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News Blog

Why flat taxes are unfair, food taxes worse

by Jesse Fruhwirth
- Posted // 2010-11-17 - Shortly after getting straight with its morals and removing the state tax on food--which is basically a tax on life itself--Sen. Stuart Adams, R-Layton, proposed a $150 million state food tax that would take less from the rich and more from the poor.

The "worst idea of the day," according to @BrenSmith, was written up in the Tribune.

[Adams] has been working on a proposed bill that would raise $150 million for school construction needs by reinstating the full sales tax on food. School districts would then slash their property taxes by an equal amount. The idea would be to help spread school funding more evenly.

At least the committee he proposed it to shunned the idea--for now. But the food tax in Utah is bound to be a like a zombie, you better "double tap" to make sure it's dead. So let me try.

What's so wrong with Adams' plan? Well, who owns property? Not poor people. But poor people do gotta eat. So this plan blatantly shifts a greater tax burden from moderate and high income people wealthy enough to afford property onto lower-income people and the poorest among us--even people whose food is paid for by Food Stamps--who have no hope of getting even a sub-prime mortgage. Poor people spend up to a third or more of their wealth on food while really rich people might spend more on a single piece of jewelry than the poor person spent on food all year long.  That means the pain threshold on a food tax is worse for poor people who can least afford it.

Now, why does our state's flat tax, perhaps the only truly dastardly thing former Gov. Jon Huntsman supported, make Adams and other food-tax proposals worse than they would be otherwise?  Well, because the rest of the world ain't flat, Jack.

The simple elegance of a flat tax--everyone pays 5 percent of their income--hides its unfairness. A flat tax could be fair if we lived in a "flat priced" world, where everyone who buys a loaf of bread pays, say, .00013 percent of their yearly income. That way, poor people who make $7,500 per year would pay about $1 for a loaf of bread while someone who makes $750,000 per year would pay about $97.50 for the same loaf of bread.  Does that seem fair?  Well, it's the same logic as the flat tax.

But pricing doesn't work like that and thus it seems strange that people think it's fair to tax people that way. Flat taxes may have some virtues, but fairness to moderate and low-income people is not one of them.

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REPLY TO THIS COMMENT
Posted // November 22,2010 at 19:09

I know how to raise more money for schools: have a "flat" household exemption.

That would mean everyone has the same number of exemptions, whether they are single or have 22 children.

Right now, those of us with one child (or none, or few) are subsidizing the families who pay very little in taxes, due to being able to deduct each child.

Down with socialistic "per child" deductions.

 

REPLY TO THIS COMMENT
Posted // November 22,2010 at 16:08

19% Flat Tax

Income $40,000 Tax = $7,600

Income $2,000,000 Tax = $190,000

It looks like people with more income pay more in taxes even with a flat-no deductions tax structure.

Down with deductions!

Down with all Sales Taxes for that matter.

If we tax this way the federal government would have nearly 3 trillion to work with. Isn't that enough? No.

We would need a flat tax of 24% on every penny earned through income to cover the 2010 federal budget. I think we can cut out quite a few items and charge ourselves less in federal taxes.

This of course does not include taxes on profits buy businesses/corporations.

Wierd how some very crude calculations come out just about right.

 

REPLY TO THIS COMMENT
Posted // November 17,2010 at 16:24

Your logic is illogical.

The simple elegance of a flat tax is not only that everyone pays 5% of their income, it's that there is no ability to cheat on taxes. No one gets out of paying, rich or poor, everyone pays. Ownership in the "state" by vested interest.

Purchasing power and expendable income have nothing to do with the citizenry having a vested interest in the government that is supposed to represent them.

 

Posted // November 23,2010 at 07:31 - I'm open to a VAT tax. I think I favor it, but I want to do more studying. And while it sounds paternalistic to say that the state should meet people's needs, either you help people out or you'll be jailing them, and usually helping them out is cheaper--and more in line with our value on freedom. Also, usually if you're jailing someone, there someone who was victimized, so meeting the needs of the poor is really meeting the need we all have for security. How does this relate to taxes? Well, a lot of people aren't making a living wage to begin with and then the flat tax comes in and knocks them even lower. That's not fair, and it's just not wise either.

 

Posted // November 19,2010 at 12:45 - Explain why you think its unethical and immoral to have the people who would vote to improve their lot at the expense of others. (this goes for 95% of voters, just so you don't think I am picking on the poor) Simply put, the economic condition a person finds themselves in does not negate their need to contribute to the whole when they expect to have their "needs" met by the system. The poor and the rich both must contribute equally (not equal $$ but equal %), both must have a vested interest in the state being "successful". You are correct, everyone pays taxes, even bums. But the flat tax is a solution to the graduated federal income tax, not a solve all for every tax around. If you want a single tax to take care of everything, then you would be looking more at a universal VAT or a "Fair tax" which does away with Fed, State, property, etc. and instead puts a huge tax on the sale of goods.

 

Posted // November 17,2010 at 18:03 - I should add: we ALL pay taxes, poor or not. Everyone pays sales taxes, we are all impacted by property taxes (even rents pay property taxes though the landlord plays middle person), and we all pay food taxes, too. Almost any worker pays into Social Security and Medicaid/Medicare. Many, many Americans do not pay the federal income tax; but hardly no one gets by scott free without any taxes at all.

 

Posted // November 17,2010 at 16:52 - Hey jones, I appreciate that. But there are many ways to ensure that there is "no ability to cheat." And I've wrestled often with the problem--and it is a problem--that many Americans get to vote, for example, to increase services or issue bonds even though they themselves don't pay taxes and thus may vote in a way that benefits them most even if the results are not economically sound. The nightmare situation is when more than half of voters don't even pay taxes--we're not there yet, but that would be a problem. But again, installing a fundamentally unfair flat tax as the solution is, well, unfair--unethical, and immoral, too.

 

 
 
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