Wednesday, October 19, 2011

Flat

As in "flat on your butt"--which is the way you will be if something like a flat-tax plan ever passes. This flat-tax idea seems to be the latest gee-gaa plan being trotted out by the Republican candidates for the GOP nomination for president in next year's election. It's going to make everything better, they say. Rick Perry, the governor of Texas, beloved of the Tea Party nuts and flat-earth types who think science is absurd when they don't agree with its conclusions, is about to trot out his own flat tax proposal. It's a "me-too" move: Perry is countering the so-called "999 plan" being proposed by Herman Cain, the Godfather Pizza guy. One of the 999 triad is a 9 percent flat tax on incomes. Another is a 9 percent national sales tax (a consumption tax).

Here's all you need to know about these taxes the flat tax on incomes or on consumption: they're regressive. They fall much harder on middle and low income people than on the rich "for the simple reason that most lower income people use all of their income to pay for food, clothing, shelter and other consumption whereas members of the upper class have lots of cash to spare that they are unlikely ever to consume in their lifetimes. There are additional significant flaws in those tax schemes, like unrealistic economic assumptions, difficult transition paths, rosy revenue scenarios, misleading propaganda about rates and the probability that a national sales tax that cuts deeply into lower income finances will repress consumption that fuels small businesses." And they would join a lot of other regressive taxes already out there: state and municipal sales taxes, for example.

There's a really good discussion of why these tax proposals are good only for the uber rich right and why the Cain plan is even more regressive here.
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