Monday, June 8, 2009

An Idea Whose Time Has Come?

Schwarzenegger suggests state consider flat tax

Could the flat tax come to California?

Gov. Arnold Schwarzenegger said today that he would like to see such “radical” proposals come out of a commission now studying an overhaul of the state’s tax system. The governor told the editorial board of the Sacramento Bee that he hoped the commission would not be afraid to propose something like “a 15% straight tax.”

“That’s the kind of radical, daring kind of a proposal that I want to see on the table so we can look at it and say, ‘Oh, let’s study this, maybe that is the way to go,’ ” Schwarzenegger said during the discussion, which was webcast.

The current system, based on highly unstable income tax revenue that fluctuates with the economy, “doesn’t work,” Schwarzenegger said.

Advocates of a flat tax, which applies a single tax rate to all income, say it increases compliance with the tax codes because it is so simple and easy to understand. But opponents dislike that it taxes the wealthy at the same rates as the poor.

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I am a strong proponent of the flat tax.

It would simplify the tax code. We literally could change tax forms to postcards.

It would cut down significantly on tax cheats. It would eliminate the convoluted tax code that is used by Obama's cabinet members to hide income.

It would be hard to come up with a more fair system for taxation.

One of the big arguments against it is that it taxes the poor at the same rate as everyone else. In the interest of fairness we do have to recognize that the money the poor makes does not go as far as someone from a higher tax bracket.

Someone making less than $10,000 simply would be unable to give up $1,500 and still survive. The simple answer to this is shield the first portion of income from taxes. Maybe we have a personal and child exemption like we do now. After that, everyone pays the same rate. This will keep the poorest of people from paying taxes.

The other side of the argument is that the wealthy shield income from paying taxes. Again there is a simple solution, do away with all write offs. No writing off mortgage interest, business lunches, etc. All income is taxed at the same rate. No capital gains tax, no tax shelters, etc.

You make $40,000 your tax is 15% of $40,000, you make $40 million your tax is 15% of $40 million. I'm not sure why this is a problem.

6 comments:

Always On Watch said...

I read yesterday that California may also upend its longstanding welfare system, which has drained the taxpayers and businesses dry for the past several decades.

As for the flat tax, such a policy would severely cut the employees needed at the government tax agency. Of course, many CPA's would also go out of business.

But, ultimately, a flat tax is the fairest kind of tax. Progressive taxation is actually a tool of Marxism.

mksviews said...

Exactly Always and Chuck. I agree 100%, a flat tax is the best and you don't have to have it at 15%, you can bring it down even further to say 10% or less. In places where it's been tried, it's actually brought in more money than before.

Because the incentive is there for people to make more money, since you get to keep more of it.

As for the poor, just make a certain level of income exempt from it, or make them pay only half of it. by and large, i think people poor or rich would want to contribute something to society. Even if a flat-tax system is too radical, at least cut current rates significantly.

People want to work, we all want to work and make more money and keep it for ourselves. When you punish people for working extra jobs by taxing them even more is when you reduce productivity and encourage the welfare state.

Hope Arnie gets somewhere with this.

DaBlade said...

I like the flat tax too. As Ahnuld might say, the current tax code has big love handles and is a flabby girlie tax.

Pamela D. Hart said...

Chuck: I agree with you on exempting some income for the poor. A flat tax would make things so much easier, less cheating and less government. Maybe Arnold will get somewhere with this considering his current dire situation which would open the doors for everyone else.

shoprat said...

We had a presidential candidate in 96 and 00 who ran on such a platform. Your first 14K for you and 14K for your spouse, and some amount for your children would be deducted and the government would get 1/6 of the remainder. I forget who it was. Forbes I think.

Chuck said...

AOW, it would cut the IRS staffing to the bone but the money could be used to lower taxes which would wind up in the economy to hire those people

MK, agreed. I think 15% was in the article? I do think it could be lower and your right, it would give people an incentitive to make more money

DaBlade, tone it up

Pamela, welcome. I was thinking the same thing, maybe nows the time to try it? Plus California has a tendancy to lead the country on some of these things

Shoprat, it was Forbes, he's really the one that started the conversation