Ted Cruz and the Flat Tax

ForbesShould Cruz continue to profess the desire for a flat tax, the Democratic opposition will be downright jubilant, as they will be able to further the perceived economic divide and distrust of Republican candidates by explaining that the institution of a flat tax will increase the tax burden of many lower and middle-class taxpayers while immensely benefitting the wealthy.

The truth is that a flat tax is fundamentally superior to the current progressive tax system for a number of reasons. Functionally, right now, the poor get actual benefits paid to them from the tax system through the Earned Income Tax Credit along with various other credits and deductions, and of course leaving out the actual benefit programs for food, housing, unemployment, and so on. These people are incentivized to vote for higher taxes on everyone else, taxes they do not have to pay.

On the other end of the spectrum, some corporations with political connections and those who inherited their wealth also pay little or nothing in taxes, through the use of clever accounting, special tax loopholes inserted by politicians they helped elect, and the simply fact that taxes are based on income rather than consumption -- and they are wealthy enough to have effectively no personal income because they are wealthy enough that they do not have to work. These people have little incentive to reduce the taxes they aren't paying personally anyway.

The people in the middle, however, those who are working to secure an income for themselves and their families, those who are not yet rich but working hard to become rich; these people pay through the nose to a tax system that penalizes them more the harder they work.

By switching to a flat tax, the incentives across the political spectrum will be corrected. The IRS can be largely eliminated, along with its horrible bureaucracy and repressive rules and political bias. The incessant political desire to trade favors in the tax system for campaign donations will be reduced. The tax preparation industry can be eliminated. People can do their taxes on a postcard -- add up your income for the year, calculate 10% (or whatever the number is) of that, and send it in.

A poor man may send in $1000 from his income of $10,000. Does that seem too much? Surely he will receive more than that in government benefits even without the various tax credits he used to receive, and he can always vote to lower his taxes along with everyone else's taxes.

A hard-working individual may send in $10,000 from his income of $100,000. Does he need the money less than the poor man? Perhaps, but he is already paying 10 times more and receiving fewer government benefits.

A high-earning figure like a celebrity or CEO may bring in $1,000,000, but they will pay $100,000 rather than claiming their latest film didn't make any money because it was all hidden in shell corporations that lost money on paper, and they won't be able to avoid the taxes by employing their family and friends in a tax-exempt charity that just happens to pay for its executives to travel, play golf, and get good PR.

That's what fair looks like. Everyone pays the same rate.

There's a reason they call the current income tax system "progressive".

This entry was published Wed Mar 25 11:06:38 CDT 2015 by TriggerFinger and last updated 2015-03-25 11:06:38.0. [Tweet]

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