Ok, ok, so there has been A LOT of talk about taxes lately. I have heard frustrations like "We're paying too much" or "we're not getting what we paid for" or "We should have a flat tax, because our tax system is so unfair".I recently had a discussion about this flat tax idea with a close family member.
It scares me that people think it is OK for citizens to lay out the idea of a Flat tax. I think that mostly, this concept is completely misunderstood, or not thought about enough. FLAT TAX is a very bad idea. Here's why for example...
Lets say that a Flat Tax rate of 20% has been applied...
Scenario #1: Janet is a single mother, making $26,000 dollars/year gross. She has 3 children, and very litte support from her ex. It's tax time, and she owes $5200 in taxes for last year and is wondering how she is supposed to support her family. She worries about paying her rent, childcare and feeding her children on a daily basis. She also pays for healthcare through her job, with a deduction from each month's paycheck of $195.00. Her rent is about average, $800/month for a tiny 3 bedroom apartment. She estimates that she can feed and clothe her children for about $100/week. Utilities, including phone & tv service are about $180. She figures that she will spend $50 on gas each week, and she has POS car and auto insurance costs about $85/month.
Monthly costs Monthly Income
$1860 $2166
In this scenario, Janet would have $306.00 left. Without paying taxes. If she paid her 20% tax by splitting it up over the course of the year, she would be in trouble, with a leftover monthly income of: -$127.00/month. Yikes.
Scenario #2: Gregory has worked his way up the corporate ladder. He is successful with a yearly gross income of $20,000,000. His mortgage payment on his 3rd home is $10,000/month and he has two sports cars that are completely paid off. He has a yacht, and his own private island off the coast of Florida. He doesn't worry about monthly bills or costs, he has people to do that. He is exicted about the decision to imply a flat tax rate. He will actually get to keep more of his income this year! In previous years, before the flat tax, he was practically giving away one-third of his money! now, he will only have to pay $4,000,000. Wow. What a difference! Greg is going to buy another Yacht, and he has his eye on some forclosed real-estate properties as well. What should he buy next?
Ok, so I know that these scenarios are extreme, but just to stimulate a little thought. A flat tax isn't fair, it isn't reasonable. Just think about it. What makes the most sense? Couldn't we apply that well known quote, "where much is given, much is required" to this? I know that it wasn't originally said about anything like this, but think about it. Some people say that a flat tax is the only fair way...but what is really fair?
Obviously 20% means A LOT more to the poor and middle class. A flat tax rate benefits the wealthy.
Just a thought. If there's anyone out there, What is your opinion??
