Thursday, September 20, 2012

Representation Without Taxation

America's foundation was partly based on no longer accepting "Taxation without representation" from the King of England.   Is it any less logical for Mitt Romney to question "Representation without Taxation?"  I'm stealing from Ian Cowie at The Telegraph in using his phrase.  It's so good!

You know America might be reaching a tipping point when about 50% of the household in the US have at least one member receiving government payments.  Assuming benefits continue indefinitely (some benefits do and some don't), which would be Obama's apparent dream,  then people who receive benefits naturally would have an interest in maintaining or voting for candidates that are "soft" on government redistribution---on and on until the system collapses.   This is the relevant correlation with the European countries, who are well beyond the "tipping point."

Yes, a lot of those households receiving benefits are on Social Security and Medicare. Some receive Medicare.  It's actually a complicated situation. And yes, 47% of workers pay no income tax. See the Wall Street Journal Article here.     I know Mitt Romney went overboard and erred in his assessment of a complicated state of affairs, but I think I understand his alarm and despair at the current state of affairs.    

Ok, I've oversimplified too much and beat up unfairly on the bottom 47%.   I apologize for myself and Mitt but........

A Flat Tax Rate Is Truly Fair To All

That's why there should be a flat tax of 18 or 20% on all income above the poverty level.  In that way, everyone pays their fair share.   If you're single and make $40,000, then you pay 20% of the difference between $40,000 and the poverty level of $11,170.  This equates to 20% of $28,830 or $5766 in Income Taxes.   If you make $1,040,000, then you $208,000 in Income Taxes.

Oh, and no deductions.   That's really fair right??   Right!  I'm glad that you agree.    This way, everyone has "skin in the game" and all can squawk with truly equal vigor about how well their tax dollars are spent.

You want to know why this is so difficult?   It's because the bottom 47% aren't paying income tax now.  If you have a truly flat rate, then most of the bottom 50% have to pay something!  Also, since the top 1% are already paying 24% on average, then the 20% flat rate actually lowers their marginal rate (the top 1% revenue would go up because no deductions).

Sorry, but you already agreed that the flat rate is fair!   What we have now is unfair and amounts to "representation without taxation" for about half of the people in the USA.

Oh, an average tax collection rate of say 18% is four percentage points above the post-war average tax take of 14% and would substantially solve the budget deficit problem if there were some real budget cuts to match!

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