fair" are obligated to give new meanings to a variety of words in order to reinforce their ideologically motivated re-definition of "fairness." By most definitions and standards of fairness the flat rate tax is fair.

Following on from what I said above, what you have written above is madness. The current system of progressive taxation is more 'fair and honest' than a regressive taxation system because a regressive taxation system indirectly discriminates against those with lower incomes.

The current progressive taxation model is fair because it aims to encourage greater equality of lifestyles etc between people of different incomes whilst incorporating incentive for higher incomes.

 

[absolution*]

A flat tax rate lowers interest rates

How so? ...................

 

[Vahl]

This is one of the more idiotic things i have ever read.

Agreed.

............................

 

[Not-That-Bright]

How so? ...................

The flat tax would pull down interest rates immediately. Today’s high interest rates are sustained partly by the income tax deduction for interest paid and the tax on interest earned. The tax benefit ameliorates much of the pain of high interest, and the IRS takes part of the income from interest. Borrowers tolerate high interest rates and lenders require them. The simple tax would permit no deduction for interest paid and put no tax on interest received. Interest payments throughout the economy will be flows of after-tax income, thanks to taxation of business income at the source.

With the flat tax, borrowers will no longer be so tolerant of interest payments and lenders will no longer be concerned about taxes. The meeting of minds in the credit market, where borrowing equals lending, will inevitably occur at a lower interest rate. Potentially, the fall could be spectacular. Much borrowing comes from corporations and wealthy individuals who face marginal tax rates of 34 and 40 percent. The wealthy, however, almost by definition, are the big lenders in the economy. If every lender and every borrower were in the 40 percent bracket, a tax reform eliminating deduction and taxation of interest would cut interest rates by four-tenths—for example, from 10 to 6 percent. But the leakage problem in the United States is so great that the actual drop in interest would be far short of this huge potential. So much lending comes through the devices by which the well-to-do get their interest income under low tax rates that a drop of four-tenths would be impossible. Lenders taxed at low rates would be worse off if taxation were eliminated but interest rates fell by that much. In an economy with lenders enjoying low marginal rates before reform, the meeting of the minds would have to come at an interest rate well above six-tenths of the prereform level. But the decline would be at least a fifth—say from 10 percent to 8 percent. Reform would thus bring a noticeable drop in interest rates.

One direct piece of evidence is municipal bonds, which yield interest not taxed under the federal income tax. Tax reform would make all bonds like tax-free municipals, so the current rates on municipals may tell us something about the level of all interest rates after reform. In 1994, municipals yielded about one-sixth less interest than comparable taxable bonds. But this is a conservative measure of the likely fall in interest rates after reform. Today, tax-free rates are kept high because there are so many opportunities to own taxable bonds in low-tax ways. Why buy a bond from the city of Los Angeles paying 6 percent tax-free when you can create a personal pension fund and buy a Pacific Telesis bond paying 7 percent? Interest rates could easily fall to three-quarters of their present levels after tax reform; rates on tax-free securities would then fall a little as well.

The decline in interest rates brought about by putting interest on an after-tax basis would not by itself change the economy very much. To Ford Motors, contemplating borrowing to finance a modern plant, the attraction of lower rates would be offset by the cost of lost interest deductions. But the flat tax will do much more than put interest on an after-tax basis. Tax rates on corporations will be slashed to a uniform 19 percent from the double taxation of a 34 percent corporate rate on top of a personal rate of up to 39.6 percent. And investment incentives will be improved through first-year write-off. All told, borrowing for investment purposes will become a better deal. As the likely investment boom develops, borrowing will rise and tend to push up interest rates. In principle, interest rates could rise to their prereform levels, but only if the boom is vigorous. We cannot be sure what will happen to interest rates after tax reform, but we can be sure that high-interest, low-investment stagnation will not occur. Either interest rates will fall or investment will take off.

As a safe working hypothesis, we will assume that interest rates fall in the year after tax reform by about a fifth, say from 10 to 8 percent. We assume a quiescent underlying economy, not perturbed by sudden shifts in monetary policy, government spending, or oil prices. Now, let us look at borrowing decisions before and after reform. Suppose a prereform entrepreneur is considering an investment yielding $1 million a year in revenue and involving $800,000 in interest costs at 10 percent interest. Today the entrepreneur pays a 40 percent tax on the net income of $200,000, giving an after-tax flow of $120,000. After reform, the entrepreneur will earn the same $1 million and pay $640,000 interest on the same principal at 8 percent. There will be a 19 percent tax on the earnings ($190,000), without deducting interest. After-tax income is $1,000,000 minus $640,000 minus $190,000, which equals $170,000, well above the $120,000 before reform. Reform is to the entrepreneur’s advantage and to the advantage of capital formation. Gains from the lower tax rate more than make up for losses from denial of the interest deduction.

How can it be that both the entrepreneur and the government come out ahead from the tax reform? They don’t—there is one element missing from this accounting. Before the reform, the government collected some tax on the interest paid by the entrepreneur—potentially as much as 40 percent of the $800,000, but, as our stories about leakage make clear, the government is actually lucky to get a small fraction of that potential.

To summarize, the flat tax automatically lowers interest rates. Without an interest deduction, borrowers require lower costs. Without an interest tax, lenders are satisfied with lower payments. The simple flat tax will have an important effect on interest rates. Lower interest rates will also stimulate the housing market, a matter of concern to almost everyone.

Note that it is American, I can't find any Australian Flat Tax proposals.....
here's one for anyone that's interested : http://66.102.7.104/search?q=cache:...Flat%20Tax.pdf+australian+flat+tax+rate&hl=en

 

[SashatheMan]

too much quoting. i say we deal with all this by looting the streets. whos with me

 

[absolution*]

Note that it is American, I can't find any Australian Flat Tax proposals.....

I want to debate you. Not some anal cunt from America.

 

[Vahl]

Note that it is American, I can't find any Australian Flat Tax proposals.....

The Quote attached to the above post is from the Hoover Institute at Stanford University. This is a dangerous source of info with huge bias. Aspect of the mission statement:

and limit government intrusion into the lives of individuals.

This is principle of third way politics, such as that of the corporate friendly IDU.
This political stream aims to increase the power of the wealthy by limiting government power in economic and social issues. They are supported by wealthy corporations etc.

This is fangerous as I'd prefer to be governed by those whose fate is dependant on my vote and as such has a need to meet my needs than a profit hungry wealthy prince.

 

[Not-That-Bright]

A flat tax rate would be regressive because it taxes unfairly. As BASIC economics will show, a poor persons marginal propensity to consume will be higher than someone on a higher income. Ie a poorer person needs a higher proportion of their income to meet their basic needs than does a wealthy person. Therefore through regressive taxation the rich become richer very quickly whilst the poor remain static. This is because as a richer person needs less money to meet their basic needs they therefore have a greater amount of money available to save and therefore can accrue interest/rent/dividends etc that contribute to their wealth and increase their income. Thus a flat rate of taxation for everyone is unjust and clearly a poorer person will be taxed at a far higher functional rate than would a wealthier person. Therefore a progressive taxation system is necessary to ensure greater equality across the community and to better maintain the balance that is the ideal in any society.

.......................

Lower taxes actually boost government revenue by stimulating economic activity

 

[absolution*]

Lower taxes actually boost government revenue by stimulating economic activity

Fuck, did you even do HSC Economics you retard?