Colman: THE FLAT-RATE TAX

In 1996 Steve Forbes ran for President.  His key Platform position was a FLAT TAX of 17%.  The idea of a Flat Tax was popularized by Dr. Milton Friedman in the 1960’s.  This is an idea that has been discussed for years.  The concept is simple—ever citizen should be treated equally, no loopholes, exemptions, special provisions.  All citizens are equal, so all should pay the same rate of taxation.

 Liberals are generally strong supporters of Social Security and Medicare.  These liberals might not be aware that both programs are supported by flat-rate taxes.

 Flat-rate taxes are regressive, meaning that they bear down harder on lower-income people.

 The benefits of derived from Social Security and Medicare may — or may not — be regressive.”

It is time—over 100 years since the passage of the Constitutional amendment to allow for the income tax—the 16th Amendment is law.  But times and attitudes have changed.  If we want equality mandated by government, then it has to be consistent.  A Flat Tax is the ultimate in consistency.  It is the ultimate in equality—no citizen is more important than another and none should be forced to, by percentage pay more than any other wage earner.  What do you think?  Time to change our tax system?

THE FLAT-RATE TAX

By Richard Colman, Exclusive to the California Political News and Views,  1/27/20 

 Tax day, April 15, 2020, is not far away.  And it’s not too early to think about taxes.

Some people like a flat-rate tax; others loathe it.  What many people do not know is that America already has flat-rate taxes.

 If there were a true flat-rate tax, paying taxes would be mathematically easy.  If the tax rate were 10 percent of all income, the tax on $100,000 of income would be $10,000.

 One might ask if a flat-rate tax is fair. 

 A person earning $1 million ($1,000,000) per year would pay $100,000 in taxes while a person earning $50,000 a year would pay $5,000. 

 The individual earning $50,000 presumably would need the $5,000 paid in taxes more than the individual who paid $100,000.  The person earning $50,000 would have expenditures for food, shelter, utilities, and other expenses.  Paying $5,000 in taxes could be a hardship.

 Conservatives, in general, tend to support the flat-tax, arguing that government has no right to take a higher percentage of income from wealthier people than individuals who have lower incomes.

 Those opposed to the flat-rate tax tend to be liberals.  However, these liberals might not be aware that American wage earners already have to pay two flat-rate taxes.

The first flat-rate tax is the tax for Social Security.  That tax, which applies only to wages (not income derived from rent, interest, or the sale of stocks) is 6.2 percent.  The wage-earner’s boss has to match the 6.2 percent.  Thus, on wages of $100,000 annually, the total Social Security tax would be $12,400 ($6,200 from the worker and $6,200 from the boss).

 If wages, in 2020, exceeded $137,700 per year, no Social Security tax would be due.

 The second flat-rate tax is for Medicare.  That tax, for most people, is 1.45 percent of wages, and the boss has to match that 1.45 percent.  Thus, the Medicare tax on $100,000 of annual income would be $2,900.  People with higher wages (such as $200,000 per year or more) have a higher Medicare tax rate.

 The Medicare tax does not have a ceiling.  The Medicare tax applies to all wage income.  However, the Medicare tax, like the Social Security tax, applies only to wages, not other income. 

 Social Security and Medicare combined are called “payroll taxes.”

Both Social Security and Medicare are federal programs.  Social Security became law in 1935.  Medicare was signed into law in 1965.

 Liberals are generally strong supporters of Social Security and Medicare.  These liberals might not be aware that both programs are supported by flat-rate taxes.

 Flat-rate taxes are regressive, meaning that they bear down harder on lower-income people.

 The benefits of derived from Social Security and Medicare may — or may not — be regressive.

 In the 1990’s, Newt Gingrich (R-Georgia), speaker of the House of Representatives from 1995 to 1998) wanted a balanced federal budget.  President Bill Clinton, a Democrat, agreed but imposed one condition:  Social Security and Medicare could not be touched.

 There can be a compromise on flat-rate taxes.  The compromise would entail employing a flat-rate tax on wages above a certain level, such as $60,000 per year.  Thus, a person earning $40,000 annually, would not pay into Social Security or Medicare.

Both Social Security and Medicare are in financial jeopardy.  At current expenditure rates, both programs are or will be headed for bankruptcy.  A future Congress will have to decide how to proceed.

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.

Comments

  1. In trouble because of ?

    How about politicians taking money from the accounts (they call it borrowing). If it was stated that there could be no taking of money for those accounts and the “borrowed” money had to be paid back in 20 years think SS and MedCare would be OK?

    Politicians on both side need to wake up and be honest.

  2. throw in a VAT as well

  3. “It is time—over 100 years since the passage of the Constitutional amendment to allow for the income tax—the 16th Amendment is law.”
    All Amendments are law, until and unless repealed. An Amendments “concreteness” as law is not time dependent. For examples, Prohibition was enacted and repealed in roughly twenty years, but the Senate electoral college was replaced by direct election from the Constitutions’ ratification until 1913.
    Now the direct correlation between the federal income tax and its’ financing of the federal governments transformation into a sprawling, invasive, disobedient servant that dabbles in hobbies like: the “skin game” (affirmative action and the failed ERA), and sedition (our financed intelligence bureaucracies meddling in domestic politics), ought to bear interesting examination. IMHO

  4. A VAT is a punishing tax. It suppresses innovation and economic priced goods. It has been tried in other locations/States or countries with the same result. Value Added Taxes at each stage of production increases the costs and is massively regressive.

  5. TheRandyGuy says

    Unless the 16th Amendment is repealed, we’d find ourselves with both a flat tax and an income tax. No deal.

  6. Informative article! Thank you for pointing out that employers pay 1/2 of SS and Medicare taxes for each employee. In CA there are two additional flat taxes SDI and Sales Tax. Yes, a flat tax would make things so much easier, as well as remedy the fact that the minimum-wage earner has no tax shelters and other deductions, like “Staff Parties” and “Depreciation” (my apologies to the self-employed and the building owners, of which I am and have been both). But, yes, no deal. Unless the current tax is completely wiped out, we would end up with both. Also, don’t even think of a Constitutional Convention, given the proven assertiveness of liberals and the lack thereof of conservatives and libertarians.

Speak Your Mind

*