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RealEyesRealizeRealLies's avatar

On this U.S. Tax Day, what are your thoughts about our current income tax system vs replacing it with a simplified flat sales tax across the board?

Asked by RealEyesRealizeRealLies (29357 points ) April 15th, 2014

CATO Institute has some interesting perspectives about the U.S. income tax system.

Really? As of 2003 the Income Tax Code is over 53,000 pages long? Seriously?
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What’s your opinion of abolishing the IRS Income Tax System, and instead replacing it all with just a higher flat sales tax across the board?

And if you are for the idea, what do you suppose is the reason it doesn’t happen?

I really don’t know enough about it to have an opinion. I’m asking you.

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13 Answers

Seek's avatar

Poor people would end up paying significantly higher percentage of their income to tax.

The people who can least afford it would be penalized even further.

Kropotkin's avatar

If the CATO Institute told me that the sky was blue, I’d have to look up to check.

As for a flat sales tax. What a great way of burdening the poor and transferring even more wealth to the rich. That is what Cato and the other “Libertarian” think tanks are all about.

What’s really missing is the same level of advocacy for working class interests, which would actually represent the majority of ordinary people—and if there were, they would not be arguing for a flat tax, but rather a strengthening and an increase in progressive taxation.

RealEyesRealizeRealLies's avatar

So is our current IRS Income Tax system the way to go?

I watched a Ken Burns documentary last night on prohibition era. He claims that over 30% of taxes were attributed to alcohol sales. Prohibition required another form of taxation, and thus the IRS was born out of that necessity.

Seek's avatar

False dichotomy.

The IRS is fucked up. That doesn’t make a flat tax the answer.

RealEyesRealizeRealLies's avatar

What, do you think, is?

Seek's avatar

That is for wiser folk than I to think of. I simply don’t know enough to come up with an answer. I know we need to pay the country’s bills, but also need to make sure all the babies are fed and as few people as possible go without a roof over their heads.

I am essentially a socialist and a social liberal. I feel like the government’s duty is to assure the basic needs of the people are met – shelter, food, healthcare, safety, employment and infrastructure- and otherwise stay out of our way.

johnpowell's avatar

In Oregon we don’t have a sales tax. The price you see is the price you pay. A sales (or flat tax) is a regressive tax. It is designed to hurt the poor.

In Oregon we tax income and property. Things the poor are unlikely to have. We manage to get by.

hominid's avatar

Great answers above. There isn’t much I can add other than to say that nobody loves the current tax codes (well, maybe some do). But any efforts in reform should be to make taxes more progressive.

I think we have a problem of perception. As with the public’s general confusion about wealth inequality, there are similar problems with the public’s understanding of current tax burden.

And as @johnpowell mentions, there are plenty of regressive forms of taxation (sales tax, tolls, fees, etc). We shouldn’t be looking to add income tax to this list.

SavoirFaire's avatar

I’ve never understood the obsession with how many pages long various parts of the law are. The tax code is over 53,000 pages? Well, so what? The vast majority of it does not apply to us as individuals, nor even presents the appearance of doing so. Furthermore, the Cato Institute seems to be including both empty forms and investment guides as part of the tax code. Yet the forms are just what we fill out to comply with the code, and the investment guides published by the IRS are not themselves part of the law. As usual, then, the problem is being exaggerated.

Also of note is the weaselly way in which the “tax army” claim is worded: “income taxes are so complex that there are up to 1.2 million paid tax preparers in the country” (emphasis added). The words “up to” are a way of hiding the fact that the actual number of preparers in any given year is likely below this number. But why Cato should have a problem with this is unclear. As a (right-)libertarian think tank, surely they have no quarrel with people—be it 1 or 1.2 million—choosing of their own free will to go into the market as tax preparers. All the market can bear, right?

rojo's avatar

@johnpowell Not trying to be argumentative here but can you explain to me why you feel at sales tax is a flat tax and a regressive tax and why it is designed to hurt the poor specifically?

Cruiser's avatar

I do agree with CATO in that the tax law is way more complicated and convoluted than it needs to be and also that it should be a lot simpler especially with IRA’s and retirement savings.

I also agree with this comment ” The income tax distorts financial planning and business investment, and it encourages tax avoidance and evasion.”

I know with the ungodly amount of taxes I paid this year I am going to pull out all stops and take every angle I can to bring that amount to an amount I can stomach and maybe even get a refund to boot.

hominid's avatar

@rojo – re: sales tax as a regressive tax – if I buy a washer/drier for $1000 here in MA I will pay $62.50 in sales tax. Someone else who only makes $30k/yr also has to pay that same $62.50 in sales tax when they make the purchase. But that $62.50 is a much higher percentage of that other person’s income than mine. My neighbor and I are paying different percentages of our income to the state for the purchase of the the $1000 item.

Seek's avatar

^ And that goes for auto registration and tag fees, too.

Seriously, $200 just to transfer a title and transfer a license plate? I already have the damned plate!

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