[quote=pri_dk]
A flat tax rate isn’t simple. It’s simple-minded. A platitude that almost no one understands.
[/quote]
I agree with this.
I hear a lot of people argue for and against a flat tax without stopping to consider how it works.
A true flat tax means No Deductions. No mortgage interest rate deductions, no deductions for kids, childcare, etc. No deductions. No sheltering earnings by contributing to a 401k. FLAT tax means that you pay tax on every dollar of income. No more adjusted gross…
This is pretty straight forward for wage earners. Less so for corporations and self employed.
Is it net income? – what constitutes an expense? Do you allow businesses to deduct expenses when you do not allow individuals to make deductions? Is that fair? Do you allow depreciation of assets? How do you write off inventory?
It sounds simple but the reality is that there are teams of lobbyists ready to go to battle to protect their specific deduction.
Now if you’re talking about a marginal flat tax – that allows deductions – and we’re back in the same mess we have now. Just a variation of it. Who decides what deductions apply? How does it work with corporations?
Or we could go with a consumption flat tax – a VAT. That’s what Forbes proposed. That would just push entire sections of the economy under the table. (As it is in Europe.)
Flat tax sounds good until you look at how it would actually work.
