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Flat Taxes: For Better or Worse? Comments

  • By DailyWorth Team
  • October 24, 2011


Perry and Romney are headed for a confrontation on tax policy. (STEVE MARCUS - REUTERS) Perry and Romney are headed for a confrontation on tax policy.
(STEVE MARCUS - REUTERS)
By now you’ve figured out that a flat tax is pretty much what it sounds like.

In the case of Republican candidate Herman Cain, who is proposing the 9-9-9 system (9% corporate tax, 9% personal, 9% national sales tax), the basic idea is that you’d pay 9% income tax whether you earned $25,000 or $250,000 or $2.5 million.

Others besides Cain have made similar proposals to simplify the tax code. But simpler doesn’t guarantee better. And a flat tax isn’t a magic bullet for our financial woes.

Let’s play out a true flat tax of 9%, with no exemptions, no exceptions: We all pay 9%. If you earned $25,000, you’d pay $2,250 in income tax. If you earned $250,000, you’d pay $22,500.

It looks “fair,” but as you go up the income ladder, those with higher incomes in effect pay less of their disposable incomes. Proponents argue that this frees up the wealthy to spend and invest more.

Opponents say that a flat tax won't replace existing tax revenue, and that it unfairly penalizes lower earners.

Either way, the whole flat tax debate is starting to smell like a giant distraction from the bigger issues that need serious political intervention: jobs, jobs, and did we mention? JOBS.

Don’t flatter us. What do you think of the flat tax debate?

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