NationStates Jolt Archive

As everyone knows, the US has the most complicated and time-consuming tax code in the world. Irrespective of how much Americans actually pay, there are all sorts of deductions and tax shelters and special rules, not to mention the Alternative Minimum Tax. Americans spend an average of four months of their lives complying with taxes, and corporations spend far more time with taxes than in any other nation in the world.
It's clear that the US needs to simplify the tax code. But can we go further, and have a flat tax? I think we can. This country needs a flat tax rate for all Americans to pay, no matter what anyone earns. With extremely few exceptions, there should be no deductions, and therefore, everyone would have a clear idea on what he would pay. Several nations in Eastern Europe have done it, and have fast growing economies. Why not us?

As everyone knows, the US has the most complicated and time-consuming tax code in the world. Irrespective of how much Americans actually pay, there are all sorts of deductions and tax shelters and special rules, not to mention the Alternative Minimum Tax. Americans spend an average of four months of their lives complying with taxes, and corporations spend far more time with taxes than in any other nation in the world.
It's clear that the US needs to simplify the tax code. But can we go further, and have a flat tax? I think we can. This country needs a flat tax rate for all Americans to pay, no matter what anyone earns. With extremely few exceptions, there should be no deductions, and therefore, everyone would have a clear idea on what he would pay. Several nations in Eastern Europe have done it, and have fast growing economies. Why not us?

I've heard good arguments for flat taxes, reverse income tax, etc. I just don't think people here are going to buy into it. We're not all economists, and most of us probably don't even respect economists. :p I doubt we're going to adopt any radical changes.

As everyone knows, the US has the most complicated and time-consuming tax code in the world. Irrespective of how much Americans actually pay, there are all sorts of deductions and tax shelters and special rules, not to mention the Alternative Minimum Tax. Americans spend an average of four months of their lives complying with taxes, and corporations spend far more time with taxes than in any other nation in the world.
It's clear that the US needs to simplify the tax code. But can we go further, and have a flat tax? I think we can. This country needs a flat tax rate for all Americans to pay, no matter what anyone earns. With extremely few exceptions, there should be no deductions, and therefore, everyone would have a clear idea on what he would pay. Several nations in Eastern Europe have done it, and have fast growing economies. Why not us?

Because then there wouldn't be as many rich people to pay off our government officials, of course. ;)

Several nations in Eastern Europe have done it, and have fast growing economies.

LMFAO!

I've heard good arguments for flat taxes, reverse income tax, etc. I just don't think people here are going to buy into it. We're not all economists, and most of us probably don't even respect economists. :p I doubt we're going to adopt any radical changes.
Why do I get the feeling that becoming a lawyer would earn me less hatred than studying to be an economist? :p

I can tell I have a really good idea so far:).

It's not going to happen because people in the states have no idea how to change. They are satisfied with the comfort their government provides them, false or not. Too bad, because our tax system is horrible.

Can't we just simplify the tax code without a flat tax?

Why do so many people seem to think that the only way to simplify taxation is a flat tax?

According to an article I read a while ago the current US structure is in effect a flat tax (at around 20% for all income bands), once all considerations have been accounted for (I wish the Tax Foundation would release some new statistics to see if this is true). I am not sure if this is correct though. If this is so, a flat tax would streamline things without any other significant changes. In the context of the current system a flat tax could go with a negative income tax.

LMFAO!

Umm, Eastern European economies have seen phenomenal economic growth since the mid 1990's...they're one of the success stories of the post-Communist era, and several of them are fast approaching Western European levels of income and living standards. Here are some GDP growth numbers:

Estonia, 2000-2007: +96.5%
Latvia, 2000-2007:+95.2%
Lithuania. 2000-2007:+73.7%

In fact, Estonia grew an incredible 11.4% last year, faster than China and with a per-capita GDP already three times as large at around $21,000.
Those rates are absolutely phenomenal, especially given the developed state of their economies.

-------------------------------------------------
In regard to the OP, I do support a flat tax, but with a credit system for people below a certain income threshold to counteract the regressive aspects of the system.

I can tell I have a really good idea so far:).

you do know the poor struggle as it is...and what you want to do is put more strain on them with some bad economic theory

I'd like to hear this great revelation you have had beyond "look at eastern Europe there doing so well with all there trade deficits!!!!1"

I can tell I have a really good idea so far:).

You don't. Flat taxes are the most regressive and harm the lowest income people the most. They're the ones least able to afford it.

the problem with a flat tax is that people have different circumstances, and it would end up hurting people more than it would help. For a flat tax to work you have to have certain tax credits and a threshold for people living below a certain percentage above the poverty level, otherwise you run into all sorts of problems that will actually cost the government more money.

The US tax code now isn't perfect, but with a few tweaks it's mostly fair, the Earned Income Credit rules need to be changed, and the Alternative Minimum tax done away with......and the capital gains rules need to be messed with a bit.....but it really doesn't require much.

Why do I get the feeling that becoming a lawyer would earn me less hatred than studying to be an economist? :p

At least as an economist, people would look at you like you were a harmless quack, rather than a malefactor, as a lawer. :p

you do know the poor struggle as it is...and what you want to do is put more strain on them with some bad economic theory

I'd like to hear this great revelation you have had beyond "look at eastern Europe there doing so well with all there trade deficits!!!!1"

Um, trade deficits are not necessarily a bad thing. They generally exist in growing economies with very large investment inflows. In fact, trade surpluses can sometime reveal the opposite. Until recently, Germany and Japan had stagnant economies, yet the largest trade surpluses in the world.

At least as an economist, people would look at you like you were a harmless quack, rather than a malefactor, as a lawer. :p

Who cares about everyone else? Both can pay really, really well.

Umm, Eastern European economies have seen phenomenal economic growth since the mid 1990's

that is to be expected when nations update there industrial sectors, and in particular find themselves suddenly open to new markets

In fact, Estonia grew an incredible 11.4% last year, faster than China and with a per-capita GDP already three times as large at around $21,000.
Those rates are absolutely phenomenal, especially given the developed state of their economies.

if only there currency wasn't experiencing big inflation...

Who cares about everyone else? Both can pay really, really well.

Yes they do. I was talking about reputation, not compensation. :p

Why do so many people seem to think that the only way to simplify taxation is a flat tax?
Because many simpletons fancy themselves economists and/or listen to economists who fancy themselves unbiased.

that is to be expected when nations update there industrial sectors, and in particular find themselves suddenly open to new markets

Yes, and their tax system is part of the reason. They're having such great growth because their system is open, transparent, and encouraging to foreign and domestic investment. They couldn't update their economy or sell to new markets without a system that is attractive to foreign investment.

if only there currency wasn't experiencing big inflation...

Well, price inflation itself isn't too bad at 4.4%, especially for a free market economy. Currency depreciation is necessary to balance out their trade deficits, and it does help their economy by increasing demand for domestic goods rather than imports.

Can't we just simplify the tax code without a flat tax?

Why do so many people seem to think that the only way to simplify taxation is a flat tax?

We've tried. Ironically, all it did was worsen the bureaucracy and give politicians the ability to weasel more special-interest credits and loopholes in to the system. Honestly, we're not going to get anything done in regard to the tax code unless we stop allowing the foxes to guard the budgetary henhouse.

the problem with a flat tax is that people have different circumstances, and it would end up hurting people more than it would help. For a flat tax to work you have to have certain tax credits and a threshold for people living below a certain percentage above the poverty level, otherwise you run into all sorts of problems that will actually cost the government more money.
An idea such as yours was what was first used when the income tax became constitutional in 1913. Only a few thousand of the wealthiest Americans had to pay back then, and it wasn't much. If a flat tax were to go into effect, that's probably what would happen. But such a threshold should only be low enough to ensure that taxes make survival impossible. It should not impede one's financial advancement.
And such a threshold, btw, should not be at the poverty level, at least not the current definition. For one, the US government needs to redefine the poverty line. Several impoverished people don't qualify, and several people who are considered impoverished really aren't.

Yes they do. I was talking about reputation, not compensation. :p

Well, compensation is always more important than reputation. Except to the overly-sensitive.

Well, compensation is always more important than reputation. Except to the overly-sensitive.

Always? ;) *Goes off to rob the next train that comes by* :p

An idea such as yours was what was first used when the income tax became constitutional in 1913. Only a few thousand of the wealthiest Americans had to pay back then, and it wasn't much. If a flat tax were to go into effect, that's probably what would happen. But such a threshold should only be low enough to ensure that taxes make survival impossible. It should not impede one's financial advancement.
And such a threshold, btw, should not be at the poverty level, at least not the current definition. For one, the US government needs to redefine the poverty line. Several impoverished people don't qualify, and several people who are considered impoverished really aren't.

I said a percentage above the poverty level (can't pull figures out of my head)

We've tried. Ironically, all it did was worsen the bureaucracy and give politicians the ability to weasel more special-interest credits and loopholes in to the system. Honestly, we're not going to get anything done in regard to the tax code unless we stop allowing the foxes to guard the budgetary henhouse.

We've tried what exactly?

I'm not aware of any major attempts. Perhaps you could enlighten me.

I know there are people like Gravel that support Fairtax in the US. But I'm not aware of any legislation that has been passed which attempted to simplify tax codes and ended up failing.

Um, trade deficits are not necessarily a bad thing.

...if you happen to live in a developed nation that doesn't happen to have a large manufacturing sector

Yes, and their tax system is part of the reason. They're having such great growth because their system is open, transparent, and encouraging to foreign and domestic investment. They couldn't update their economy or sell to new markets without a system that is attractive to foreign investment.

thats an especially shaky claim when before 1991 foreign investment in eastern Europe was still very much a complicated issue

an example is when Russia implemented flat tax

Well, price inflation itself isn't too bad at 4.4%, especially for a free market economy. Currency depreciation is necessary to balance out their trade deficits, and it does help their economy by increasing demand for domestic goods rather than imports.

however Estonia has had to delay there Euro adoption because of it which in turn hurts the economy of the country

...if you happen to live in a developed nation that doesn't happen to have a large manufacturing sector

Actually, it hurts more in a well-developed postindustrial country. The UK struggled with one in the seventies and eighties for this reason. Only now, with an expanding economy, does a trade deficit not seem to be hurting much.

No thanks. I rather like the concept of the progressive income tax. The only problem is that the rich keep trying to weasle their way out of paying their share, and so bureaucracy and red tape are created to control them. If people would pay their taxes and deal with trying to lower them the proper way (through politics, rather than by scamming the gov't), there wouldn't be a problem.

MAJOR Snip. Why not us?

This tax is much better. It is a fair tax, and before you slam it read all about it please. http://www.fairtax.org/site/PageServer

This tax is much better. It is a fair tax, and before you slam it read all about it please. http://www.fairtax.org/site/PageServer

I've been a little dubious about a national sales tax, because lower-income groups devout more of their income to expenditures. Otherwise, this plan is far beyond my wildest dreams. So good, in fact, that I think it will never happen.

I've been a little dubious about a national sales tax, because lower-income groups devout more of their income to expenditures. Otherwise, this plan is far beyond my wildest dreams. So good, in fact, that I think it will never happen.

Did you read it? Did you understand no one below the poverty level will pay any tax? Do you understand everyone will receive a monthly check to refund any tax collected up to the amount for the poverty level? :rolleyes:

It's great and can become a reality if we get behind it.

Did you read it? Did you understand no one below the poverty level will pay any tax? Do you understand everyone will receive a monthly check to refund any tax collected up to the amount for the poverty level? :rolleyes:

It's great and can become a reality if we get behind it.

Maybe. It'd certainly be better than what we have now. But it'd never become a reality, especially now. The Dems have Congress.

I'd rather have no income tax then flat. I'm all for a national sales tax though.

*derails thread*

I think there should be a wrinkly tax :(

As everyone knows, the US has the most complicated and time-consuming tax code in the world. Irrespective of how much Americans actually pay, there are all sorts of deductions and tax shelters and special rules, not to mention the Alternative Minimum Tax. Americans spend an average of four months of their lives complying with taxes, and corporations spend far more time with taxes than in any other nation in the world.
It's clear that the US needs to simplify the tax code. But can we go further, and have a flat tax? I think we can. This country needs a flat tax rate for all Americans to pay, no matter what anyone earns. With extremely few exceptions, there should be no deductions, and therefore, everyone would have a clear idea on what he would pay. Several nations in Eastern Europe have done it, and have fast growing economies. Why not us?
Given the state of globalization and off-shore banking, is this truly viable? With the ability to move outside the US for corporate tax purposes, we now live in a world of tax competition. A flat tax is overly simplistic, and could end up hurting the economy more than helping.

Can't we just simplify the tax code without a flat tax?

Why do so many people seem to think that the only way to simplify taxation is a flat tax?

Because its the ultimate state of simplicity.

You don't. Flat taxes are the most regressive and harm the lowest income people the most. They're the ones least able to afford it.

Howso?

Die.

Die.
Very thoughtful contribution. How long did it take for you to come up with it? Certainly broadened my understanding on the matter...

Flat taxes are not the 'most regressive taxes meant to screw the poor' - I have not seen a single flat tax proposal that did not exclude low income people. Not one. I suppose a flat rate on all income earned above the poverty line to be taxed at the same rate doesn't allow you to get a kick out of trying to screw over other people, but it is hardly regressive.

One of the reasons why there is such a problem is the onerous bureaucracy of the tax system - all the write-off, exclusions, exceptions, credits, waivers, and subsidies distort the picture wildly to pay off special interest groups to the detriment of the public.

When irrational people say 'screw the rich', what actually happens is the upper middle class gets screwed. Usually pretty badly. Those with enough money to hire creative accountants or take advantage of all the wonderful tax programs the government offers to claim credits, exceptions, waivers, and a multitude of other tax avoidance schemes are not much affected aside from whatever special provision they can get inserted into the newest 'reform' to let the write off the purchase of their newest toy.

This is why complicated tax codes of hundreds of thousands of pages, so complex even IRS agents do not understand it all, is just an open door to fraud and abuse. The tax code should not be a vehicle for whatever pet project some politician wants - it should be for no other purpose than to collect revenue for the state to use on the programs it wants to fund.

The number one reason why we should have a flat tax is to eliminate corruption - special interest groups pushing for their handout should not dictate our tax code. A tax code that costs hundreds of billions of dollars a year to comply with (that is just tax compliance and paperwork - a cost above and beyond the actual tax bill).

I don't think a flat tax would work as well as people think it would. For most income brackets the tax rate is about 20% but for some of the really high ones I'm pretty certain that its closer to 23-25% area to balance out the loss taken on the lowest brackets. I never found my taxes to be complicated... the complicated part was always the tax returns, which I hardly understand the purpose of anyway.. but anyway it would be nice if they could simplify things a little bit further, I'm tired of doing my whole families taxes every year.

I forgot my central argument. You will never convince politicians of the merit a flax tax rate may or may not have. The central line in thier minds is... all that morass and and confusion creates jobs, if it creates jobs its good.

A politician sees the word JOBS and automatically thinks

Jobs = Good = Win = Re-election > No jobs = Bad = Lose = No Re-election

Yes it is a math equation of sorts...

I don't object to the idea of simplifying the tax code, but keeping it progressive is better.

If the poor are excluded then it's not really a flat tax, is it? they're paying 0% while the others aren't.

A flat tax is still, however, a horrible horrible idea. The richest people already have more money than they know what to do with -- once you have ten milliod ollars, do you REALLY need more? If anything, they need to make things STEEPER -- I'd say that they add a new tax bracket (50% of their yearly income) for those who make more than $1 million a year.

If the poor are excluded then it's not really a flat tax, is it? they're paying 0% while the others aren't.

It is a flat tax in terms of everyone paying the same - generally speaking it is along the lines of a simple equation:
Tax = (Income - Poverty line) * Rate

Or what is probably a little better - eliminate all welfare and use:
Tax = Income * Rate - Poverty line

A flat tax is still, however, a horrible horrible idea. The richest people already have more money than they know what to do with -- once you have ten milliod ollars, do you REALLY need more? If anything, they need to make things STEEPER -- I'd say that they add a new tax bracket (50% of their yearly income) for those who make more than $1 million a year.

How about $10,000 a year is more than some have... so why don't we just figure out what the poorest person has and take away everything else? Do you REALLY need any more than what puts you up to the poverty line?

Penalizing productive people gives a very perverse incentive not to produce. Not to mention people of means relocating somewhere that does not think "wealthier than I am = evil".

Howso?

Because the lower the income, the more you need all the money you have to afford anything.

The average cost of living in the US is around $15,000 a year. If you make $20,000, at a flat tax of 20%, you actually make only $16,000. That would leave a person who makes $20,000 only $1,000 for anything and everything that may come up.

Woo.

Now, imagine someone who has $1,000,000. At 20%, that leaves them with $800,000.

Hey, who can afford a flat tax more, a person who makes $20,000 or a person who makes $1,000,000? Quite simply, the lower the income, the less you can actually afford to pay in taxes. 20% harms a person of lower income far more than a person of higher income.

Penalizing productive people gives a very perverse incentive not to produce. Not to mention people of means relocating somewhere that does not think "wealthier than I am = evil".
I demand to know how making a multi-million dollar salary makes some one productive.

It is a flat tax in terms of everyone paying the same - generally speaking it is along the lines of a simple equation:
Tax = (Income - Poverty line) * Rate

Or what is probably a little better - eliminate all welfare and use:
Tax = Income * Rate - Poverty line



How about $10,000 a year is more than some have... so why don't we just figure out what the poorest person has and take away everything else? Do you REALLY need any more than what puts you up to the poverty line?

Penalizing productive people gives a very perverse incentive not to produce. Not to mention people of means relocating somewhere that does not think "wealthier than I am = evil".

You do realize that you are suggesting a regressive tax, not a flat tax.

This infact makes lower incomes pay a higher percentage of their income than higher incomes.

A flat tax is a flat percentage. You description of flat tax is not... congruent with reality.

I demand to know how making a multi-million dollar salary makes some one productive.

Because we all know that Britney Spears and Paris Hilton are the most productive people in America.

:D

Way to completely miss the point, entropic. I thought I wouldn't have to point out that bill gates et al still have half their income, but...

I'll play devil's advocate to your post SL. One argument I often see in favor of raising taxes on the rich is that it'll encourage them to work harder.
http://www.googlersblogs.com/node/215
If that is true for the rich then it is certainly true for everyone. Therefore -the most compassionate thing we could do is raise taxes on the poor.

You seem to single out people earning over $1mil annually as rich. Is that your definition of rich? I only wish that is what the IRS considered rich! The IRS has a fluid definition with starts around $85,000 (ira deductibility) $150,000 (Roth IRS) $212,000 (deductions phase outs) and $350,000 (highest tax rate). There are many other tax credits, deduction and exemption phase-out levels. All are substantially below $1mil.

Did you know that in many states people earning $1mil arelady pay around 50% income tax? California and New York for example.

I'd encourage you to study more and learn more about tax rates. It is a complext and confusing topic for certain, but there are many interesting things to be discovered within.

I would also encourage you to learn about the other side of the balance sheet - spending. Compare it to business. Does profitability of a business increase or decrease when the raise prices? Is the highest price competitor the most profitable? Why would a business aant to cut prices permanently? Temporarily? Why would they sell some things at a loss? The answer may surprise you. What happens when a company experiences reduced profitability? What happens when the government experiences reduced profitability? (trick question). Have fun with it!

If the poor are excluded then it's not really a flat tax, is it? they're paying 0% while the others aren't.

A flat tax is still, however, a horrible horrible idea. The richest people already have more money than they know what to do with -- once you have ten milliod ollars, do you REALLY need more? If anything, they need to make things STEEPER -- I'd say that they add a new tax bracket (50% of their yearly income) for those who make more than $1 million a year.

Because we all know that Britney Spears and Paris Hilton are the most productive people in America.

:D

I agree. We should tax the shit out of slutty blonds! Teach those unproductive wenches to shut the fuck up and stay in the kitchen where they belong! Only people who earn their money should be allowed to enjoy it. Gift giving should be fucking illegal - especially to slutty blonds who flash their beavers like creditcards. Child stars should have to surrender all of their property the moment they finish puberty - expecially if they shave their goddam skull after their third divorce.

:rolleyes:

You do realize that you are suggesting a regressive tax, not a flat tax.

This infact makes lower incomes pay a higher percentage of their income than higher incomes.
I can't do math and that's bullshit.

$12k is the poverty line in AL (because we are regressive idiots)

$20k at flat 20% rate = $4k in taxes, $16k takehome

$20k at 20% rate for his instance that makes sense
($20k - $12k) * 20% = $2400 in taxes, $17600 takehome

$13k at flat 20% = $2600 taxes, $10,400 takehome
($13k-$12k) * 20% = $200 taxes, $12,800 takehome


How is a flat tax not taking more of their money and less regressive than what he proposes?
At higher incomes, the difference between his proposal and a flat tax is irrelevant relative to the amount being taken in.

I can't do math and that's bullshit.

$12k is the poverty line in AL (because we are regressive idiots)

$20k at flat 20% rate = $4k in taxes, $16k takehome

$20k at 20% rate for his instance that makes sense
($20k - $12k) * 20% = $2400 in taxes, $17600 takehome

$13k at flat 20% = $2600 taxes, $10,400 takehome
($13k-$12k) * 20% = $200 taxes, $12,800 takehome


How is a flat tax not taking more of their money and less regressive than what he proposes?
At higher incomes, the difference between his proposal and a flat tax is irrelevant relative to the amount being taken in.

Eh... the person I was referring to seemed to be implying a flat dollar amount tax, not a percentage tax.

On second thought, I'm not sure if I read his post correctly.

My fault.

Can we at least agree that a regressive tax is not exactly the best idea?

That would be the case if there weren't so many exemptions. Unfortunately, there are way too many usable as loopholes in the tax code. I'm sure at least some of them can be removed!

As everyone knows, the US has the most complicated and time-consuming tax code in the world. Irrespective of how much Americans actually pay, there are all sorts of deductions and tax shelters and special rules, not to mention the Alternative Minimum Tax. Americans spend an average of four months of their lives complying with taxes, and corporations spend far more time with taxes than in any other nation in the world.
It's clear that the US needs to simplify the tax code. But can we go further, and have a flat tax? I think we can. This country needs a flat tax rate for all Americans to pay, no matter what anyone earns. With extremely few exceptions, there should be no deductions, and therefore, everyone would have a clear idea on what he would pay. Several nations in Eastern Europe have done it, and have fast growing economies. Why not us?
Because the politicians in power can shape our tax code to favor one segment or another of the population. They can use tax breaks to buy votes.

Will a flat tax escape that sort of manipulation? Maybe, but consider this. The initial income tax was a flat tax. Only for the wealth, too. But it became the mess that we have today as politicians discovered how to manipulate it to their advantage.

We simplified the tax brackets back some time ago from a dozen or so, reaching up to about 75%. That was consolidated into 5 brackets, extending up to maybe 25%. Over the years, more brackets have been added and the upper brackets have increased. There's no reason that a flat tax wouldn't suffer the same fate again.

I demand to know how making a multi-million dollar salary makes some one productive.

it's the other way around, Brainiac.

it's the other way around, Brainiac.

So all productive people are multi-millionaires? I know for a fact that that isn't true, so it must be the way I said it the first time.

My question stands: How does having a multi-million dollar salary make some one productive?
By which I mean, I demand to see evidence of all multi-millionaires being productive.

So all productive people are multi-millionaires? I know for a fact that that isn't true, so it must be the way I said it the first time.

My question stands: How does having a multi-million dollar salary make some one productive?
By which I mean, I demand to see evidence of all multi-millionaires being productive.

You need to learn about logic. Or sets, I don't care which. There are very few IFF propositions in real life and probably none in economics.

There are sets of people that earn large salaries. Of that set, there's a subset of people that are productive and a subset of people that aren't. The first subset is much larger than the second.

Outside of that set exists a subset of people that are productive, but don't earn large salaries, as well as a subset of people that aren't productive and don't earn large salaries.

Don't confuse that with wealthy people that don't earn salaries, which is how your last demand is stated.

One could make the argument that investment alone is productive because it drives the economy. That would make the case for wealthy, non-wage earners being productive.

So all productive people are multi-millionaires? I know for a fact that that isn't true, so it must be the way I said it the first time.

My question stands: How does having a multi-million dollar salary make some one productive?
By which I mean, I demand to see evidence of all multi-millionaires being productive.


It is not just productivity. Money itself can be productive. It is also about being willing to take chances, ownership of ideas, marketability of oneself, coaching skills, talent, responsibility, liability, education, knowledge and many other factors. Productivity alone aint shit.

You need to learn about logic. Or sets, I don't care which. There are very few IFF propositions in real life and probably none in economics.
So you assert all productive people are multi-millionaires?

There are sets of people that earn large salaries. Of that set, there's a subset of people that are productive and a subset of people that aren't. The first subset is much larger than the second.
Irrelevant. As long as the subset of productive people that arn't multi-millionaires exists, I am right.

Don't confuse that with wealthy people that don't earn salaries, which is how your last demand is stated.
So there are multi-millionaires that arn't productive? I win again.

As everyone knows, the US has the most complicated and time-consuming tax code in the world. Irrespective of how much Americans actually pay, there are all sorts of deductions and tax shelters and special rules, not to mention the Alternative Minimum Tax. Americans spend an average of four months of their lives complying with taxes, and corporations spend far more time with taxes than in any other nation in the world.
It's clear that the US needs to simplify the tax code. But can we go further, and have a flat tax? I think we can. This country needs a flat tax rate for all Americans to pay, no matter what anyone earns. With extremely few exceptions, there should be no deductions, and therefore, everyone would have a clear idea on what he would pay. Several nations in Eastern Europe have done it, and have fast growing economies. Why not us?
Simple taxes don't have to be flat. A progressive tax structure does not have to have the Alternative Minimum Tax, shelters and rules. You can get rid of them while maintaining the progressive structure.

In fact, what 'flat' tax advocates don't know is that they are actually advocating a progressive tax, albeit one with two bands (a 0% and the 'single' band) in any case. I think that pretty much proves that complex tax =/= progressive tax.

Likewise, flat taxes won't effect corporations, who aren't effected by the income tax structure.

Given the state of globalization and off-shore banking, is this truly viable? With the ability to move outside the US for corporate tax purposes, we now live in a world of tax competition. A flat tax is overly simplistic, and could end up hurting the economy more than helping.

Sure it would help. It would reduce compliance time, which is the US's main weakness in tax competition, and the taxes would still be relatively low compared to the rest of the world.

Because the politicians in power can shape our tax code to favor one segment or another of the population. They can use tax breaks to buy votes.

Will a flat tax escape that sort of manipulation? Maybe, but consider this. The initial income tax was a flat tax. Only for the wealth, too. But it became the mess that we have today as politicians discovered how to manipulate it to their advantage.

We simplified the tax brackets back some time ago from a dozen or so, reaching up to about 75%. That was consolidated into 5 brackets, extending up to maybe 25%. Over the years, more brackets have been added and the upper brackets have increased. There's no reason that a flat tax wouldn't suffer the same fate again.

I've heard once that the US should create a tax agency along the same lines as the Federal Reserve. One of the few things the US has done right in public finance is to create a central bank independent of the government, something that still doesn't exist in most countries. We should have a similar agency that determines the government's needs, and draft legislation for Congress to vote on. It can reject or accept it, but should keep modifications to a minimum.

A flat tax is a regressive tax, actually.
Proof:
Let I = the a person's gross income for a year.
Let N = the cost of a person's necessities. This is roughly the same for each person, because each person requires a certain amount of food, and a place to live, and clothes. Sure, perhaps a wealthier person eats finer foods and such, but that is luxery and not necessity.
Let T = the flat tax rate. This is a number between 0 and 1.
Let L = the amount of money left from a person's gross income after necessities and taxes are paid for. (The L roughly symbolizes luxery.)

L = I - I*T - N "Luxery Money" left over for luxery and investment is the gross income subtract the taxes and subtract the necessities.

Given all this information, what percentage of each person's income is left over for luxery and investment?

L/I = 1 - T - N/I Keeping in mind that 1, T, and N are constants, the only thing that varies on the right side of the equation is I. You can see for yourself by plotting this on a graph* or something (or if you know calculus, taking the derivitive with respect to I), that this number increases as income I increases.

Therefore, the flat tax system is regressive, as was to be the theorem proven.

*Note: If You would like to try graphing this on a graphing calculator, since T and N are constants, just use an arbitrary flat tax rate for T and an arbitrary positive number for N and let I be x.

I've heard once that the US should create a tax agency along the same lines as the Federal Reserve. One of the few things the US has done right in public finance is to create a central bank independent of the government, something that still doesn't exist in most countries. We should have a similar agency that determines the government's needs, and draft legislation for Congress to vote on. It can reject or accept it, but should keep modifications to a minimum.
That same philosophy was employed to recommend military base closings, as well. It kept Congress from manipulating the closings list fairly successfully. My personal preference is for the income tax and all payroll taxes to be abolished at the federal level and replaced with the FairTax.

A flat tax is a regressive tax, actually.
Proof:
Let I = the a person's gross income for a year.
Let N = the cost of a person's necessities. This is roughly the same for each person, because each person requires a certain amount of food, and a place to live, and clothes. Sure, perhaps a wealthier person eats finer foods and such, but that is luxery and not necessity.
Let T = the flat tax rate. This is a number between 0 and 1.
Let L = the amount of money left from a person's gross income after necessities and taxes are paid for. (The L roughly symbolizes luxery.)

L = I - I*T - N "Luxery Money" left over for luxery and investment is the gross income subtract the taxes and subtract the necessities.

Given all this information, what percentage of each person's income is left over for luxery and investment?

L/I = 1 - T - N/I Keeping in mind that 1, T, and N are constants, the only thing that varies on the right side of the equation is I. You can see for yourself by plotting this on a graph* or something (or if you know calculus, taking the derivitive with respect to I), that this number increases as income I increases.

Therefore, the flat tax system is regressive, as was to be the theorem proven.

*Note: If You would like to try graphing this on a graphing calculator, since T and N are constants, just use an arbitrary flat tax rate for T and an arbitrary positive number for N and let I be x.
You could have halved that whole thing without explaining what the single letters stand for which no one is going to bother keeping up with anyway because who like single letter acronyms? Mathmeticians maybe.

And didn't my equations already prove that anyway...

If the poor are excluded then it's not really a flat tax, is it? they're paying 0% while the others aren't.

A flat tax is still, however, a horrible horrible idea. The richest people already have more money than they know what to do with -- once you have ten milliod ollars, do you REALLY need more? If anything, they need to make things STEEPER -- I'd say that they add a new tax bracket (50% of their yearly income) for those who make more than $1 million a year.

Well then its a flat tax that makes an exception for the poor.

Oi, so lets make it so the people who invest the most in companies and actually create wealth for the economy are not able to do that. Thats what happened when we had tax brackets of 70-80%, then in the 80s we lowered it to like 35% and BAM massive boost in economy.

Flat tax would ensure equality in that I pay 20% of my money, you pay your 20%, that is unless you are under the poverty line.

So you assert all productive people are multi-millionaires?


Irrelevant. As long as the subset of productive people that arn't multi-millionaires exists, I am right.


So there are multi-millionaires that arn't productive? I win again.
I guess justifying a trivial premise with a trivial proof is about your speed. Seems like fodder for the spam forum, though...

You could have halved that whole thing without explaining what the single letters stand for which no one is going to bother keeping up with anyway because who like single letter acronyms? Mathmeticians maybe.

And didn't my equations already prove that anyway...

I read it. But then again, I am actually studying economics so I deal with long strings of equations every time we do a new theorem or case study.

However, I think it is generally common knowledge that a flat tax in and of itself is regressive. That's why you would need a EITC-style credit to offset the effects of the tax while still retaining the simplicity of the system.

So there are multi-millionaires that arn't productive? I win again.

You are a master at one dimensional arguments. You should get a special badge to put on your t-shirt.

However, I think it is generally common knowledge that a flat tax in and of itself is regressive. That's why you would need a EITC-style credit to offset the effects of the tax while still retaining the simplicity of the system.

I don't disagree a flat tax is obviously regressive.

You are a master at one dimensional arguments. You should get a special badge to put on your t-shirt.
Why argue in more dimensions than are possessed by my opponents?

This tax is much better. It is a fair tax, and before you slam it read all about it please. http://www.fairtax.org/site/PageServer

Wait that's what I was talking about

One problem, The rich will simply charge their finances to their company.
So a CEO can buy 1 Private Jet, 6 Limos and who knows what else and not pay the government a single cent. And since there's no income tax, they pay nil!

It's another scam of the "Make the rich richer" bullshit.

The rich deserve to pay more, if they're "Helping the economy" so much then they have enough to help the government as well.

People who make all their money on the Stock market especially.

So to all who believe the "Fair tax" is fair? Screw you.

I eliminated complexity is your concern, just get rid of all the loopholes.

the problem with a flat tax is that people have different circumstances, and it would end up hurting people more than it would help. For a flat tax to work you have to have certain tax credits and a threshold for people living below a certain percentage above the poverty level, otherwise you run into all sorts of problems that will actually cost the government more money.

The US tax code now isn't perfect, but with a few tweaks it's mostly fair, the Earned Income Credit rules need to be changed, and the Alternative Minimum tax done away with......and the capital gains rules need to be messed with a bit.....but it really doesn't require much.

This is off-topic and a pure sidenote, but the tax rates are not fair. If they were fair, they'd be high enough to start paying down the deficit before the boomers retire and their children need to start paying 70% income tax rates to maintain services once China stops paying the bills.

I read it. But then again, I am actually studying economics so I deal with long strings of equations every time we do a new theorem or case study.
Congratulations! You are embarking on a journey where you will come out thinking 30 variable calculus equations are too simplistic to properly model an event and then butting heads with the vast majority of non-economists who actually behave irrationally and have such a bias that they do not even want to listen to reason.

Just for fun: http://www.youtube.com/watch?v=VVp8UGjECt4

However, I think it is generally common knowledge that a flat tax in and of itself is regressive. That's why you would need a EITC-style credit to offset the effects of the tax while still retaining the simplicity of the system.

As I mentioned before, this is why every serious proposal for a flat tax always comes with a modifier (typically a credit equal to the poverty line). I think it was Friedman who was the first staunch advocate for a flat percentage with a rebate fixed to poverty line. It both eliminates the problems with welfare, social security, and the rest while reducing the complexity and distortions to incentives.

Just to give props to the old man, and because it is very relevant to the discussion (though longer than the attention spans of most denizens of NS):
http://video.google.com/googleplayer.swf?docId=6813529239937418232

You do realize that you are suggesting a regressive tax, not a flat tax.

This infact makes lower incomes pay a higher percentage of their income than higher incomes.

A flat tax is a flat percentage. You description of flat tax is not... congruent with reality.

No - a flat tax is neither progressive or regressive - it is flat. Given that they also tend to come with an exclusion for poverty line, they are functionally progressive. Given that a flat tax rate is, by its very definition, not a higher percentage for lower income households, I think you have a serious misunderstanding of the issue.

No - a flat tax is neither progressive or regressive - it is flat. Given that they also tend to come with an exclusion for poverty line, they are functionally progressive.
Unless the exclusion goes a good bit higher than the poverty line, that fact is irrelevant. And if it is only made progressive by a poverty line exclusion, it is nowhere near progressive by itself.

Congratulations! You are embarking on a journey where you will come out thinking 30 variable calculus equations are too simplistic to properly model an event and then butting heads with the vast majority of non-economists who actually behave irrationally and have such a bias that they do not even want to listen to reason.

Just for fun: http://www.youtube.com/watch?v=VVp8UGjECt4



As I mentioned before, this is why every serious proposal for a flat tax always comes with a modifier (typically a credit equal to the poverty line). I think it was Friedman who was the first staunch advocate for a flat percentage with a rebate fixed to poverty line. It both eliminates the problems with welfare, social security, and the rest while reducing the complexity and distortions to incentives.

Just to give props to the old man, and because it is very relevant to the discussion (though longer than the attention spans of most denizens of NS):
http://video.google.com/googleplayer.swf?docId=6813529239937418232

Ha, as a mathematician I must comment that there are many models that, even with an infinite amount of variables, are too simplistic to model a phenomenon.

And I watched the Friedman video. It was interesting, but he never mentioned a flat tax, or did I miss it?

No - a flat tax is neither progressive or regressive - it is flat. Given that they also tend to come with an exclusion for poverty line, they are functionally progressive. Given that a flat tax rate is, by its very definition, not a higher percentage for lower income households, I think you have a serious misunderstanding of the issue.

I don't understand how you can say this after taking into account my mathematical arguement stated before. Please don't ignore

I don't understand how you can say this after taking into account my mathematical arguement stated before. Please don't ignore

I don't even know what the fuck your argument was and I think I'm on the same side.

Ha, as a mathematician
Fucking called.

This is off-topic and a pure sidenote, but the tax rates are not fair. If they were fair, they'd be high enough to start paying down the deficit before the boomers retire and their children need to start paying 70% income tax rates to maintain services once China stops paying the bills.

Gee. That s a one-sided rational. Maybe if you earned more you wouldn't have had to mortgage your entire future to buy that lamborghini. You lazy suck. Go earn more money. What? you can't afford a lamborghini? Why the fuck would you spend more than you earn??? Ask again - Why the FUCK would anyone spend more money than they are earning?? More to the point - why the fuck would anyone think that raising taxes to pay for stupid spending is any better of an idea?

Sure, why not? How about at a really low rate, about 15% or less. That would ensure small government.

I don't understand how you can say this after taking into account my mathematical arguement stated before. Please don't ignore

I ignored your 'proof' because it was spurious. You harangue me for ignoring your 'proof' while completely ignoring my own post (or at least are guilty of making only the most cursory glance). I have clearly stated that every serious proposal of a flat tax has some provision for low income cases. Either the income up to the poverty line is not taxed, or there is a credit at the amount of the poverty line.

In the first case, your own 'proof' would put this as taxing only the income that can be devoted towards luxuries and none of that which is used for necessities. In the latter, all personal income is devoted towards luxuries as the poverty line credit provides for necessities.

Using one tax rate, regardless of income level, is hardly 'regressive', but is actually the most equitable in the terms of treating people equally. Rich or poor, you pay the same portion of your income.

Additionally, you raise a very questionable goal towards which you seem to be working: that it is the responsibility of everyone else to ensure that you have luxuries. While this is not a comment directly on your 'proof', it shows an ideological viewpoint which has been consistently shown not to be viable - collectivism may work for small family units but is completely inappropriate for national economies. Ensuring that everyone has equal access to luxuries is neither practically workable nor morally desirable (though the latter is a personal viewpoint, and as such does neither determination, for or against, should be used to form public policy).

I fully understand the desire to provide for the basic necessities of life, simple human compassion as well as a cynical desire to live in a reasonable society allow for that, but your point that it is the responsibility of the state to provide for luxuries (which is always at the cost of someone else) is not something with which I can agree.

I ignored your 'proof' because it was spurious. You harangue me for ignoring your 'proof' while completely ignoring my own post (or at least are guilty of making only the most cursory glance). I have clearly stated that every serious proposal of a flat tax has some provision for low income cases. Either the income up to the poverty line is not taxed, or there is a credit at the amount of the poverty line.
Then you take into account that people can be taxed so their final income is below the poverty line and a flat tax loses any amount of progressiveness you could argue it has.

Using one tax rate, regardless of income level, is hardly 'regressive',
Only if you ignore blatantly obvious facts. Like "taxes takeaway money" and "above poverty line - taxes can equal below poverty line."

but is actually the most equitable in the terms of treating people equally. Rich or poor, you pay the same portion of your income.
Which does not magically make something progressive or fair.

What the other guy proposed (Taxes = [Income - Poverty Line] * Rate) is progressive and fair.

Sure, why not? How about at a really low rate, about 15% or less. That would ensure small government.
No it wouldn't, because 'tax and spend' would become 'spend and spend' as it is now.

No it wouldn't, because 'tax and spend' would become 'spend and spend' as it is now.
Bingo.
For people who print their own money and write their own paycheck, fiscal responsibility is a no-go.

Ha, as a mathematician I must comment that there are many models that, even with an infinite amount of variables, are too simplistic to model a phenomenon.

And I watched the Friedman video. It was interesting, but he never mentioned a flat tax, or did I miss it?

Economics can be done with only a few variables, depending on the desired accuracy of what you are modeling. In the end, economics is a social science which just shoots from the hip - while it cannot give you mathematically precise statements (especially converting qualitative data like personal preferences into quantitative data), it can show you general trends and reveal actual effects of policies.

I guess that was the wrong video - apparently that one just talks about social security, welfare, and such things rather than income tax...

Friedman proposed a flat tax rate coupled with a refundable tax credit (which would eliminate all welfare programs). Essentially, everyone in the US would receive the tax credit and pay the same fixed rate. Those with the lowest incomes (whose tax bill was less than the credit) would receive the balance as a tax refund - though I think he wanted to discount this significantly so as to lessen the incentive to just not work and collect the money.

You could set the tax credit level to either be fairly low, and thus only eliminate the tax burden on the poor, or fairly high to ensure a minimum income for everyone. I prefer to set it high enough that we could eliminate all other social welfare policies. The efficiency gains from that would more than make up for the costs as well as eliminating all the distortions from those programs.

Paying out half the poverty rate would still encourage employment while providing enough that practically everyone could survive even if underemployed. It would be interesting to undertake such an evaluation, but that would be fairly tricky. Not only would you have to check both the tax receipts and budget expenditures, but also estimate the employment effects, the efficiency gains, the further economic stimulus of added spending, etc.

Then you take into account that people can be taxed so their final income is below the poverty line and a flat tax loses any amount of progressiveness you could argue it has.


Only if you ignore blatantly obvious facts. Like "taxes takeaway money" and "above poverty line - taxes can equal below poverty line."


Which does not magically make something progressive or fair.

What the other guy proposed (Taxes = [Income - Poverty Line] * Rate) is progressive and fair.

I quite literally laughed out loud at this...

Did you not even read the part you quoted? If income equal to the poverty line is not taxed, that means you get income equal to the poverty line as a minimum (so long as you actually earn that much). Any additional taxes paid are on income in excess of the poverty line, thus the only possible way it would result in an income belove the poverty line is if the tax rate was greater than 100%.

That particular equation T=(I-Pl)*R is not what 'the other guy' proposed, that is what I proposed. Funny how you can decry my proposal as being regressive yet turn around and then say it is progressive and fair.

I ignored your 'proof' because it was spurious. You harangue me for ignoring your 'proof' while completely ignoring my own post (or at least are guilty of making only the most cursory glance). I have clearly stated that every serious proposal of a flat tax has some provision for low income cases. Either the income up to the poverty line is not taxed, or there is a credit at the amount of the poverty line.

I did read that statement about tax credits. My apologies for not having put that into my post, I was only responding to the immediate text I had quoted, which had left the part of tax credits off of it. I won't tell you how to argue, but may I suggest that instead of saying "flat tax" to mean flat tax and credit system, but you say "flat tax with a credit system", since they are two different things and there is a large number of people who would propose simply a "flat tax" system, and even a larger amount who would take the meaning of "flat tax" to be just "flat tax".

In the first case, your own 'proof' would put this as taxing only the income that can be devoted towards luxuries and none of that which is used for necessities. In the latter, all personal income is devoted towards luxuries as the poverty line credit provides for necessities.

Using one tax rate, regardless of income level, is hardly 'regressive', but is actually the most equitable in the terms of treating people equally. Rich or poor, you pay the same portion of your income.

I appreciate the virtue of this credited flat tax system, however I don't think it is an ideal. I think the tax system should be a tool used to encourage growth in some sectors, discourage growth in others, and in general raise money for the government. In this sense I think the way the tax system is set up now does this well, although I don't know if the encouraged and discouraged sectors are what I think they ought be. Also, I think the tax system should be set up to allow for greater social mobility. I don't believe in a flat welfare system, but I want to see that anyone who wants to climb up the economic ladder should have a fair chance to do so. So really I'm more concerned with a fair chance at climbing the economic latter then "fair" amount of money taken out of income.

Additionally, you raise a very questionable goal towards which you seem to be working: that it is the responsibility of everyone else to ensure that you have luxuries. While this is not a comment directly on your 'proof', it shows an ideological viewpoint which has been consistently shown not to be viable - collectivism may work for small family units but is completely inappropriate for national economies. Ensuring that everyone has equal access to luxuries is neither practically workable nor morally desirable (though the latter is a personal viewpoint, and as such does neither determination, for or against, should be used to form public policy).

I fully understand the desire to provide for the basic necessities of life, simple human compassion as well as a cynical desire to live in a reasonable society allow for that, but your point that it is the responsibility of the state to provide for luxuries (which is always at the cost of someone else) is not something with which I can agree.

While I'm not saying that my equation is the model that can encapsulate life, liberty, and the universe, I don't really understand where you got all of this from. I'm not sure what view of collectivism you're putting forth, but I don't think I'm for it? Really I have no idea where you got any of these opinions of me from unless you are trying to give me some attributes of some other arguer against a flat tax system?

Economics can be done with only a few variables, depending on the desired accuracy of what you are modeling. In the end, economics is a social science which just shoots from the hip - while it cannot give you mathematically precise statements (especially converting qualitative data like personal preferences into quantitative data), it can show you general trends and reveal actual effects of policies.

Well, sure, sometimes it can. Consider the use of linear regression to reveal general trends. It works great if what you're talking about is differentiable, but if you're working with things that are non-differentiable, no amount of variables is going to help you. A good example is in financial markets. Quantitative Analysts use math to analyze the stock market and such. Unfortunantly, they work in a continuous but non-differentiable world. How frustrating for them! Of course economics can only be done with a few variables though, there's only so much time in the universe.

I guess that was the wrong video - apparently that one just talks about social security, welfare, and such things rather than income tax...

Friedman proposed a flat tax rate coupled with a refundable tax credit (which would eliminate all welfare programs). Essentially, everyone in the US would receive the tax credit and pay the same fixed rate. Those with the lowest incomes (whose tax bill was less than the credit) would receive the balance as a tax refund - though I think he wanted to discount this significantly so as to lessen the incentive to just not work and collect the money.

You could set the tax credit level to either be fairly low, and thus only eliminate the tax burden on the poor, or fairly high to ensure a minimum income for everyone. I prefer to set it high enough that we could eliminate all other social welfare policies. The efficiency gains from that would more than make up for the costs as well as eliminating all the distortions from those programs.

Paying out half the poverty rate would still encourage employment while providing enough that practically everyone could survive even if underemployed. It would be interesting to undertake such an evaluation, but that would be fairly tricky. Not only would you have to check both the tax receipts and budget expenditures, but also estimate the employment effects, the efficiency gains, the further economic stimulus of added spending, etc.

I absolutely love listening to Freidman speak. Even though I don't always agree with him, he never dodges tough questions. If he's speaking about something and you say "hey, what about this?" it seems 3/4ths of the time his next statement is "well some people may ask what about this? so let me address that..." He's definitely one of the most powerful thinkers of the century.

No it wouldn't, because 'tax and spend' would become 'spend and spend' as it is now.

Or some competetant economists could be brought and so its tax and spend, likes its supposed to be.

I don't disagree in principle with the idea of a flat tax, so long as what we mean is a uniform percentage rate, and that the threshold is at a reasonably fair level - this is obviously going to be dependent on average incomes, cost of living, etc.

But do principles and ideologies really have that much to do with it?

What I'm wondering is this: What proportion of flat tax advocates are actually driven by some kind of ideology of principle about taxation? I'm guessing the answer to that is - very few, verging on none. It's more realistic (and way more likely) that people arguing for a flat tax are doing so purely out of a personal desire to pay less tax themselves. Do they really care about the economy? Do they really care about the taxation levels on anyone but themselves? Not likely.

The same issue can be found in those who argue for tax cuts for the rich - the sort of tax cuts that Reagan pushed through in the 1980's, and the sort that Dubya has pushed through in the last few years.

At least Reagan had an ideology, even if it was total bullshit. I'm talking about Trickle Down Economics. Also known as Supply Side Economics, Voodoo Economics or Rosey Scenario. The principle was that cutting taxes for the rich would encourage investment - leading to economic growth, this benefitting everyone. Needless to say, this didn't happen - or at best, happened on a far smaller scale than was originally predicted.

Apologists for Reaganomics still trot out the tired old argument that "A rising tide lifts all boats". But what the supply side advocates forget is that those boats who are firmly anchored to the bottom are a bit fucked!
In reality, trickle down economics was just an excuse to cut taxes for the rich and have a great big party. The ideology was almost certainly false - but even if it wasn't, it was irrelevant except to serve as a smoke screen.

Dubya has succeeded in cutting taxes for the rich on a larger scale than Reagan could imagine. The Inheritance tax has been completely repealed. The income tax has been savagely cut. Many corporations have received massive retroactive tax cuts. But the payroll tax has remained unchanged - and there are even some calls to increase it.

To his credit, Bush hasn't tried to make the same supply side economic argument that Reagan did. Instead, he has consistently misled the public by obfuscating this issues surrounding tax cuts. For example, he repeatedly claimed that the repeal of the inheritance tax would benefit the majority of farmers and small business owners - while in reality, only 1% of estates paid any inheritance tax at all - and the bulk of the tax was paid by between 3000 and 4000 estates per year.

Now I'm not a professional economist - but who knows, maybe some people on here reading this might be. Could anyone come up with a workable theory on how giving General Motors a lump sum transfer of $800,000 (the result of their retroactive tax cut) can possibly lead to more investment when the company is already sitting on $8 Billion in cash?

As for the issue of corporations declaring their profits in tax havens - they can only do this because we let them get away with it. Dubya might publicly decry this practice - but that's not a real answer. The solution is to properly fund the IRS and find a way to prevent companies which are clearly making profit from declaring it overseas in a fraudulent manner. It's hard to do - but not impossible. If we manage this, then the taxes on everyone else can become less of a burden - and we get the added bonus of restored trust in corporate governance - which really will lead to more investment.

I don't disagree in principle with the idea of a flat tax, so long as what we mean is a uniform percentage rate, and that the threshold is at a reasonably fair level - this is obviously going to be dependent on average incomes, cost of living, etc.
When people speak of a flat tax, we speak of a single tax rate and not of a fixed lump sum. The idea being that no matter who you are or what you do, you pay the same fixed percentage.

But do principles and ideologies really have that much to do with it?

What I'm wondering is this: What proportion of flat tax advocates are actually driven by some kind of ideology of principle about taxation? I'm guessing the answer to that is - very few, verging on none. It's more realistic (and way more likely) that people arguing for a flat tax are doing so purely out of a personal desire to pay less tax themselves. Do they really care about the economy? Do they really care about the taxation levels on anyone but themselves? Not likely.
You are arguing from a personal bias with little to no actual information – you assume everyone is selfishly just trying to wiggle out of taxes rather than create a more efficient and equitable system. The staunchest flat tax advocates are economists who base the support for flat tax on both theoretical models and actual case studies. Given the switch of an increasing number of countries to a flat tax system, the number of case studies is growing rapidly, all of which pointing to substantial economic gains.

Funny how you characterize the behavior of others as being obviously self-serving selfishness while you operate out of a sense of altruism.

The same issue can be found in those who argue for tax cuts for the rich - the sort of tax cuts that Reagan pushed through in the 1980's, and the sort that Dubya has pushed through in the last few years.

At least Reagan had an ideology, even if it was total bullshit. I'm talking about Trickle Down Economics. Also known as Supply Side Economics, Voodoo Economics or Rosey Scenario. The principle was that cutting taxes for the rich would encourage investment - leading to economic growth, this benefitting everyone. Needless to say, this didn't happen - or at best, happened on a far smaller scale than was originally predicted.
Events like this do not occur in a vacuum – the slashing of the tax rate should have spurred much greater growth than it did (but it did still spur a lot of growth). One of the big reasons it did not have as much of an effect is because businesses were greatly harmed in the 60s – taxes were cut, leading to a boom. Businesses loved it and expanded greatly for a few years, only to suffer massive losses as congress got greedy and suddenly jumped taxes back up. Not being stupid, management was not going to risk a career-ruining move by trusting congress again. If you saw your boss ruin the business by trusting congress, now that it is your turn you would be likely to play it safe.

The problem with ‘trickle-down’ is not that it doesn’t work; it is that it has become very difficult to convince people that it will continue. Long term investments are based on expectations of the future, not temporary situations, and as such will not be made if people expect congress to jack the rates back up – nobody wants to get caught with their pants down again.

Cutting rates has shown time and time again to be highly beneficial. The late 80s, the 60s, the 20s; all great products of slashing the tax rates. The past few years are also a great example – rates were cut and the economy has been booming (which is remarkable how shallow a recession there was after the tech bubble). Granted, government debt is way too high, but that is a Keynesian position and not a supply-side position.

Most economists tend to put the optimal rate at around 20-25%; any higher and you put too much of a break on the economy for short-term gain. Higher taxes might net you some more money right away, but people will quickly adjust and the economy will suffer. Cutting the rate has the potential to give a commensurate boost, but people are more likely to take the windfall at first because they will not make long-term plans on something that is not likely to continue.

In the interest of full disclosure, I must admit that my defense of supply-side economics is fairly patchy because I am not a supply-sider (though I find such descriptors to be very spurious). Best to say I am more of an Austrian schooler with a spin of monetarism (perhaps a Schumpeterian with Mises and Friedman influences?).

Apologists for Reaganomics still trot out the tired old argument that "A rising tide lifts all boats". But what the supply side advocates forget is that those boats who are firmly anchored to the bottom are a bit fucked!
In reality, trickle down economics was just an excuse to cut taxes for the rich and have a great big party. The ideology was almost certainly false - but even if it wasn't, it was irrelevant except to serve as a smoke screen.
Careful, your bias is showing ;)

Booming economies raise the standard of living for everyone. Labor becomes scarce, thus wages go up, capital flows more freely so credit is easier to get (thus making loans and financing cheaper for people); a growing economy is a good thing.

Dubya has succeeded in cutting taxes for the rich on a larger scale than Reagan could imagine. The Inheritance tax has been completely repealed. The income tax has been savagely cut. Many corporations have received massive retroactive tax cuts. But the payroll tax has remained unchanged - and there are even some calls to increase it.
Unless I am mistaken, it is not Bush, but his opponents, who are demanding an increase in payroll taxes.

To his credit, Bush hasn't tried to make the same supply side economic argument that Reagan did. Instead, he has consistently misled the public by obfuscating this issues surrounding tax cuts. For example, he repeatedly claimed that the repeal of the inheritance tax would benefit the majority of farmers and small business owners - while in reality, only 1% of estates paid any inheritance tax at all - and the bulk of the tax was paid by between 3000 and 4000 estates per year.
Politicians are savvy enough to know that the general public holds an irrational bias, and thus will not use terms such as ‘trickle-down economics’. Inheritance taxes are not something I agree with on principle (and I am not in a position where that will ever affect me – unless I happen to find a rich wife, but that’s not likely). What it will do is end a lot problems as the reason why receipts on inheritance is so low is because people try to avoid paying it. Without worrying about having it taxed away, it is much easier to pass a business on to your children, invest in new ventures for their sake, and make very long-term plans and investments in the hopes that your children will benefit.

By the by, 1% is a very large number when you are talking about the national economy – think of it this way, 1% of the population is still 3 million people. Saying ‘only’ 1% is not helping your case.

Now I'm not a professional economist - but who knows, maybe some people on here reading this might be. Could anyone come up with a workable theory on how giving General Motors a lump sum transfer of $800,000 (the result of their retroactive tax cut) can possibly lead to more investment when the company is already sitting on $8 Billion in cash?
Because taxing someone just because they have some wealth is not a good recipe for economic growth. Just because a company has some cash in the bank does not mean it is a good idea to raise taxes on it. For example – how about if every time your bank account has a positive balance, we say you are obviously making a profit so we will raise your taxes? Sound like a good way to encourage you to save some money?

A tax cut is not a transfer – lowering taxes is not giving someone government money, it is just not taking as much of theirs away from them, it is letting them keep more of what they earned. Additionally, perhaps you haven't noticed, but just because you have some money in the bank, it does not mean that you are roaring along boosting the economy by providing great products and the jobs to make them. All it means is that at some point, you made a profit and were smart enough to save some of it – which comes in handy through the long periods where they are loosing billions of dollars a year.

GM lost $2 billion last year and $10.4 billion the year before; when you are talking about a company this big, shaving less than a million dollars off a tax bill is not exactly a big scandal of corruption.

As for the issue of corporations declaring their profits in tax havens - they can only do this because we let them get away with it. Dubya might publicly decry this practice - but that's not a real answer. The solution is to properly fund the IRS and find a way to prevent companies which are clearly making profit from declaring it overseas in a fraudulent manner. It's hard to do - but not impossible. If we manage this, then the taxes on everyone else can become less of a burden - and we get the added bonus of restored trust in corporate governance - which really will lead to more investment.
I just do not understand how people think sometimes – rather than fix the problems with the Byzantine tax code in this country, we should blame others? The enforcement of the tax code itself is very difficult because the tax code is so very complex – simplification makes enforcement far easier, makes compliance easier (less costly), and encourages trust in the tax system with greater transparency.

You also let your selfishness show there – tax business so you won’t tax me! Of course figuring out why we are driving business overseas is not nearly as worthy of focus as punishing those who stay.

Gee. That s a one-sided rational. Maybe if you earned more you wouldn't have had to mortgage your entire future to buy that lamborghini. You lazy suck. Go earn more money. What? you can't afford a lamborghini? Why the fuck would you spend more than you earn??? Ask again - Why the FUCK would anyone spend more money than they are earning?? More to the point - why the fuck would anyone think that raising taxes to pay for stupid spending is any better of an idea?

Because however stupid the things we chose to spend our money on, we chose in the legitemate constitutional manner, and therefore have an obligation for paying our own way and not letting our children foot our bill?

I would have thought, given your emphasis on personal responsibility in your other posts, that you would have gotten this, but if you don't have the money for a program, you either find a way to raise it or you don't enact the program. Our current revenue-raising efforts do neither. Instead, they mortgage the nation's security and boomer's children's fiscal health for current spending. It is therefore unfair and unethical. As for why they do this, ask a boomer. It's my experience they have trouble dealing with the phrases "No" and "Because we can't do that", but that doesn't really explain the generation as a whole.

When people speak of a flat tax, we speak of a single tax rate and not of a fixed lump sum. The idea being that no matter who you are or what you do, you pay the same fixed percentage.

That's OK then.

You are arguing from a personal bias with little to no actual information – you assume everyone is selfishly just trying to wiggle out of taxes rather than create a more efficient and equitable system.
The staunchest flat tax advocates are economists who base the support for flat tax on both theoretical models and actual case studies. Given the switch of an increasing number of countries to a flat tax system, the number of case studies is growing rapidly, all of which pointing to substantial economic gains.

Is that really such an unfair assumption to make though? I concede that it's not necessarily true in some cases - some professional economists really do believe in the theory with conviction. But one principle stands out above all others here: It is difficult for a man to understand something if his salary depends on him not understanding it. The staunchest advocates of the flat tax, economists or otherwise, would probably have much to gain personally from the implementation of such a system. You don't hear many of the world's poor arguing in favour of a flat tax, do you? Although probably that is because nobody is in agreement on where the threshold should be set.
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Funny how you characterize the behavior of others as being obviously self-serving selfishness while you operate out of a sense of altruism.


Now there's an unfair assumption if ever I saw one.
I'm currently a student and hence don't pay any taxes. It doesn't affect me at the moment, and provided the threshold is set at a reasonable level, it won't affect me. So why should I even care?
I said I wasn't against the idea of a flat tax - I didn't say I thought it was the best idea though. I'm personally in favour of progressive taxation (not the silly brackets of 70% tax and above though), provided it is limited somewhat so that nobody pays more than 50% of their income in taxes. Any more than that is destructive.


The problem with ‘trickle-down’ is not that it doesn’t work; it is that it has become very difficult to convince people that it will continue. Long term investments are based on expectations of the future, not temporary situations, and as such will not be made if people expect congress to jack the rates back up – nobody wants to get caught with their pants down again.

Fair point - you can argue the toss about what sort of taxation policy to have, but what it certainly should be is consistent, so that business knows where it stands.


Cutting rates has shown time and time again to be highly beneficial. The late 80s, the 60s, the 20s; all great products of slashing the tax rates. The past few years are also a great example – rates were cut and the economy has been booming (which is remarkable how shallow a recession there was after the tech bubble). Granted, government debt is way too high, but that is a Keynesian position and not a supply-side position.

Really? How then do you explain the fact that the economy boomed after Clinton raised taxes on the top bracket? Admittedly, he had to do it in order to reduce the crippling national debt caused by a decade of Reaganomics, but even so, the growth was impressive. And no, you can't say that it was a delayed effect and give the credit to Reagan or Bush 1, I'm afraid.

A better example is this: To put things in perspective, consider that Americans pay about 34% of GDP in taxes (although this is probably a bit lower since the Bush tax cut took effect). In comparison, Sweden pays almost double - 60% of GDP in taxation. If you accept the theory that cutting taxes leads to economic growth, then you should expect Sweden's economy to be as dead as Monty Python's parrot. This is not so - Sweden is booming - far lower unemployment than the US, with far higher living standards, despite the cost of booze being sky high.

The real way to protect the economy is to make people spend more money. You can do so by lowering interest rates to encourage people to spend on credit - but then you just set yourself up for a future crisis because you can't guarantee that rates will stay low. Also, it's more difficult to attract foreign investment with a low interest rate.

A much better way is to protect the purchasing power of lower paid workers - people who aren't just going to stuff money into savings accounts, but people who are going to spend it. Cutting taxes for the rich might lead to more investment and spending, but it's not a guaranteed effect by any means. Putting more money into the hands of those who will definitely spend it - building the economic pyramid up from the bottom - is a far more sustainable way of producing growth than giving a few rich plutocrats even more power.


Booming economies raise the standard of living for everyone. Labor becomes scarce, thus wages go up, capital flows more freely so credit is easier to get (thus making loans and financing cheaper for people); a growing economy is a good thing.

True, a growing economy is a good thing, on that we can agree. But cutting taxes for the rich is a dubious and rather unreliable way of creating growth.


Unless I am mistaken, it is not Bush, but his opponents, who are demanding an increase in payroll taxes.

True - although this is largely to do with securing the social security surplus (which is funded out of payroll tax receipts) than anything else. But that's a different argument. I do have an essay which corrects a lot of common misconceptions about social security, which I posted in a previous thread a few weeks ago - nobody took any notice.


By the by, 1% is a very large number when you are talking about the national economy – think of it this way, 1% of the population is still 3 million people. Saying ‘only’ 1% is not helping your case.

I can't argue with that. But the argument Bush was making was that eliminating the inheritance tax would benefit the majority of farmers and small business owners. 1% may be a lot of people - but there's no way you can honestly define it as a majority in any sense. In any case, most farmers and small businesses weren't affected by the inheritance tax in the first place.


Because taxing someone just because they have some wealth is not a good recipe for economic growth. Just because a company has some cash in the bank does not mean it is a good idea to raise taxes on it. For example – how about if every time your bank account has a positive balance, we say you are obviously making a profit so we will raise your taxes? Sound like a good way to encourage you to save some money?

Fair point - but that doesn't answer my question. Hint: You don't base profits on bank balances, but on turnover. You also try and cut out creative accounting tricks, such as paying employees with stock options (which don't count as expenses) instead of real wages (which do).


A tax cut is not a transfer – lowering taxes is not giving someone government money, it is just not taking as much of theirs away from them, it is letting them keep more of what they earned.


True - but I was talking about retroactive tax cuts - which in actual fact are a direct lump sum transfer of money from government to tax cut recipient.


You also let your selfishness show there – tax business so you won’t tax me! Of course figuring out why we are driving business overseas is not nearly as worthy of focus as punishing those who stay.

I can see how you might perceive it as being selfish - but you've slightly misinterpreted what I said. Surely it makes sense to crack down on tax evasion. If I personally arranged to have all my paychecks delivered to an office in Bermuda so I didn't have to pay tax on them, the IRS would be down my throat screaming Fraud! But corporations can get away with it, despite clearly having profitable domestic operations. All I'm saying is that if we effectively prevent tax evasion, then the overall tax burden for everyone could be a bit lower. That's good for everyone, right? If it takes a flat tax system to accomplish this, then fine, I'll go with that.

Wow, quite a lengthy conversation going on here. I'm honored.

Now, I wonder if some states would be willing to replace their progressive income taxes with flat taxes. Two states (Nevada and Pennsylvania, I think) have no income tax, but for the rest that do, I wonder if they can.

Wow, quite a lengthy conversation going on here. I'm honored.

Now, I wonder if some states would be willing to replace their progressive income taxes with flat taxes. Two states (Nevada and Pennsylvania, I think) have no income tax, but for the rest that do, I wonder if they can.

Why would they replace them with flat taxes? Taxes aren't supposed to be constructed in order to "punish" everyone equally, they're the sole tool a legislature has to enact change (for better or for worse).

Why would they replace them with flat taxes? Taxes aren't supposed to be constructed in order to "punish" everyone equally, they're the sole tool a legislature has to enact change (for better or for worse).

I think of it this way. All citizens are equal before the law. Therefore, they pitch in equally.

I think of it this way. All citizens are equal before the law. Therefore, they pitch in equally.

Thanks for the advice, Stalin.

Thanks for the advice, Stalin.

You're welcome. Now back to the gulag, all of you.

Wow, quite a lengthy conversation going on here. I'm honored.

Now, I wonder if some states would be willing to replace their progressive income taxes with flat taxes. Two states (Nevada and Pennsylvania, I think) have no income tax, but for the rest that do, I wonder if they can.

Texas has no state payroll tax.

Although the sales tax is higher then some states to compensate, and seems to be working, we have a surplus.

Texas has no state payroll tax.

Although the sales tax is higher then some states to compensate, and seems to be working, we have a surplus.

Well good. Glad some states have their finances in order. I live in New York, and between rising health care costs and an incompetent state government, we're not only some of the most heavily taxed Americans, but also have a horrible financial status.

Well good. Glad some states have their finances in order. I live in New York, and between rising health care costs and an incompetent state government, we're not only some of the most heavily taxed Americans, but also have a horrible financial status.

You can complain when you have to pay twice the state's highest sales tax on food and drugs.

You can complain when you have to pay twice the state's highest sales tax on food and drugs.

Well, aren't you just a gloomy little cloud, here. NS seems to be full of them these days.

Texas has no state payroll tax.

Although the sales tax is higher then some states to compensate, and seems to be working, we have a surplus.

Unfortunantely a sales tax is a regressive tax.

So when tax time comes along you don't need to fill out a State level Income tax form?

Well good. Glad some states have their finances in order. I live in New York, and between rising health care costs and an incompetent state government, we're not only some of the most heavily taxed Americans, but also have a horrible financial status.

Oy vey, you're telling me! Though to be fair, its not entirely the state government's fault, the local levels are the worst.

I'm just curious, do you live in:
Group 1: New York, Kings, Queens, Bronx, or Richmond County?
Group 2: Suffolk, Nassau, or Westchester County?
Group 3: Anywhere else?

I'm originally from group 2 but now live in group 1.

Oy vey, you're telling me! Though to be fair, its not entirely the state government's fault, the local levels are the worst.

I'm just curious, do you live in:
Group 1: New York, Kings, Queens, Bronx, or Richmond County?
Group 2: Suffolk, Nassau, or Westchester County?
Group 3: Anywhere else?

I'm originally from group 2 but now live in group 1.

Western New York, in Rochester. I figured that New Yorkers would deal with local governments more, but up here, we don't have the demands of a large city. Just an incompotent state government that robs us blind. New Yorkers probably have it worse overall, but I must say that the city has done remarkably well these past few years. Upstate, meanwhile, is going to the shitter. I'm leaving for DC soon.

Western New York, in Rochester. I figured that New Yorkers would deal with local governments more, but up here, we don't have the demands of a large city. Just an incompotent state government that robs us blind. New Yorkers probably have it worse overall, but I must say that the city has done remarkably well these past few years. Upstate, meanwhile, is going to the shitter. I'm leaving for DC soon.

I hope you don't take offense if I agree that Upstate's economy is going down the shoots, now that so many jobs have been leaving.

The interesting things about the city is that property taxes are actually really really cheap, mainly because you have so many people paying on the same property. On the other hand, I believe the city does have its own income tax. I'm not sure how big it is since I don't claim residency here yet.

Group 2 I think has it the worst right now. The local property taxes are ridiculous. Just, yeah, out of their minds. 75% of them almost go to education though. Thats why you don't see many private schools on long island, the public schools tend to pull their weight. There's only like one or 2. Maybe 5 max if I haven't heard of some. But thats five in a region of 3 million on LI.

Edit: Also, good luck in DC! I hear there's a lot of crime down there, but as long as you avoid the 1600 Pennsylvania Avenue area I think you'll be fine. :D

I hope you don't take offense if I agree that Upstate's economy is going down the shoots, now that so many jobs have been leaving.
None taken. Virtually anyone who can leave is leaving.

Group 2 I think has it the worst right now. The local property taxes are ridiculous. Just, yeah, out of their minds. 75% of them almost go to education though. Thats why you don't see many private schools on long island, the public schools tend to pull their weight. There's only like one or 2. Maybe 5 max if I haven't heard of some. But thats five in a region of 3 million on LI.
Don't get me started on education in the state. It's not bad as far as other states go, but we have a looney and overpriced one.
Edit: Also, good luck in DC! I hear there's a lot of crime down there, but as long as you avoid the 1600 Pennsylvania Avenue area I think you'll be fine. :D
Thanks. The high crime areas, btw, are only about half the city. The other half is filled with government offices, embassies, large corporations, millionaires, etc. That's the half I'm moving to. But thanks again.

But one principle stands out above all others here: It is difficult for a man to understand something if his salary depends on him not understanding it.
So essentially you are stating that economists (and everyone else who supports a flat tax) are paid to not understand how an economy works? I might be able to respect your statement if you limited it a tendency toward bias among those who work for a policy group with a specific focus, a corporate interest, or a narrow political group. Stating that all economists and other supporters of a flat tax are paid to be biased against other tax systems is nothing short of a tinfoil hat conspiracy theory of economics.


The staunchest advocates of the flat tax, economists or otherwise, would probably have much to gain personally from the implementation of such a system.
As does everyone else. Wallmart executives state that having a decade which makes the Great Depression look like the time of milk and honey would be bad. Obviously they are motivated by self-interest. This does not mean having the worst depression in history would be a good thing.

You don't hear many of the world's poor arguing in favour of a flat tax, do you? Although probably that is because nobody is in agreement on where the threshold should be set.
Honestly, I cant say that I have spent much time traveling the world discussing it. Whether 'the poor' are in favor of it or not is irrelevant. Not only are 'the poor' not a homogeneous group, even poor people are motivated by self-interest. This is why you have people yelling about how money is evil and that anyone with not living in poverty should have their assets forcibly redistributed - I doubt any rational individual thinks this is a viable economic system, yet 'the poor' seem to be in favor of it.

When looking at the effects of disease and appropriate cures, it is far better to ask doctors and not survey 'the poor'. When evaluating the effects of nuclear fission, it is generally better to ask physicists than to survey 'the poor'. Somehow economics is different; people hold that uneducated and impoverished masses are somehow better able to craft public policy which is most equitable and promotes the greatest growth. Personally, I tend to look to economists when it comes to economics.

Of course, a lot of 'the poor' in Africa who get infected with HIV ignore doctors and listen to so called 'common knowledge', which holds that it is caused by witchcraft and is cured by sleeping with a virgin. I tend to go with people who have spent their lives in pursuit of objective knowledge on the subject rather than relying on 'the wisdom of the village'.

I'm currently a student and hence don't pay any taxes. It doesn't affect me at the moment, and provided the threshold is set at a reasonable level, it won't affect me. So why should I even care?
I said I wasn't against the idea of a flat tax - I didn't say I thought it was the best idea though. I'm personally in favour of progressive taxation (not the silly brackets of 70% tax and above though), provided it is limited somewhat so that nobody pays more than 50% of their income in taxes. Any more than that is destructive.
You should care because the economic fortunes of the society you live in has a great impact on your life. Everyone (aside from a few hermits) is affected by economic policy - even if you do not pay taxes yourself (though presumably you too will someday enter the workforce).

Most of those who have devoted years of study to it (those evil economists who can't be trusted - years of academic pursuit has instilled the desire to foster greater suffering and drive people into destitution) put that rate at being around 25% before it becomes destructive.

*by the by, I am just taking the piss about the whole evil economists thing. I don't think it likely that you think that way; too many years reading economic theory encourages

Really? How then do you explain the fact that the economy boomed after Clinton raised taxes on the top bracket? Admittedly, he had to do it in order to reduce the crippling national debt caused by a decade of Reaganomics, but even so, the growth was impressive. And no, you can't say that it was a delayed effect and give the credit to Reagan or Bush 1, I'm afraid.
Productivity gains mostly. You know... the whole 'tech boom' you might have heard something about. Raising taxes on the wealthy is absolutely not the way to encourage economic growth. That you would even suggest such a thing is absolutely absurd.

A better example is this: To put things in perspective, consider that Americans pay about 34% of GDP in taxes (although this is probably a bit lower since the Bush tax cut took effect). In comparison, Sweden pays almost double - 60% of GDP in taxation. If you accept the theory that cutting taxes leads to economic growth, then you should expect Sweden's economy to be as dead as Monty Python's parrot. This is not so - Sweden is booming - far lower unemployment than the US, with far higher living standards, despite the cost of booze being sky high.
Above optimal taxation will not suddenly cause an economy to completely stop - it causes a reduction in growth. You really should actually take half a moment, just a couple seconds is all it takes, to check your facts before spewing off utter nonsense.

Swedish unemployment is higher than the US (though low for Europe) with many people estimating the official number to be considerably lower than reality. Even the official rates put it at 5.6% compared to 4.8% in the US, but many independent groups claim the official Swedish rate is a fraction of reality. McKinsey puts it around 15% (others put it higher, but I trust McKinsey to do a fair job). When it comes to living standard... that is also debatable. Unfortunately such a consideration is very difficult to compare in an objective fashion.

Sweden also has a fairly unique economic environment - it is in interesting demographic and geographic position which allows it to survive as well it does with its system, but it could do far better. The tax burden there is around 51%, which greatly inhibits their economy. With a workforce that is highly educated, well developed infrastructure, amazing access and proximity to markets, and many other great attributes could put Sweden as one of the best places in the world - but they fall far short of their potential.

Economic reform could put Sweden to the top, but their excessive government burden holds their economy down.

The real way to protect the economy is to make people spend more money. You can do so by lowering interest rates to encourage people to spend on credit - but then you just set yourself up for a future crisis because you can't guarantee that rates will stay low. Also, it's more difficult to attract foreign investment with a low interest rate.
You do not 'protect the economy' by making people spend money - you just make them more vulnerable to adverse circumstances. The only reason we have not seen serious problems is because the rest of the world is still happy to prop up this unsustainable position (largely because some countries are trying to fix their currency to the dollar).

Lowering interest rates encourages investment - it has very little to do with consumer spending compared with business spending. You want businesses to take loans to invest in expansion. Obviously you cannot guarantee that rates will stay low - inflationary pressures require a rise in the interest rates to contract the money supply so the economy does not overheat. Your concern is because people with debt sometimes foolishly take on more than they can sustain - largely because of your view that 'spend like there is no tomorrow' is good economic policy. Foreign investment is not scared away by low interest rates in the least - rate of return on investment is what is important. Government bonds are not as attractive, but when it comes to economic investment it is fairly irrelevant if it comes from foreign or domestic sources.

A much better way is to protect the purchasing power of lower paid workers - people who aren't just going to stuff money into savings accounts, but people who are going to spend it.
How does people not saving money protect their purchasing power?
Money in a savings account is a good thing - it not only protects people from loosing everything when the economy is not perfect, but it also provides funds for the banks to loan out. When foreigners are willing to loan money to your country you can get away with not having any domestic savings, but it is a very dangerous position to be in.

There is a little something called the money multiplier. Basically, when money is deposited in a bank, the bank loans it out again (minus a reserve). That loan is then used to buy other things and the seller of those things puts it in the bank. The bank then loans the money out again. This goes on and on. "Stuffing it in a bank" does not eliminate money from the economy but does quite the opposite - it provides funds for investment.

Cutting taxes for the rich might lead to more investment and spending, but it's not a guaranteed effect by any means. Putting more money into the hands of those who will definitely spend it - building the economic pyramid up from the bottom - is a far more sustainable way of producing growth than giving a few rich plutocrats even more power.
I really do not know what to say at this point... other than perhaps you should work a little harder on eliminating your political bias and learn a bit about basic economics and finance. 'Sticking it to the fat cats' may be a romantic notion among the working class, but as an economic philosophy, it lacks any empirical basis.

Investment is a good thing - investment comes from someone devoting a lot of money into improving (or starting) a business. This money can either come from leveraging assets (loans or corporate bonds) or out of pocket. If you want to restrict things down to out of pocket expenditures, then only rich people will be able to invest.

Small business owners are the core of any successful economy - the vast majority of which rely on investment, rather than their own savings (oops, wait, i forgot they are not supposed to have any savings). This requires both people to have put money in the bank and incentives to loan that money out (a good return on investment). If you penalize investment (high tax rates) there will not be enough incentive to justify the risk. Why loan my money out if, best case, I will make a pittance, but could also loose it all? Is that pittance worth the risk?

Robust spending is a good thing, but not when it comes at the expense of killing credit markets. What do you think would happen if people had to pay for everything up front? No mortgages, no car loans, and no credit cards.

True, a growing economy is a good thing, on that we can agree. But cutting taxes for the rich is a dubious and rather unreliable way of creating growth. Do you really believe higher taxes are a way of stimulating an economy? Encouraging investment is the best way to stimulate an economy. Investment spurs growth by expanding businesses, improving productivity, improving infrastructure, and even creating business to begin with.

Just cutting taxes on high incomes and capital gains does not create a booming economy, but it is a major factor. No policy operates independently of everything else. You have to have all the right ingredients, but unfortunately too many people do not understand economic systems.

Look at it this way: not eating a pound of fudge a week will not make you thin, but it is really hard to get in shape if you do.

True - although this is largely to do with securing the social security surplus (which is funded out of payroll tax receipts) than anything else. But that's a different argument. I do have an essay which corrects a lot of common misconceptions about social security, which I posted in a previous thread a few weeks ago - nobody took any notice.
Never saw it. The Social Security system is a horrid thing that really needs to be removed. Payroll taxes seriously restrict employment and drive down wages. I love that some people make arguments that a flat tax is regressive taxation, where as an actually regressive tax like the SS payroll tax is ignored.

the argument Bush was making was that eliminating the inheritance tax would benefit the majority of farmers and small business owners. 1% may be a lot of people - but there's no way you can honestly define it as a majority in any sense. In any case, most farmers and small businesses weren't affected by the inheritance tax in the first place.
Never said 1% was a majority, and it really doesnt have to be. I am a staunch supporter of fair systems, not 'lets screw over a minority'.

Fair point - but that doesn't answer my question. Hint: You don't base profits on bank balances, but on turnover. You also try and cut out creative accounting tricks, such as paying employees with stock options (which don't count as expenses) instead of real wages (which do).
Actually, profits are how much your income exceeds expenditures. Generally speaking, when your assets go up, it is typically considered making a profit. ;)
Higher turnover is meaningless - I can sell 10 widgets with a profit margin of $10 ($100 profit), or I can sell 100 widgets (much higher turnover) with a profit margin of $0.50 ($50 profit). In this case, higher turnover led to less profit, not more.

The point is, just because a company has some money in the bank (which every smart company - or person for that matter - keeps some cash in the bank), does not mean that it should be taxed at a higher rate.

Stock options are a perfectly valid means of compensating employees. Also, stock options are (at least in the US after 2005) considered expenses (before the GAAP change, they were just included in the accompanying financial notes and not as an expense). I'm not sure why you raise stock options, unless you mean to imply that stock options are untaxed income, which they are most certainly not. The market value of the share is usually taxed as ordinary income rather than capital gains (though one type of stock option carries a lot of restrictions but is eventually taxed just as capital gains).

As such, the only benefit (before the 2005 change) was that a company could make their earnings look a little better (though at the cost of potentially diluting the share price a little). In terms of tax avoidance, it is not an issue.

True - but I was talking about retroactive tax cuts - which in actual fact are a direct lump sum transfer of money from government to tax cut recipient.
Oops, i overcharged you... here is your change.

I can see how you might perceive it as being selfish - but you've slightly misinterpreted what I said. Surely it makes sense to crack down on tax evasion. If I personally arranged to have all my paychecks delivered to an office in Bermuda so I didn't have to pay tax on them, the IRS would be down my throat screaming Fraud! But corporations can get away with it, despite clearly having profitable domestic operations. All I'm saying is that if we effectively prevent tax evasion, then the overall tax burden for everyone could be a bit lower. That's good for everyone, right? If it takes a flat tax system to accomplish this, then fine, I'll go with that.
That is not a valid comparison. The valid comparison would be for you to change your citizenship and live in Bermuda, but conduct business with American clients.

Tax evasion is obviously a bad thing and this is one of the big selling points of a flat tax. Flat taxes make the compliance cost of taxes (time and money spent filling out paperwork or with an accountant) much lower, which encourages compliance. Additionally, flat taxes eliminate the complex system of tax credits and exemptions which allow for 'creative' accounting to attempt tax avoidance. This is also one of the arguments for making tax rates very low and easy to understand: the grey and black economies constitute a huge sector of economic activity which, if encouraged to join the regular economy, would result in massive gains.

Some estimates put the complexity of the US tax system to cost the economy around $200 billion dollars for federal taxes alone (about 20% on top of what is collected). There are 6.6 billion hours that could be spent doing other things. This doesn't even include state or local taxes.