Sunday, January 6, 2008

Some say 41% flat tax too low.

Presidential candidate Mike Huckabee is proposing a flat tax that some say is unrealistic because it is too low to replace income tax. The suggested flat rate is 23% on the purchase of all goods and services. Small businesses which make up the majority of jobs (other than government) would pay 23% on their service or goods and 23% when their owners spend the earnings. Since the second 23% is not on the total amount it works out to 41%. Local sales tax could add another 8% on each side. I worked for a major company for years doing software development and data processing. I now do that through a web business to individual customers. I pay 6.6% sales tax (Texas) and several hundred for local and federal small business permits. I then pay what everyone else pays on the earnings plus a little extra without a company match on Medicare. But unfortunately I do not get many of the benefits, such as health insurance, unemployment benefits, or disability coverage. I then pay another 8.25% sales tax on most things I purchase. When companies outsource to India, or do data processing in-house, they do not pay sales tax or these business fees for the developers. If that rate goes to 23%+6.6%=29.6% I doubt that very few US companies could compete with foreign technology companies. Since these are internal business processes taxing foreign companies would not work either. The entire process could move overseas. I don’t know how a 41%+6.6%+8.25% = 55.85% tax is low. But since I now pay as much as 78% tax 6.6%+8.25%+28%+1%+20%+12%+4.25%+3%+3%+2% (does not add up to 78% because some taxes such as 4.25% franchise tax is not on total income) on my income I guess it is. What about just half. I vote for a flat 50% tax only on what I spend and not on what I make.

2 comments:

Anonymous said...

Working HARD at something that brings you life supporting income and of course a sense of personal accomplishment, will make paying the taxes seem a little easier!

Anonymous said...

First, there will never be a flat tax for some obvious reasons (primarily, the rich are expected to more, much more).

BUT, if there was... I anticipate some very interesting dynamics. 1. People would consume less! 2. Would you have to pay National Sales tax on everything? Like buying a house? Some have suggested that necessities would not be taxed. That would be cool, but a regulation nightmare. 3. People would create local markets. If I can borrow my neighbors lumber cutting machine, then I avoid the taxes. Or if I can craft from scratch gifts - woohoo. Or if I can cut firewood and avoid natural gas, yeah! Or if I can raise my own chickens, or have a greenhouse for veggies, or drill my own well or do my own home improvements... Basically, the value for your own time goes up!

Now, I just need to stop spending so much time pondering a pipe dream.