President Obama has been pushing for a tax system that taxes the rich more heavily than they already are. He calls it paying “their fair share,” but is it really fair? Why (or why not) use a flat tax system?
The way our tax system works now is that the bottom 20% of earners pay 0.3% of the total tax burden, while the richest 20% pays 67.9% of the total tax burden.
Wait, so how is that unfair? It sounds like the rich are already paying more than their fair share and the less well-to-do are getting a pretty sweet deal, so what’s the problem?
What is a Flat Tax System?
A flat tax system charges people a set rate. For instance, if the flat tax rate is used and is set at 30%, that means both the guy making $30,000 a year is taxed 30% on his earnings, and the guy who makes $100,000 pays 30% of his earnings in taxes as well.
If we were really going for a fair tax system, this would be the best option. No one gets any advantage over another, and everyone is treated the same. In a sense, this is the true tax system of a classless society. It is, by definition, equal.
What Is Being Proposed?
The president wants to extend the Bush-era tax cuts for the middle class, which he defines as those making less than $250,000, while increasing taxes on the rich.
For the lower class, this sounds like an even better deal than they have now…only there’s one problem.
It makes the rich far more influential than they already are.
Who has greater influence on what you do: your boss or the guy asking for change outside 7-11? If you’re employed, you probably answered your boss. If you are not, then you probably said the guy outside 7-11. However, the guy outside 7-11 isn’t doing anything to pay your bills or your unemployment.
So Why Don’t We Use a Flat Tax System?
The reality is that, although it is the most fair, it also hurts the lower classes since, obviously, they have less to begin with.
But lets call this what it really is: it is a grossly disproportionate tax rate on people who benefit the least from government programs. It sounds ugly, but that’s because it is anything but “fair.”
With the fiscal cliff approaching, and the Bush-era tax cuts quickly coming to an end, what we thought was economic pain has only been a scratch compared to the evisceration on the horizon.