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fair tax, flat tax, they are all taxing

In honor of tax day, I thought I would write about a subject I have addressed many times before--taxes. Lately, I have heard a bit of talk about the fair and flat taxes. I wish I understood them more so I could decide if either of them is the "right" answer.

On the surface, the fair tax seems okay in some respects. You pay taxes on things you buy so you have some control (if food is included, I can see a bit of a downside, but for it to be simple, I guess everything should be included). For example, if I want a 20k car, if I am taxed 25 percent on it, then my car now becomes 25k. Seems hefty, but considering my income will not be taxed, not so bad. And it is not as if most people buy items like that all the time. Surely one of my smart friends can tell me what I am missing here.

The flat tax, in many ways, makes more sense, but I bet that is because I know very little about that. I have always wondered why someone making 200k should pay a higher percentage of taxes than someone making 20k. If you are paying the same percentage, obviously the person making 180k more is going to be paying a lot more, so what is wrong with that? But my understanding is you still have to fill out a tax return for this (though it should be simpler), and I imagine people will find loopholes.

I caught a few minutes of Glenn Beck around 1 a.m. this morning. He said the tax code is something like 60,000 pages. That is insane. Who is going to read that? And since it changes fairly often (3,250 changes since the start of President Bush's term, an average of more than one a day), my guess is pretty much no one.

Luckily, I read this today: The president noted that he's asked his economic advisers to thoroughly review how to simplify the tax code and report back to him by year's end.

If these people (some of whom have failed to properly pay taxes) need eight months to review and figure out how to simplify the code, clearly our current systems is complicated and flawed. Something should be done. Let's hope it is.

In the meantime, I would love to hear from any of you who understand this.
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Comments

ashley said…
I would highly recommend reading the FairTax book to anyone who is interested in this topic. I read it a few years back, and it explains the plan very clearly. Regarding your comment about paying taxes on food, there are solutions built into the proposed legislation that would effectively prevent people from having to pay taxes on necessities.

I thought the book was interesting not only because of its analysis of how the FairTax might work...but also because it provides a very nice history of taxation in the United States. Gives you a little bit of perspective on where we are today and how we got here.

Anyway, it's less than 200 pages. And a pretty quick read...not dry and boring like some might suspect it is. I'm a big supporter of the FairTax over the flat tax because I like the idea of not having to report my income to the government at all, and I like the idea that EVERYONE will pay this tax...not just people who chose to report their incomes and comply with regulations. Even people who make money illegally will be putting in their share! ;)

I'm really glad to see this issue getting more attention! Check out the web site to see how you can learn more and get involved!
April 16, 2009 at 9:13 AM
Chri said…
Glad to learn about Ashley's book recommendation. I need to learn more about the tax options as well. (I've always thought "Well Flat Tax, duh." because that seemed to make the most sense.) I really don't understand it when I hear "46 million people who file tax returns don't pay taxes." It's an income tax, right. If you make ANY income, you should be taxed, right?
April 16, 2009 at 11:34 AM
christine said…
Oops, hit return when I was typing my name in that last comment...
April 16, 2009 at 11:36 AM
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