Re: Forbes Camp.

Ron Kean (
Wed, 17 Mar 1999 13:42:56 -0500

On Wed, 17 Mar 1999 07:02:11 -0500 The Baileys <> writes:
>Michael Lorrey wrote:
>> Forbes, Archer and
>GOP disciples are attempting to capitalize on the average American's
>ignorance of the complexities of the tax system. The complexity in
>current tax system is not the progressive tax rate (there are 4 or 5
>rates which are very easy to follow). The complexity in the current
>system is determining what is "taxable income".

Excellent point. Calculating the tax from a tax table or tax rate schedule is the easy part. The large direct compliance costs are associated with the other data collection and interpretation issues. But there is an arguably much larger cost associated with a complex income tax system, and that is the adverse economic impact of tax avoidance activities.

We can keep the
>tax concept (i.e., higher income earners pay a larger portion of
>earnings than lower earners) while simplifying the tax code.

But I think the standard flat tax proposal actually is rather progressive in the sense that higher income people pay a higher percentage of their income in tax, despite the name 'flat tax'. That is because the flat tax, as proposed, is not really flat across all incomes. There would be large personal exemptions and dependent deductions which means that a household would have to be solidly middle to upper middle class to pay any significant income tax. For example, a family of four would have to earn something like $30,000 to even begin paying income tax. And it's important to keep in mind when looking at the whole tax system that most US wage earners pay about as much, or more, in SS and Medicare tax than they do in federal income tax, if one counts the 'hidden' employer paid portion of the SS tax.

But why
>Forbes and others want to do that when they can captalize on the
>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

Those with high incomes now pay a very high share of the total income tax take. My impression of the current tax system is that the highest income quintile pays considerably more in tax (all taxes) than the benefit that quintile receives, and that the lowest quintile receives much more in benefits than they pay. But I don't have statistical data to back that up.

In the latest Berkshire Hathaway report, it was claimed that BH and its sub components paid 1/635th of the total federal revenue in 1998 (or maybe it was income tax only). So 635 BHs could fund the federal government.

A high income person tends to invest a large portion of that income. To tax the income away reduces total investment. In the long run a high tax, highly-regulated society would end up much poorer than a low tax society. Compare Cuba with Switzerland (or Liechtenstein, which is thought to have a $50,000 per capita GDP). That is only an estimate, because Lichtenstein, which has no income or sales or VAT tax, does not expend government funds collecting and processing such statistics.

Ron Kean





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