Yesterday I talked about the fair tax, and today I want to talk about the flat tax.  I actually favor the flat tax just because it’s simpler solution to the problem. I’ve lived with the flat tax currently in the state I am in, and I honestly think it’s a very fair system.

We pay 5.3% on our income period.  We can write off $7000 as a married couple and I think $3500 of income for each child.  Then the rest is taxable income whether it comes from a salary or dividends or interest.  Any income is taxable and everyone gets the same rate.  So whether I make $30k or $300k I pay 5.3% period.  The dollar amount varies, but the rate does not.

So where’s the problem?  It’ll simplify the system, it’ll be fair that everyone pays the same, and everyone gets the same individual and child personal exemption. Sounds good right?

Well the problem is that people will be paying more taxes period.  The number thrown around has been between 15-20% flat tax.  The richest people in the US like Warren Buffet pay 15% because he only lives on dividends.  Whereas if you are a couple with 2 kids making $300k you’ll be paying 33%.  Does that sound fair?  Hence why Buffet has spoken out about a flat tax and why it’s fair.  In fact he’s made a bet about it.

So why not the flat tax?  Well the rich would obviously be paying a heck of  a lot more.  No more deductions and write offs.  No more loopholes.  But also the middle class who might have a lot of kids or deductions will also be paying more.  And definitely those people who pay nothing right now (about 50% of US Taxpayer), the idea of paying 15-20% in flat tax sounds downright crazy!

So the flat tax while fair I think, and easy to implement, would probably screw and piss off a lot of the rich and poor.  Plus it would be hard to people to adjust to living on less and many politicians who make a lot, would find themselves out of jobs.

But wouldn’t it be simpler than what we have now?  And we could collect more if we didn’t allow so many loopholes?