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Democrats Need To Unite In Favor Of A Flat Tax

Democrats Need To Unite In Favor Of A Flat Tax


By Angie Pratt

A flat tax structure in the United States is a way for Democrats to force the Republicans to put their money where their mouths are. A flat tax says nothing about how revenues are distributed. It is strictly about how you raise money for the government to do the work of its citizens.

A flat tax doesn't have to hit the poor the hardest. By simply saying something to the effect that a flat tax will be applied to all income -- no matter its source -- over $25,000 (for example) alleviates the problem with hurting the poor. It also mitigates the issue that most have ignored in their discussions of a flat tax-- the fact that most middle class people actually currently pay considerably less than the often-proposed flat tax rate of 18% to 19%.

A flat tax is a way to take a way an issue that the Republicans are using to beat up Democrats - tax fairness. The Republicans have been for years saying that a progressive tax system simply isn't fair. They have, of course, been doing so knowing full well that they don't actually want to get rid of the present tax system.

A flat tax is a way to take power away from big business. As everyone knows the process of doling out tax breaks enhances a politician's power and their ability to raise campaign bribes - I mean contributions. By moving to a flat tax system, the incentive to donate funds to influence taxes is removed.

It is important to remember that a flat tax system is spending neutral. A flat tax doesn't, in and of itself say that the government can't influence markets (those in the know understand that in reality there are no free markets). By removing all deductions - except for the before mentioned $25 - the government hasn't given up its right to encourage spending -- convoluted or not.

Let's look at the mortgage deduction. Obviously the ability to write off your mortgage influences people to buy houses by making it cheaper to do so. But wait a minute. Is the purpose of the deduction to help Bill Gates to buy a house or is it to help Mrs. Smith, the math teacher, at the local high school?

The answer is that Bill Gates doesn't need our help. Mrs. Smith does. How might the government continue to encourage Mrs. Smith to buy a house? Well . if they really wanted to the government could, for example, always subsidize her interest rate. Remember, a flat tax system doesn't mean that the government doesn't use its spending power to influence behavior.

How about deductions for medical expense? Wouldn't getting rid of that deduction really hurt people just when they need help the most? Not necessarily. Not giving some one a deduction on their taxes doesn't mean that the government can't help them out in some other fashion.

Face it. You don't currently get to take the deduction unless your expenses are over 7% of your income. Let's briefly look at 2 cases.

A person who makes $25,000 gets to start taking a deduction after they have spent $1,750 on medical bills. Under our new flat tax system that exempts the first $25,000 in income, there is no reason to give a deduction. They aren't paying any income tax anyway.

A person making $60,000 gets to start taking a deduction in the current system after they have spent $4,200 on medical bills. Assuming a 25% tax rate, the deduction might be worth $1,050. Certainly nothing to sneeze at unless you remember that you have actually already reduced his tax bill by exempting the first $25,000 in income.

Now. how might the government actually proactively help a person who is suddenly faced with a big medical expense? The choices are nearly endless. Universal health insurance is certainly an option worth evaluating.

A flat tax is a golden opportunity for the Democratic Party. Perhaps its biggest benefit is what can easily be deduced from the few short examples used above. It changes the discussion from who is deserving of tax breaks to who needs our help and how can we do so.

The added benefit that we all receive is that it makes the workings of our government that much more transparent. Today. no one understands the tax code. If you pay a flat tax on all income over $25,000, no matter it sources, the complexity is gone. So also are the hours and hours needed to fill out the paperwork.

Call the Republicans on their bluff.

*************

Written by Angie Pratt ( http://www.politicalposts.com).


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