Saturday, July 5, 2008

The Straight Dope Hates All Over the Flat Tax

Cecil gets asked about the flat tax, and it turns out he's not a fan:

As a general proposition, the wealthiest Americans do pay the bulk of the individual income taxes collected in the U.S. That's a point worth making, since the belief that the rich pay zip while the little guy gets slugged is the impetus behind the "flat tax" proposal, the stupidest idea to come down the pike since pet rocks.

He then cites some statistics like this one showing that the rich bear a large percentage of the tax burden:

The top 3 percent of filers, those making $100,000-plus, paid 40 percent of the taxes.

So what information is he leaving out? He's not saying what percentage of their income rich people are paying.

It could very well be the case that the top 3 percent of filers pay 40 percent of the taxes, but that they're still only being taxed at a rate of 18%.

According to this story:

Warren E. Buffett was his usual folksy self Tuesday night at a fundraiser for Sen. Hillary Rodham Clinton (D-N.Y.) as he slammed a system that allows the very rich to pay taxes at a lower rate than the middle class.

Buffett cited himself, the third-richest person in the world, as an example. Last year, Buffett said, he was taxed at 17.7 percent on his taxable income of more than $46 million. His receptionist was taxed at about 30 percent.

Cecil's entire argument rests on the percentage of total taxes that rich people pay, rather than demonstrating whether or not taxes really are "progressive" (a shitty word, if you ask me).

If you simplify the tax code, treat all income equally, and tax everyone at a flat rate sensible enough to still fill our coffers, it would be a simpler, fairer, more transparent tax system.

1 comment:

Anonymous said...

Of course, the people who are making less than $100,000 a year are paying an additional 15% of their income for social security tax. Warren Buffett pays the same amount, but for him it's just over zero percent of his income. And people who have to spend most of their income on gas and food and such pay sales taxes. Warren doesn't pay sales taxes if he chooses not to spend it all, or to move to a no sales tax state.

I agree that the code is too complicated, but I'm not sure how much simplification is really possible, or how much simplification could accomplish. People are entitled to pay as little taxes as they can, which means they have strong incentives to find loopholes. The state has large incentives to close those loopholes, which generally requires more complex and specific rules.

(I came from Pharyngula and this post caught my eye).