Quote:
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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You're going in circles. Are we talking about goods and services taxes, or income taxes? They're vastly different in their impact on poor vs. rich.
GST is regressive not because rich people pay a different percentage on purchases than poor people. It's regressive because poor people spend a much larger percentage of their income on necessities such as food, transportation, and shelter.
For the sake of argument: let's say that with $25K income, virtually all of it goes to purchasing necessities. GST of 20%, $5K paid in taxes, for a net tax rate of 20%.
Now take $100K income, $25K of which is spent on necessities. $5K paid in taxes, for a net tax rate of 5%. So now the amount of discretionary spending determines the actual net tax rate on the $100K. It's a nice problem to have.
A truly "flat" income tax is regressive because, again, the lower income must all be spent on necessities and, by taking taxes out, there is less money to spend on them. Even Ronald Reagan's proposed 17% "flat" tax had a floor, an amount of income that was not taxed.
My biggest problem with Reagan's plan, Steve Forbes' plan, and other "flat" tax plans I've seen is that their true objective is to totally eliminate capital gains taxes on individuals. Talk about punishing people who work hard for their money! If my neighbor makes $50K/year on investments, and I make $50K/year via a paycheck, what in the world is fair about him paying no tax and me carrying 100% of the burden?