this post was submitted on 18 Jul 2023
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The issue with a flat tax system, though, is that the value behind each dollar is different for different classes of people.
$20 is chump change for a billionaire. $20 for a middle class person might be some nice takeout for an evening. $20 could mean whether or not a working poor person can eat that day, or if they have to save what money they have for rent or electricity.
A flat tax system isn't actually "flat", not in practice. It'd be more accurate to describe it as "regressive".
Nicely put. I recently bought a new house and was thinking about this same concept. I moved to a area with a high COL, but the markup on houses was much higher than other goods (still high, but not as big).
So when applying for my loan, they use debt to income ratios to determine if you're eligible. So let's say you bought a house and the price (yearly) was 50% of your income. If one house was at 500k and the other at 200k, your 50% for other goods is vastly different. My mortgage came out to 3600/month, right about 50%. But that still leaves another 3600 for other goods. If my mortgage was 50% at 1200, then I would have 1200 leftover for other goods, which just doesn't go nearly as far. But the bank sees these two scenarios as exactly the same.
I agree with you, but wouldn't a flat percentage fix this? Something like everyone pays 20% tax on all earned and unearned income, no exceptions.
No, because you're charging people the same effective rate regardless of their ability to pay.
Someone in the 0.1% of the 0.1% can afford to give a lot more of their income than someone in the bottom 25%. As such, a flat tax rate would negatively impact lower income taxpayers compared to high-earners.
Hence why I described it as "regressive" in my earlier comment.
I would agree to a flat tax (even as high as 50% or higher if enough provisions are made) if there was a universal basic income to ensure nobody goes without it's basic necesities met.