MSNBC: Rachel Maddow Show- Paul Krugman: Why The Flat Tax Fails

Progressive Economist

Progressive Economist

Source: This piece was originally posted at FRS FreeStates

Twenty years ago (and I’ll be nice here) you could accuse Progressive Democrats of being the tax hikers and not just on the wealthy, but on the middle class as well. And thanks to President Bill Clinton the Democratic Party was able to eliminate, or at least scale back that horrible stereotype. Because President Clinton cut taxes for everyone and was very fiscally responsible as President. The tax hike stereotype kept Democrats out of the White House in the 1970s and 80s. But during this presidential campaign of 2011-12, hopefully that stereotype will be switched to Neoconservative Republicans. (As I call them) As it relates to Herman Cain with his 9-9-9 flat tax and now Rick Perry’s flat tax. Because that’s exactly what a flat tax is, a middle class tax hike. Because you would be raising taxes on people paying 10-15% in Federal income taxes, to 18-20%. While people who are currently paying 28-33% in Federal income taxes, would get a tax cut.

The wealthy would go down to that 18-20% tax bracket. And with the flat tax the Earned Income Tax Credit, or EITC would be eliminated. So low-income workers would now get a tax hike. And of course Neoconservatives like to make the argument that low-income workers don’t pay taxes. What they fail to realize or mention is that they pay payroll taxes. Which of course is a regressive income tax on middle and low-income workers. Because it’s a flat tax that no matter how much you’re making per year in income, you get stuck having to pay the payroll tax. A flat tax may sound great, because it simplifies the Federal tax code a hell of a lot. But the negative aspects of it can’t be ignored as well. Do we need tax reform, of course, do we need a more simpler tax code, well considering that most Americans don’t understand it, that should be a pretty good clue there. But we need to do it in a way that helps us get our Federal debt and deficit under control.

We need a new tax code that would also help to lead to economic and job growth. Thats also fair to all Americans who pay taxes and doesn’t try to benefit one group over the other in an unfair way. Which why I believe in what’s called the Fair Tax or a version of it, which is a consumption tax. That would replace the income tax, not be an addition to it. That would give Americans the economic liberty to decide how much they pay in taxes. Based on what they consume in America, that would also be progressive as well, (at least my version of it) because I would tax basic items that people need to survive, like food, health care, health insurance, clothing, family Autos etc, at a low rate. like 5-7% and tax luxury items like luxury cars, planes, yachts, second homes, sporting events, etc, at a much higher rate. As well as things that are unhealthy for people. Like alcohol and tobacco at a high rate as well to discourage those activities. Of course we need tax reform in America for multiple reasons, but we need to do it in a way that’s fair and beneficial for our economy. That also helps us pay down our debt and deficit and get them under control and that’s not regressive. That gives one group of people and unfair advantage over everyone else in America.
MSNBC: Rachel Maddow Show- Paul Krugman: Why The Flat Tax Fails

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About Derik Schneider

Blogger on everything that interests me and that I'm knowledgeable about.
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