From: The Baileys (nanotech@cwix.com)
Date: Wed Mar 17 1999 - 05:02:11 MST
Michael Lorrey wrote:
>I fail to see how it could be a fiscal catastrophe. Its generally
recognised
>that the 17% rate he proposes is revenue neutral,
I'm not sure who is "generally" recognizing that Forbes' 17% tax rate is
revenue neutral, but the U.S. Department of Treasury is not one of them.
The Treasury estimates Forbes' plan will revenue shortfalls of $200
billion+. The Archer, Gramm, and Kemp flat tax proposals are as bad or
worse. Even Robert Hall and Alvin Rabushka, who first proposed the concept
of a flat tax in 1983, have stated that a flat tax is not tenable.
>and considering that the
>average millionaire actually pays taxes in the 14% range indicates that the
rich
>will actually pay more.
First, you pay federal income taxes on your current income, not your net
worth. Thus, net worth is not a good indicator of effective tax rate.
Secondly, the top marginal tax rate in the U.S. is 39.6%. Since this rate
applies to income over $200,000 its obviously wrong to think that the
"average" top-tier income earner's effective tax rate is 14%. Also, Forbes
plan eliminates taxation of capital gains and interest. 70% of all capital
gains and interest income is realized by the top 5% of American society.
Here we have a tax rate change from 28%/20% to 0%. It is quite clear that
under Forbes flat tax proposal (and the others as well) that the upper and
upper middle class will receive all of the tax benefit. Furthermore,
according to the Treasury, 69% of the tax benefit generated by Forbes plan
inures to the top 3%.
The flat tax promotes the myth that a simpler tax code must incorporate a
single tax rate regime. This is absolutely wrong. Forbes, Archer and other
GOP disciples are attempting to capitalize on the average American's
ignorance of the complexities of the tax system. The complexity in the
current tax system is not the progressive tax rate (there are 4 or 5 tax
rates which are very easy to follow). The complexity in the current tax
system is determining what is "taxable income". We can keep the progressive
tax concept (i.e., higher income earners pay a larger portion of their
earnings than lower earners) while simplifying the tax code. But why would
Forbes and others want to do that when they can captalize on the public's
distaste for the current tax system by deceiving them into supporting a huge
tax cut for Forbes and the rest of his wealthy buddies.
Doug Bailey
doug.bailey@ey.com
nanotech@cwix.com
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