One of the advantages of a fair tax would be the simplicity of filing one’s taxes. Individuals who previously were required to fill out more than just the standard 1040EZ form, due to a marriage, dependent children, and investments or were the owner of a corporation, a myriad of other forms were required. Now, one simple form would be needed. The tax that the government had collected the previous year, would be compared to the flat rate tax percentage of 17% or 20% and the difference would either be paid or refunded. With a 20% flat rate tax, an individual making $40,000 a year would have had to pay $8,000 in taxes.
One, who made $100,000 that year, would have to pay $20,000 in taxes. As one can plainly see, the more one makes the more tax they have to pay. Even the most hardened capitalist will usually agree with that basic premise. However, that is not the rate that applies to those who make that much money. A person, who works a full time job and makes $8 an hour, will result in an annual salary of roughly $16,600. After taxes and a refund of roughly $1,000, that person will end up paying about 12% of their income to federal taxes.
If that person would not be satisfied with one job, but wanted a second full time job, even one that paid him only $8 an hour, his income before taxes would be roughly $33,000. Not only would he have to pay more tax, just by the simple fact that he made more money, but the percentage of his income that would be required to be paid to the government, would increase as well. This individual is being punished for having an above average work ethic. He is being punished for hard and useful work while others are claiming unemployment when they can work. This is the basis of the unfairness of the current tax code.
Hard work and success are punished in favor of those who cannot or will not work. If the tax code does not adopt a fair tax but rather continues to march one step closer to socialism with the exponential rise in taxes that couriered before the Republicans took office and will likely continue, as many of the Democratic candidates have promised to roll back the tax cuts that economists have hailed as a chief reason for the current positive state of the economy, higher and higher taxes; taxes which resemble that of much of Europe, will become the reality.
Flat taxes have been considered in Europe and specifically, the UK but have been dismissed as it seems unlikely that a country that has been heading towards socialism will take such a U turn and give back to the people, economic freedom in order to decide to a greater degree, the economic freedom that the people once enjoyed. In the United States, there have been others, besides Steve Forbes which has proposed a Flat tax.
US Congressman Dick Armey has also advocated a flat tax along with a number of deductions to further reward those who work hard for the money that the receive. Armey proposed a deduction of $26,000 for married people, and $17,200 for single adults, with taxes being paid to the excess in order to make up the difference that was left after a flat tax was applied to that couple’s income.
This would mean huge savings for the lower, middle and upper middle classes while at the same time, huge savings for the rich. It is the desire to ignore the former three groups and focus only on the single latter group, which has kept many people from voicing their support for the flat tax. It has served as one of the largest impediments to the passage of the bill; erroneous public perception which, it is likely, will not disappear anytime soon.