QUOTE
Tax lunacy
US elections 2008: America's tax system may be complex. But Mike Huckabee's plan to institute a flat tax is sheer madness
Excerpts -
In any other western democracy, being a flat-taxer would put Huckabee at the outer limits of political sanity. The detail is complicated, but the concept is as simple as the name suggests: an end to a progressive income tax, an end to the consensus that those who can afford to contribute more to the good order and running of society should pay more than those struggling to get by. Outside of the former Soviet states, a flat tax system is a political non-starter for the simple reason that asking you, me and Bill Gates to pay the same tax rate on either our income or the goods and services we buy, would destabilise a country's economy, government spending and social cohesion.
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There are any number of practical reasons why a flat tax is a bad idea in practice. For one, switching to the Fair Tax - that is, an effective 30% tax rate on every purchase, with rebates paid in advance on purchases up to the poverty level - would mean repealing the 16th amendment of the US constitution, which empowers Congress to "collect taxes on incomes", but not consumption. Huckabee's as likely to get the constitution amended for tax reform as he is to walk on water. (Some commentators, such as Dean Baker in Comment is Free earlier this week, point out that in reality the rate could climb as high as 40%.) For another, government services would depend on people continually increasing their spending at a time in history when we need to learn to live sustainably and save more.
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They offered some specific examples of just how unfair a Fair Tax would be: the Treasury Department estimates that a hypothetical single mother with one child making $20,000 per year currently pays $723 in total federal taxes (including both the employee and employer shares of the social security and Medicare taxes). Under the stand-alone retail sales tax, her tax bill would go up to $6,186 - a tax increase of over 750%. A hypothetical married couple with two children making $40,000 per year would pay an additional $6,553 in taxes, an increase of more than 110% of total federal tax liability.
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Americans are rightly fed up with their complicated and ever-changing tax system. They spend $150bn every year just complying and having their taxes collected. We can all agree it's nuts and needs substantial reform. But don't fall for the snake oil of flat tax, just because it's simpler. There are any number of ways to achieve tax simplification within the existing progressive tax system. As America's fragile economy once again becomes the number one concern amongst voters, hopefully the media and candidates will start giving tax reform the attention it deserves.
UK Guardian link
US elections 2008: America's tax system may be complex. But Mike Huckabee's plan to institute a flat tax is sheer madness
Excerpts -
In any other western democracy, being a flat-taxer would put Huckabee at the outer limits of political sanity. The detail is complicated, but the concept is as simple as the name suggests: an end to a progressive income tax, an end to the consensus that those who can afford to contribute more to the good order and running of society should pay more than those struggling to get by. Outside of the former Soviet states, a flat tax system is a political non-starter for the simple reason that asking you, me and Bill Gates to pay the same tax rate on either our income or the goods and services we buy, would destabilise a country's economy, government spending and social cohesion.
...
There are any number of practical reasons why a flat tax is a bad idea in practice. For one, switching to the Fair Tax - that is, an effective 30% tax rate on every purchase, with rebates paid in advance on purchases up to the poverty level - would mean repealing the 16th amendment of the US constitution, which empowers Congress to "collect taxes on incomes", but not consumption. Huckabee's as likely to get the constitution amended for tax reform as he is to walk on water. (Some commentators, such as Dean Baker in Comment is Free earlier this week, point out that in reality the rate could climb as high as 40%.) For another, government services would depend on people continually increasing their spending at a time in history when we need to learn to live sustainably and save more.
...
They offered some specific examples of just how unfair a Fair Tax would be: the Treasury Department estimates that a hypothetical single mother with one child making $20,000 per year currently pays $723 in total federal taxes (including both the employee and employer shares of the social security and Medicare taxes). Under the stand-alone retail sales tax, her tax bill would go up to $6,186 - a tax increase of over 750%. A hypothetical married couple with two children making $40,000 per year would pay an additional $6,553 in taxes, an increase of more than 110% of total federal tax liability.
...
Americans are rightly fed up with their complicated and ever-changing tax system. They spend $150bn every year just complying and having their taxes collected. We can all agree it's nuts and needs substantial reform. But don't fall for the snake oil of flat tax, just because it's simpler. There are any number of ways to achieve tax simplification within the existing progressive tax system. As America's fragile economy once again becomes the number one concern amongst voters, hopefully the media and candidates will start giving tax reform the attention it deserves.
UK Guardian link
Emphasis added.