Let's Stop this MessAPolitico!

Wednesday, May 22, 2013

What Do We Need, Fair Tax or Flat Tax?

Wouldn't it be cool if the tax code was truly fair?  I don't mean a flat tax.  A flat tax would be simpler, but it still isn't fair.  Fair is like the grocery store.  When you go into a grocery store, a loaf of bread costs $1.89, no matter who you are.  A rich guy pays $1.89.  Middle class, single mothers pay $1.89.  Poor people pay $1.89 (with their food stamps).  Why doesn't government work the same way?  Why does a rich guy pay more for government than a middle class person?  Why do the poor get paid by the government and, consequently, pay less than no taxes?  What is fair about that?

The National Taxpayers Union publishes this information about how much tax is paid by tax payers at different income levels in tax year 2009:
  • Top 1% of AGI  -  36.73% of Tax Revenues
  • Top 5% of AGI  -  58.66% of Tax Revenues
  • Top 10% of AGI  -  70.47% of Tax Revenues
  • Top 25% of AGI  -  87.30% of Tax Revenues
  • Top 50% of AGI  -  97.75% of Tax Revenues
  • Bottom 50% of AGI  -  2.25% of Tax Revenues
How fair is this?
  • The top 1% pays 36.73 times their fair share
  • The top 5% pays 11.73 times their fair share
  • The top 10% pays 7.05 times their fair share
  • The top 25% pays 3.49 times their fair share
  • The top 50% pays 1.96 times their fair share
  • The bottom 50% pays less than 1/22nd of their fair share
Let's break this down by percentiles:
Income Category% of Tax Payers% of Tax Revenues% of Fair Share
Top 1% of AGI1%36.73%3673.00%
AGI <Top 1% to >Top 5%4%21.93%548.25%
AGI <Top 5% to >Top 10%5%11.81%236.20%
AGI <Top 10% to >Top 25%15%16.83%112.20%
AGI <Top 25% to >Top 50%25%10.45%41.80%
Bottom 50% of AGI50%2.25%4.50%
100%100.00%


No wonder politicians are elected that give the bottom 50% free stuff that is paid for by the top 25%.  Notice that the top 25% all pay more than their fair share with our current progressive tax system.  This system isn't sustainable, at least as long as we have crooked politicians.  They spend our money to shore up their political base and create political power.  Wow.  We sure have come a long way since the founders wrote the constitution.  These founders were rich men that served their country and their fellow man.  They created a document designed to protect the people from a tyrannical government.  They weren't career politicians out for personal gain.  They founded this country for the greater good.

Imagine if that grocery store worked like the government.  To buy a loaf of bread, you would need to fill out a complex tax return and bring in proof of your income.  From that return, the store would calculate your multiplier, based on your income level.  Here's what your bread would cost:
Income Category% of Tax PayersMarket Price of BreadBread Price MultiplierPrice of Bread by Income Category
Top 1% of AGI1%$1.89 36.73$69.42
AGI <Top 1% to >Top 5%4%$1.89 5.48$10.36
AGI <Top 5% to >Top 10%5%$1.89 2.36$4.46
AGI <Top 10% to >Top 25%15%$1.89 1.12$2.12
AGI <Top 25% to >Top 50%25%$1.89 0.42$0.79
Bottom 50% of AGI50%$1.89 0.05$0.09
100%


I guess the liberals would consider this a fair way to sell groceries.  Air plane tickets would work the same way.  So would cars and homes and NFL football tickets and gasoline and furniture and clothes and everything else you buy.  Just imagine how fair the world would be then.  No matter what your income level, everyone could buy the same stuff.  Heck, if you were to break down that bottom 50% category to show that the lowest 20%-25% actually get paid to live in this country, I guess the grocery would pay them to take a loaf of bread off the shelf.  (The lowest income brackets pay negative taxes.  They get a tax credit on their tax return even if they paid no taxes at all, or the credit exceeds the amount they paid into the system.  That kind of makes the term "tax return" a misnomer, because you can't return what wasn't paid in.)  If these "tax payers" want to increase their income, they could just go to the store and stock up on groceries that they don't need.  (That sounds like Keynesian economics.  They really could spend their way to prosperity!)

So, Obama isn't a socialist or a communist.  It would be ridiculous to call him that.  And this isn't a MessAPolitico either.

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