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A family of four earning less than $100,000 would pay more under a pure flat tax.Apr 24 '00 Write an essay on this topic.Several of the opinions in this section advocate a pure flat tax, that is a system in which all income is taxed at exactly the same rate, and in which there are no deductions of any kind. Advocates of this system have estimated that the tax rate would have to be between 17% and 20% to generate about the same revenue that the federal government receives today. Let's pick 17% for argument's sake. Many people think this rate will lower their taxes, but for most taxpayers it will not. The following table shows the tax and tax rate under the current tax system for a family of four earning various levels of income and taking the standard deduction. This table uses the 1999 tax rates. Taxes for identical incomes will be a bit lower in 2000 because of the automatic inflation adjustment of personal exemptions. Income / Federal Income Tax / Tax Rate $ 5,000 $0 0 % $10,000 $0 0% $15,000 $0 0% $20,000 $272 1.4% $25,000 $1,024 4.1% $30,000 $1,774 5.9% $40,000 $3,274 8.2% $50,000 $4,774 9.5% $60,000 $6,274 10.5% $70,000 $8,915 12.7% $80,000 $11,715 14.6% $90,000 $14,515 16.1% $100,000 $17,315 17.3% (Sorry about the formatting) The first thing to notice is that all but the family earning $100,000 would pay less than 17% of their overall income as tax under the current system. The next important point is that, under today's tax system, most of these families could reduce their tax even further by itemizing deductions rather than taking the standard deduction, something that will not be possible under the flat tax. The poorest families today even get a "refund" in the form of an "earned income credit," another thing missing from the pure flat tax. Well, you say, I'm in the 28% tax bracket, so I must pay 28% of my income as tax. WRONG! Just get out your tax return and divide your total tax liability by your total income. Being in a given tax bracket doesn't mean all your income is taxed at that rate. Actually, some of your income is not taxed at all, some is taxed at 15%, and some is taxed at 28% and even higher rates to yield a blended overall rate that is much lower than your "tax bracket" percentage. So, check your tax rate under the current system and think twice before jumping on the flat tax bandwagon.  |
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