Tuesday, April 18, 2006

The Ides of April

Everyone knows what that means. It is time for all the conservative bloggers who just did their taxes to once again vocally support conversion to a flat income tax. For example, Shrode at Thinklings:
Your 1040 would be postcard size. Everyone’s would be. There would be no deductions, loopholes, extra forms or addendums for anyone. You just write down how much you make. Subtract $35,000. The number that’s left is your taxable income. Take 17% of that number. That’s your tax for the year. That’s it. All done.

How cool is that? So if you make $35,000 or less, you pay no taxes. If you make $40,000, you pay 17% of $5,000.
I like this plan with one or two changes. I think the deduction shouldn't be $35,000. It should be the local poverty line income to take subsistence into account. Anyone below the poverty line pays no taxes. Everyone above it pays a fixed percentage on the excess. I'm also not sold on 17%, although it will probably be around that level.

Or repeal the the sixteenth amendment entirely. I'm all for that too.

UPDATE: Paul thinks a sales tax is better than an income tax. As a good assimilated Delawarean I must say that sales taxes are tools of the devil just like the metric system and Donny Osmond. Ok they aren't that bad but I still prefer a flat income tax.

Yes you are being taxed for producing instead of consuming, but that is part of the point. Everyone rich or poor has a minimum level of consumption we need to survive, so sales taxes impact the poor just as much as the rich. Perhaps more when you normalize taxes against income and especially when you consider that rich folks have to resources to cross national borders more liberally and avoid consumptive taxation. This is why the luxury taxes failed miserably in the '90s.

I like the flat tax. Yes you are taxing production, but you are taxing it at a constant rate. So increased production isn't taxed progressively higher as with the current graduated scale. There is still incentive to make more money even if you only keep 80% of it. There are no sharp tax brackets where an extra $100 of income can actually cost you money. It works for me.

No comments: