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Originally Posted by cbaber
Assuming we are only talking about federal income tax, the person making $25k would pay $5k, and the person making $100k would pay $20k. If you make more money you pay more money. At the end of the day everyone pays the same proportion of their income as taxes. As far as goods and services, that is a separate state and local tax and is also a flat rate, so once again completely fair.
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But the low ($25k) income doesn't leave the same option of investing. The effects of that are cumulative. Figure it out over 25 years, assuming the (arbitrary) $50k/yr investment. You can ignore inflation and assume average economic growth = investment income of ~3%. Work out how much difference in wealth is due to the unearned income. Then figure out the tax rate to correct the difference so that the after tax incomes are proportional to the pre-tax incomes. You can tax the 3% at 20%.
Re a GST: It doesn't matter at what level of government the tax is levied. The effect is the same.
There is another argument against a flat tax and that is that the same numerical amount of money has less value the more you have. Take $50 from someone who has $100 and it is very noticeable (they may starve). Take $50 (or even $5million) from someone with $10 million and it is much less noticeable (they won't starve).
At the very top end you could take all income over a certain amount and the life those income earners lead would not change in the slightest. (I'm not suggesting that be done).
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Investment should be encouraged, instead of discouraged as you seem to believe.
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Investment is fine it's just that the effects of it need to be, indeed are, acknowledged in the tax system.
The art of designing a tax system is allowing sufficient incentive to encourage effort while not locking significant human potential out of opportunity.
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Everyone should be investing, no matter how much you make.
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The benefits of investing are available to everyone, not just the wealthy.
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If a person making $25k wants more money to spend after taxes they need to make more money or spend less.
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Doing either is not always a choice.