ProPublica

Journalism in the Public Interest

Cancel

Flat Taxes Are Big in the Former USSR. Have They Worked?

Herman Cain, Rick Perry and Newt Gingrich have all introduced flat-tax proposals. What other countries have implemented flat taxes, and how has it gone for them?

Republican presidential candidate Gov. Rick Perry holds up a postcard representing his flat tax plan at the ISO Poly Films factory on Oct. 25, 2011 in Gray Court, S.C. Perry toured the factory and then discussed his 20% flat tax (Photo by Richard Ellis/Getty Images).

GOP presidential candidates Herman Cain, Rick Perry and Newt Gingrich have all introduced proposals for flat taxes, which aim to tax everyone at the same rate. The idea is to simplify the tax code, getting rid of loopholes and reducing entitlements and deductions. Gingrich and Perry have both promised that Americans would be able to file their taxes on a postcard.

Flat income taxes have been criticized for putting a greater burden on middle-income people while cutting taxes for the rich. Critics say a flat tax would bring in less revenue for the government to fund social programs (though, as Rachel Weiner of The Washington Post puts it, “of course, for many conservatives, a drastically smaller government is a feature, not a bug").

The United States briefly tried a flat 3 percent income tax between 1861 and 1872; a flat income tax was reintroduced in 1894 but was struck down by the Supreme Court. Instead, the U.S. has had a graduated income tax since World War I. We haven’t really gotten to see how a flat tax would play out here, and it’s a good time to take a look at other countries that have adopted flat taxes, and how it worked out for them.

Flat-tax success stories?

Most of the countries that have adopted flat taxes in recent years are from the former Soviet bloc. Throughout the 1990s and early 2000s, six former Soviet republics and three other Eastern European countries flattened their income-tax rates. Some, like Russia, adopted a flat personal income tax but kept a different rate for corporate income. Others, like Estonia and Slovakia, instituted a flat tax on personal and corporate income. Many of these countries also have a value-added tax, which taxes the difference between the final cost of a product and the cost of the materials used to make it.

Estonia adopted a 26 percent tax on personal and corporate income in 1994. The country had gross domestic product growth of 11.7 percent in 1997, and continuously grew between 7 and 10 percent throughout the early 2000s, although many factors, of course, contributed to that. (U.S. GDP growth was 2 to 4 percent over that period.)

In 2001, Russia switched from a system of 12, 20 and 30 percent tax rates to a 13 percent flat income tax. Adjusted for inflation, revenue from Russia’s personal income tax increased by 26 percent [PDF] in the year after a flat tax was implemented, and by nearly one-fifth as a percentage of GDP. Russia also saw strong GDP growth throughout the 2000s, ranging from 6 to 8 percent from 2003-07.

Apparent success stories like these had American supporters of a flat tax crowing. A 2005 Wall Street Journal editorial declared that "the world is flat;" the Cato Institute, a libertarian think tank, proclaimed a "global flat tax revolution."

 

But economists caution that you can’t necessarily translate these experiences into an American context.

Why flat taxes gained traction in the former Soviet Union

For one thing, those reforms came at a time of massive economic change as former Soviet republics transitioned from command economies to the free market, and Eastern European countries made other systemic changes. Estonia, which introduced a flat tax in 1994, had just started transitioning to a capitalist system three years earlier.

“One of the fastest-growing countries in Eastern Europe has been Slovakia. They introduced flat taxes in 2004, but they also then liberalized the labor market,” said Anders Åslund, a senior fellow at the Peterson Institute for International Economics. “Countries with flat income taxes have had high growth, but you can’t isolate the causality.”

For one thing, adopting flat taxes was also a way for politicians to mark a new era and separate themselves from the former regime. “It was a way of signaling a commitment to the free market,” said Michael Keen, an International Monetary Fund senior researcher who contributed to a 2005 study of Russia’s flat-tax reform.

Flat-tax reforms also caught on because a simpler tax helped to improve collection rates in countries that had large shadow economies and entrenched corruption. Indeed, among industrialized countries, Russia still ranks among the most corrupt.

For those at the top of the income spectrum — whose tax rate had dropped from 30 to 13 percent — there was less of an incentive to evade taxes. The simplified system also left less room to lie on tax forms.

“The more complex the tax system, the more avenues there are for discretion both by people on the revenue side of the collection system and the people paying the taxes,” said Gary Hufbauer, also a senior fellow at the Peterson Institute for International Economics, who formerly worked on tax policy at the Treasury Department.

More than just tax reform

While the 2005 IMF study found that overall tax compliance had improved in Russia — more people were reporting their incomes and paying taxes appropriately — the study also found that this didn’t account for the entire increase in revenue. “The general view among those who have looked closely at the data was that what happened to revenue was a reflection of broader developments to the Russian economy at the time,” Keen said.

An overall increase in wages contributed greatly to increased tax revenue. "Our analysis suggests that the strength of [personal income tax] revenues in Russia over this period was largely driven by an increase in real wage rates unrelated to the reform," the IMF study said [PDF; see p. 40].

Though proponents of a flat income tax speculate that a lower consistent tax rate would motivate people to work harder, the 2005 IMF study also found that that wasn’t the case in Russia. “Based on what we found and what others have found since, there has been very little effect on actual work effort,” Keen said.

How do the candidates’ proposals compare?

Cain and Perry’s tax proposals aren’t quite like the ones enacted in Eastern Europe. Former Tax Policy Center Director Len Burman has a helpful FAQ that clarifies this issue:

Yes, so-called “flat taxes” are common on Eastern Europe and Russia, but they’re flat rate income taxes. They include capital income, such as interest, dividends, rents, and royalties in the base as well as wage income. Because high-income taxpayers receive most of the capital income, this makes those flat taxes more progressive than the flat tax periodically proposed in the U.S. (For example, it was the centerpiece of Steve Forbes’ presidential bid. Forbes just endorsed Perry.)

Both Gingrich and Perry are proposing an optional flat income tax — Gingrich’s at 15 percent, Perry’s at 20 — that would allow you to choose between paying the flat rate or paying according to the current system. Creating a two-tiered tax system, Åslund pointed out, wouldn’t exactly simplify the tax code. Perry’s proposed income tax also isn’t totally flat, because it wouldn’t touch some types of income — for instance, investment income.

Cain’s tax plan is flatter — he’s proposing a 9 percent personal tax, a 9 percent business tax and a 9 percent federal sales tax to make up for the decreased revenue. Under current tax law, sales taxes are already levied by the states [PDF], with local taxes coming on top of that. Cain’s plan also would eliminate the Social Security and Medicare payroll taxes. (Cain has expressed interest in privatizing Social Security, and endorsed Paul Ryan’s plan to privatize Medicare.)

It’s also worth noting that sending in tax returns on postcards, as Gingrich and Perry have pledged to make possible, could cause a new set of problems. “In tax affairs, what you want is precision in terms of defining what’s income or what the tax base is and so forth. You can’t do it on a postcard,” Hufbauer said. Leaving out the details, he cautioned, would leave room for poor administration or tax evasion.

What a flat tax would do in the U.S.

Experts say we probably wouldn’t see any immediate spike in personal income-tax revenue if the U.S. were to adopt a flat income tax. Instead, they say, the candidates’ plans probably would lead to plummeting revenue for the first several years.

“Any growth effects, even in the best of circumstances, that’s a five-year proposition,” Hufbauer said. “And how much growth is a matter of debate.”

Analyses from the nonpartisan Tax Policy Center project that Cain and Perry’s plans would both lead to decreased revenue; the center hasn’t yet scrutinized Gingrich’s plan. Of the other two, Perry’s plan would have a greater impact on government coffers, cutting projected revenue by about 27 percent by 2015.

The Tax Policy Center also concluded that Perry and Cain's plans would mean an increased tax burden on middle- and low-income families. Cain has since modified his plan so those below the poverty line would be exempt from the individual tax. A Tax Policy Center researcher told The Washington Post that poor families would still see a tax increase under the plan, albeit a smaller one.

The Gingrich and Perry plans also include some exemptions and deductions that would make them less regressive. Gingrich’s plan would allot everyone a $12,000 personal deduction, and count charitable donations and homeownership as tax-deductible; Perry’s includes a $12,500 personal deduction, and deductions for “charitable contributions, mortgage interest, state and local taxes, and Social Security benefits.”

Konstantin Pribluda

Nov. 8, 2011, 3:05 p.m.

Russia or (former Soviet Union) does not rely on citizens taxes as income source.  It makes money by selling oil and gas.  And most of people do not pay full income taxes, as only some small part of real wages is paid “white” while most significant part comes over in “envelope” -  so this is not good example.

Flat tax idea will work if “One Million maximum income per member of a rich family (whether it be a businessman or king)” - type laws are passed and enforced.

Richard Ordowich

Nov. 8, 2011, 3:56 p.m.

Is a flat tax a sign of socialism? Isn’t that the term that was used to describe Obama’s health plan? Will we become like Russia? Will we adopt a VAT and then perhaps the Euro? Will communism be next? Be afraid, be very afraid of simple solutions to complex problems.

Flat taxes are stupid. 1) They impact the poor more than the rich. This is known as regressive taxation. Taxes for the rich decline. Taxes for the poor increase. Since the poor spend more of each dollar they receive, spending by this segment has a more immediate impact on the economy. 2) Sales taxes and VAT taxes place heavy burdens on the poor, again, because they spend a greater percentage of their income than the rich who have extra money to save and invest. 3) Deduction and loopholes are designed to encourage peoplr and businesses to engage in activities we consider beneficial and discourage those we don’t want to encourage. 4) The current mess in the tax code is the result of political pressure groups who push particular agendas. SIMPLIFY the graduated income tax, Don’t throw it away.

Why is there no discussion of Ron Paul’s proposal? Paul’s plan is the most detailed and the most progressive of all the Republican plans. He is polling in the top 3 nationwide and in the top two in the first two primary states… and you are talking about Gingrich’s plan? Did Pro Publica get taken over by the Neo-Con crowd? Paul’s plan addresses the real problem which is spending, not revenue. If we stop spending a trillion dollars a year overseas, like 30,000 troops in Korea for 50 years, then we can lower taxes for everyone. How is it that we became the most prosperous country on the planet with no income tax up until 1913 and now today our wealth is being squandered and the average American is being forced to live with a lower standard of living every year while nearly half of what he makes goes to the government, so they can spend a trillion a year in foreign aid and foreign occupation. We already know what works… no income tax and super small government…  so get with it and vote Ron Paul, and bring the troops home!

production or consumer tax makes sure everybody pays..from the drug dealer, under the counter income to the wealthy and corporations and tax percentage can be 10% and we would have more than enough monies coming in.  and teh corporations or business can not pass their fair share of taxes onto the public

The problem with a flat tax is that it ignores the nonlinearity of money.  That is, it’s disproportionately harder to survive, the further you are below subsistence and the faster your money aggregates (due to additional opportunity) the further above you are.  I don’t know the specific shape of the curve, but the most logical approach is to have a graduated tax that matches that shape.

I’d also point out that we should be thinking about taxing income partly based on source.  If you’re working to grow the economy (creating jobs, manufacturing goods to be sold), you should be taxed far less than if you’re a parasite (money through interest or otherwise sitting on assets).

The problem with cutting spending is that big spending can be good.  Eisenhower’s Interstate Highway plan improved commerce dramatically.  The Apollo program generated dozens of times its investment in national revenue, though putting the technology into production (we’re still seeing benefits of those days).  We’ve lost that vision and exchanged it for cut-backs or spending that can’t ever have more than a 1:1 return.

I agree with Ron Paul (via Matthew) that the troops standing around (and worse, those running around killing people in hopes that they’re terrorists), but the idea of a small government says that, first, the corporations that have turned against us will have free reign, and second, there’s no possibility of a new Apollo Project equivalent, with all science being under private lock and key.  To think we’ll make progress that way—to think we’ll survive under those conditions—is naive at best, intentionally destructive at worst.

CLARENCE SWINNEY

Nov. 8, 2011, 6:30 p.m.

FLAT HOW FLAT
No deductions for contribution to church and university?
TOTAL NATIONAL INCOME IS 12,000 BILLION
INDIVIDUAL INCOME IS 10,000 BILLION
CORPORATE INCOME IS 1200B
TOTAL CONSUMER SPENDING IS 10,000 BILLION
TAKE YOUR PICK

9-9-9 IS SO SILLY IT MAKES ME CRY
IT BRINGS IN $1,980B OF REVENUE HALF OUR 3800 BUDGET

20% FLAT TAX ON WHAT?
INDIVIDUAL BRINGS IN 2000 BILLION

2008 TOP 50% PAID 10% IN INDIVDUAL INCOME.
GOT 1000B IN REVENUE
TELL THEM TO PAY 20%. WOW WOW WOW

BOTTOM 50% PAID 3% ON INCOME OF $1,074 bILLION
20% BRINGS IN 200B BUT KILLS LOW INCOMES

WARREN BUFFETT 2010 TAX RETURN SHOWS HE PAID 10% OR 6M ON 62M INCOME. HOW DID HE GET A 56M DEDUCTION?

ALWAYS LOOK TO DOWN

10,000—1200—10,000 TAKE YOUR PICK
.(JavaScript must be enabled to view this email address) numbers freak

CLARENCE SWINNEY

Nov. 8, 2011, 6:37 p.m.

ERROR OLD MAN
2008 TOP 50% HAD 9000 +  OF INCOME NOT 1000

Eric Leinbach

Nov. 8, 2011, 7:32 p.m.

A flat tax by definition is neither progressive or regressive - it is proportional !  If you make more you pay more, if you make less you pay less. The flat income tax was endorsed by both Arthur F. Burns   ( former Fed Chairman in the 1970-1978 ) and world renown economist Milton Friedman, more than 35 years ago. Ronald Reagan made the tax code flatter From 14-70% to 14-28% ending more than 6 years of economic stagnation. More importantly, both politically and socially, a flat tax gives every American a vested interest in ONE tax rate. Since World War II politicians have played rich against poor constantly shifting the tax burden usually to the detriment of the middle class. Ending the class warfare is very long overdue. It’s time for politicians to stop manipulating the tax collection system and the American people, and be accountable. A flat income tax would minimize the “wiggle room” for elected officials- at least on the financial arena. All of us should be in the same proportional boat. The Commonwealth of Pennsylvania has had a flat income tax ranging from 2%- 3.1% for over 40 years. It is very simple. Think of the amount of money save from the reduction of the massive IRS.  And once everyone is paying the same rate the people as a whole can much more easily control elected officials and government spending.

Gary Brownfield

Nov. 8, 2011, 10:12 p.m.

How interesting that you name three candidate’s tax proposals. One of the three barely shows a blip on the national polls yet the one candidate with real answers to taxes and economic problems doesn’t get a word of mention. You are as guilty as the main stream media for the black out given Ron Paul. He gets no respect in the debates and receives less time than candidates who continuously poll below him. If we want to see real change in Washington that will lead to a better life for more Americans then Ron Paul is our last hope.

Ron Paul want’s to get rid of the I.R.S. I like that idea better.
The rest of the Politicians are owned by Wall Street or the Federal
Reserve. Choose wisely we might pull out, Listen to the others
we will Bailout. End the Fed. Take back our Country.Ron Paul 2012
while we still have an America.

Richard Ordowich

Nov. 9, 2011, 8:23 a.m.

“A flat income tax would minimize the “wiggle room” for elected officials- at least on the financial arena. All of us should be in the same proportional boat.”

Regardless of the tax code, the political process always creates “wiggle room”. Government is a bureaucracy. It is intended to balance the social needs of its constituents and the primary tools at its disposal are laws and money. Government can write laws governing how people behave and dispense money to direct behavior.  These flat tax proposals are window dressing for privatizing social security and health care. The trend towards individual responsibility is Republican and tea party dogma. The debate about how flat taxes will affect the population is moot. It’s not a progressive or regressive tax argument. It’s an argument about the size of government and government’s imposition on society.

A flat tax will not create jobs. A flat tax does not address the volatility and instability in the financial markets. It’s a political distraction from the real issues affecting the global economy. But it makes great fodder for the media!

Eric, you’re overlooking how money works.  If I’m making even ten dollars less than subsistence, my life is going to snowball downwards.  One bill gets underpaid every month, and the debt accrues.  If I’m making ten dollars more than subsistence, I can save and occasionally splurge.

Give each of those people a proportional tax and the person under subsistence goes on welfare or dies.  The person above gets closer to subsistence and maybe falls below.

If you’re over what we might call a “luxury line” (you can afford a house and multiple cars for a family, say), tax doesn’t affect you in any meaningful way.  I mean, sure, you might take one less vacation or need to keep your car for a few more years, ten, even thirty percent doesn’t damage the quality of life.

Much higher than that?  There’s a point (and there are quite a few people in this country at that level) where there’s just not enough to do with money.  So it sits, it gets invested, it gets wasted, it goes to infuencing government.  To them, denying them of the majority of their income wouldn’t harm them in the slightest—look at billionaires like Bill Gates dumping a significant portion of their savings into charity and still living the high life.

If we’re talking about taxation, we’re talking about basic math (how much can/should we subtract from a citizen’s income to provide revenue for services and security?), so any tax plan should be able to pass basic experiments like this.  Anybody who speaks in generalities about “fairness” without examples along the spectrum is a crappy economist or a liar.

These quick experiments show that the effect of a quantity of money on the economy and on the life of the owner is not strictly proportional, and is probably far from it.  A flat tax assumes that either it is proportional despite evidence or that rich people have a greater right to survival and political control than the poor.  Flat taxes, then, deny economic reality or encourage what amounts to an aristocracy.  That’s a lot of the “wiggle room” you’re seeking to avoid, since it means a politician is only beholden to the people with disposable income.

That’s not a defense of the existing system, mind you.  The current tax code (ignoring the thousands of pages of loopholes) is a series of flat taxes, and encourages a class mentality.  Worse, it sets the class divisions right in the middle of what would be modern socioeconomic classes.  A proper tax should be a smooth curve that approximates (though to a lesser degree) the reinforcing network effects of money.  I’d go so far as to say that an ideal (unachievable) tax plan should aim to linearize the effect of money, where doubling income gives you twice the effect on the economy, since any more effect is essentially “surplus” you didn’t earn.

Replace the IRS (which Reagan’s Grace Commission proved was ineffective and costly) by a much smaller, more transparent organization and add tax penalties to acts that damage the economy (offshoring jobs, hoarding money, speculating prices upward, creating “complex financial instruments,” and so forth) and tax deductions for charitable spending and community investment, and you’ve got a system that fits on an index card and—shock—discourages corruption rather than encouraging it.

Eric Leinbach

Nov. 9, 2011, 1:24 p.m.

John,
Great analysis. However how do you construct and implement your proposal?

It’s too much to ask people to be honest and truthful about what they make, and what they owe, so people simply “game” the system. They’d do the same no matter what tax structure is in place. So what to do? Get people to realize that there’s no separation between any of us; we’re all human beings living in the human being family, like fingers attached to a hand. If one part is starving it effects everyone and everything.

Equitable living based on justice and responsibility beyond selfishness is a pipe-dream that must become a reality, and really lived before anything substantive will happen. Are we up to it? Have we had enough suffering, greed, and egoic arrogance yet? Maybe not. Choice not chance determines destiny. And if we think we don’t have a choice of being tied-down to the old paradigm full of injustices, then get ready for a push-back choice that will shock and awe those who have been slumbering too long in cushy lounge chairs, because it’s about to get yanked from underneath, and it’s going to hurt when the bloated gluttonous bodies hit the cement of reality. it’s happening now. Wake up folks and smell the sweet fragrance of a new world popping up through the mud, like a lotus-blossom.

Flat taxes on a postcard are like an honor system.  You decide what amount of income is taxable and then pay it.
Problem is that honor systems haven’t worked historically, and especially those that are unlikely to be auditable.

Eric, my thinking (which I’m doing data-free and by the seat of my pants, from my desk at work—shhh!) is that it should just be a matter of your tax is a straightforward algebra on your post-deduction income.  The function would be defined by the some fraction of “super-currency” effect that combining dollars has.

That sounds more complicated than it is, so to fabricate an quick and dirty example, it’s well-known that people improve roughly quadratically (by the square of the number), so one person innovates linearly, two people cooperating get good ideas four times as fast, three nine times as fast, and so on (barring management overhead and the realities of implementing the ideas).  If we imagine money to work the same way (keep in mind that it probably doesn’t), then your “effective income” would be real revenue (minus charitable donations), squared - in math-looking form, (income - donation) * (income - donation).

The tax should be less than that (because some “network effect” is critical to encourage growth, and people who literally can’t afford to eat shouldn’t be much of anything), either by tweaking the exponent (1.5 instead of 2, for example) or taking 75% of that, or whatever.

As I said, the specific numbers are something that would need to be pulled from a real analysis, rather than my half-assed guesswork.  If it’s a smooth curve, I don’t think there’s a situation where getting a small raise costs you money, which I think is the biggest problem with the existing system.

Granted, if you’re doing the work by hand, it’s hard, but anybody with a slide rule, let alone a computer, can make the calculation easily.  Or the IRS can do it, since payroll companies report to the IRS anyway.

Whenever, current “Tax rules & Laws” and the professional Capitalist formulas of modern Economy are failed, that gives a signal to get back again to basic accounting of Socialism for redistribution of wealth for a limited time.
Money is a token, fruitful-positively usable to exchange mainly labours and not to sit as numbers in the banking system as fortunes of businessmen. Men-made new rules such as ‘$ One million maximun per person income is allowed’ and rest will go to the global public funds such as UN’s and private and public credits or debts will be wiped off, just like recent Gaddafi’s etc. are capable of totally changing present bad financial situation in the West including our USA or tomorrow’s North-America.

WE still can print it in volumes, pay off some of the debts, distribute as “must be spent vouchers and collect it back as revenues” and handle the situation by inviting foreign labours @ minimum wages, -like Saudi-Arabia or Libya, to make and produce here everything we need everyday, because we are still blessed and we have free lands and all kind of minerals here too.   
There is another preventive solution to be applied against worst kind of world situation of economy. It will be so easy that presently certified economists cannot even dream about.

Gary Brownfield

Nov. 11, 2011, 1:03 a.m.

@shahislam-When your SOCIALIST friends take over the economy completely I hope I’m dead or living somewhere where there is still freedom. I will not work nor do I expect anyone else to work and have the fruits of labor taken by force and given to someone else. What you call socialism is slavery.

Hufbauer said. “And how much growth is a matter of debate.”

Debate, like in:

“Will any of these proposals reduce the cost of production in the United States sufficient to offset the fact that the PRC and, to a lesser extent, India rig their currency exchange rates to ensure that they maintain competitive primacy?”

“If a more competitive America appeared to be a consequence of shifting the tax burden downwards, is there anything to prevent the aforementioned nations from adjusting their currency exchange rates to compensate?”

“Do we have any evidence that supports the theory that those who are represented by the Republicans, Libertarians, and the neoliberal Democrats want equitable currency exchange rates in light of the fact that most of their profits are derived from exploiting those inequities?”

I.e., if you vote for one of the right, you’re voting to sacrifice the future of your children and your nation to enhance the rate of wealth accumulation of those few who are the only people the Republicans, Libertarians, and neoliberal Democrats actually represent.

Put another way, the goal of these flat tax proposals isn’t anything new:  These proposed “flat taxes” are just more weapons that the right seeks to deploy in the economic and class war that they launched against the American people and the United States of America 40 years ago.

So don’t treat them as a “surprise” or “sneak” attack.

Ralph Chernoff

Nov. 12, 2011, 3:12 a.m.

In devising a tax system sholdn’t some considertion be given to the question of fairness? I do not, as many here do, pretend to be a highly sophisticated economist, but I feel that a fair tax should be based on the taxpayer’s ability to pay, and since the rich are (if I’m not mistaken) richer than the poor, they have a greater ability to pay for (among other hings) taxes. In other words, they are less nconvenienced by taxes than are the poor. That’s the rationale of the progressive (or graduated) income tax. I do not think this is a particularly difficult idea to grasp though many here seem to. At any rate, in 1913, the U.S. Supreme Court,  a court not then (or since) suspected of radical tendencies, didn’t. That’s why they found a flat income tax unconstitutional.

Suppose, for example, a flat tax of, say, 15%. That would leave a family earning $40,000 with just 34,000. not quite at the poverty line but the loss of that $6,000 would hurt in all kinds of ways (e.g., health insurance premiums).

On the other hand, a guy making $400,000 would be left with $340,000. Poor fellow! Hardly enough to scrape by on. He may have to sell one of his BMW’s. or a mistress.

In short, a flat tax hurts poor folks lots harder than it hurts rich folks. Again, I find it difficult to understand why anyone would have great difficulty understanding this, but apparently some of you - like Governor Perry - do.

But maybe I’m missing something. Maybe, just maybe, some of you really believe the poor should be hurt. Why not? Punishing poverty will discover poverty, won’t it? But if you belive that, why would you want a flat tax? Why wouldn’t you want an un-flat tax, one with higher tax rates for the poor and lower rates for the rich? Wouldn’t that punish the pooer and reward the rich more effectively than a merely flat tax?

On the other hand, maybe you’re just a bunch of bleeding heart socialists.

@ Gary B. Don’t worry, it will be temporary, just to reset the currently imbalanced trend and this is the only easier way for our West to maintain status quo.Trust me and thanks.

Gary Brownfield

Nov. 12, 2011, 1:06 p.m.

@shahislam “Trust me”, you must be joking. I would just as soon trust Lenin or Stalin.

Obviously, I am unable to convince you now! Economic-Austerity is unavoidable by the West and we have only 50% human control on mundane things. However, everyone is right somehow.

eric leinbach

Nov. 14, 2011, 6:48 a.m.

Ralph, fairness like beauty is in the eye of the beholder. Fairness, to every individual, is also like pornography- undefinable, but you know it when you see it. Two points for you. First, the Supreme Court did not find the flat income tax unconstitutional in 1913 because it was not fair, but rather because of constitutional limitations on the US government’s ability to tax. That is why a constitutional amendment was required in order to impose any kind of income tax (flat or progressive). Second, a mistress is not sold, and can not be; another constitutional prohibits that. Nor can they be rented, the laws against prostitution prohibit that. (except in parts of Nevada and maybe Wyoming). Women are not property interests under the law anymore; used to be but not anymore at least in the USA.

I agree with the conclusion, Ralph, but not the motivation.  If we substitute something else for money, it sounds less fair:  Let’s always make the strong guy do the physical labor, the smart guy fill out the paperwork, and the neat freak clean up after everybody else, because it’s less of a burden for them overall.  It’s the very basis of socialism, in fact (“from each according to his abilities…”), which I don’t think many people consider fair.

You’re right about the undue burden on the poor, but that shouldn’t mean flipping the burden onto the rich without a better motivation.  I suggest my approach (which I admit might be naive) because the motivation for collection (the right government has to our money) is that it maintains the economy which allows already-large amounts of money to be amplified (thereby earning its cut) and is protecting all of us against undue influence by the richest.

(Another approach that might be even fairer would be to nationalize the financial sector.  Charge interest on loans and fees on “financial instrument” transactions rather than taxation.  The last I checked, the derivatives market alone is several times the planetary GDP; take a tiny fee for each trade, and the debt gets paid off in a matter of months or the banks deleverage.  Either way, we all win.)

@eric leinbach - re: “Second, a mistress is not sold, and can not be; another constitutional prohibits that. Nor can they be rented, the laws against prostitution prohibit that. (except in parts of Nevada and maybe Wyoming). Women are not property interests under the law anymore; used to be but not anymore at least in the USA.”

Kind of make you wonder how corporations can be “people”, doesn’t it?  Since you can buy ‘em, sell ‘em, rip ‘em apart for their component parts, rent their services out, etc. etc. etc.

Ralph Chernoff

Nov. 15, 2011, 7:11 p.m.

eric writes: “fairness, like beauty, is in the eye of the beholder.” I suppose so, but to my eye, there’s nothing uglier than a flat tax.
And I admit it would be difficult to convince a flat taxer that it’s unfair because he/she just doesn’t care. Whatever the reasons for their fondness for flat taxes, fairness isn’t one of them.

But i think questions of fairness, though somewhat arbitrary, are important. For example, which is fairer, democracy or plutocracy? That too is a matter of opinion. Majority opinion.

But thank you for correcting me re the 1913 Supreme Court decision and mistresses. I’d like to get to know more about both.