What ACC teaches us about Tax.
Tax is a big issue, people hate paying tax but it's essential. A Govt needs funds to govern. OK the obvious dross is out of the way now lets get down to it.
Left style Govt's believe that the more you earn the bigger the percentage of your earnings you should pay. Commonly called 'Graduated tax scales'. Right style Govt's believe that tax rates should be flat so that the more you earn the more you pay but the percentage is the same. Commonly called 'Flat tax rates'.
The Left view in a nut shell is the more you earn the more you can afford and the Right view is that you should not be punished for earning more.
ACC teaches us that Tax rates can be capped. Radical I know but consider this.
If I was paying income tax and had paid my tax up to an amount of say $100,000 @ say 30% I would be paying $30,000 a year. That's $30,000 a year more than someone who's not paying tax at all. The when you consider that someone in this country who's not paying tax probably receives at least $6,500 in benefits, I would have paid $36,500 more than that person.
So what justification is there for taxing any income over $100K at 30%, or perhaps 40%. There is none. By the time I have paid $36,500 more than the guy living next to me on a benefit surely I have contributed sufficiently to the Govt. When you consider that I'm also paying GST on anything I spend my 'after tax money on' I'm now contributing even more.
Think about it - why is it fair to keep taxing someone more and more because they earn more. Where is the incentive to earn more when the Govt takes a bigger slice (or even the same slice) of every dollar off you when you have already paid a significant amount.
Left style Govt's believe that the more you earn the bigger the percentage of your earnings you should pay. Commonly called 'Graduated tax scales'. Right style Govt's believe that tax rates should be flat so that the more you earn the more you pay but the percentage is the same. Commonly called 'Flat tax rates'.
The Left view in a nut shell is the more you earn the more you can afford and the Right view is that you should not be punished for earning more.
ACC teaches us that Tax rates can be capped. Radical I know but consider this.
If I was paying income tax and had paid my tax up to an amount of say $100,000 @ say 30% I would be paying $30,000 a year. That's $30,000 a year more than someone who's not paying tax at all. The when you consider that someone in this country who's not paying tax probably receives at least $6,500 in benefits, I would have paid $36,500 more than that person.
So what justification is there for taxing any income over $100K at 30%, or perhaps 40%. There is none. By the time I have paid $36,500 more than the guy living next to me on a benefit surely I have contributed sufficiently to the Govt. When you consider that I'm also paying GST on anything I spend my 'after tax money on' I'm now contributing even more.
Think about it - why is it fair to keep taxing someone more and more because they earn more. Where is the incentive to earn more when the Govt takes a bigger slice (or even the same slice) of every dollar off you when you have already paid a significant amount.
posted by Gardener at 3:42 PM
2 Comments:
One of the attractions of a flat tax is that it wipes out a huge amount of tax legislation and compliance costs.
It also reduces the number of loopholes, as much of the business tax juggling is about working the system and lobbying for adjustments that can be exploited.
Russia dropped the business tax rate down to 13%, with no deductions and increased revenue. The rate was considered fairer, and was harder to avoid.
Some American studies indicated prices for goods and services are inflated by up to 20% by admin and accounting compliance costs, and that a flat tax regime would remove a big proportion of that. So, prices fall slightly.
The other is the incentives to keep more of what you earn, or earn less to improve work/home life balance. That's better for the social fabric.
The experience of countries implementing flatter taxes and lower tax rates is more growth, more small businesses thriving, bringing better circulation of money and strong competition (big businesses lose their advantage to out-deduct small businesses, or supplement their sales with corporate welfare, and tend to ship profits off shore. Small businesses tend to reinvest or spend onshore).
Bigger pie, more revenue. You don't automatically need to cut health and education to fund a growing economy.
Thanks for that.
It's always puzzled me how low flat tax can go and still work. Clearly the baggage costs of compliance with a complicated system are far higher than most people understand.
The most staggering thing about people who believe progressive tax systems are a good idea is there complete inability to comprehend their effect as a barrier to growth.
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