The flat tax is a terrible idea and only really championed by people that don't understand economics
Hahaha, you lampoon the idea and the people who consider it in one sentence without describing a single negative aspect of it. Kudos!
well your logic and explanation has thoroughly convinced me.
The most frequent argument against the flat tax, and one has to be dealt with in most practical tax systems (ie, it's not exclusive to a flat tax system), is described succinctly by wikipedia:
Critics of the flat tax argue that the marginal dollar to the low income is vastly more vital than that of the high income earner, especially around the poverty level. In their view this justifies a progressive taxation system as the added income gained from a flat tax rate to the rich would not be spent on vital goods and services for survival as they might at the poverty level with reduced taxation. However, true Flat tax proponents necessarily contest the concept of the diminishing marginal utility of money and that a marginal dollar should be taxed differently.
http://en.wikipedia.org/wiki/Flat_tax#cite_note-2
In short, those with lower income would have a more difficult time paying for housing and vital goods and services since living costs are not flexible below a certain point. Assuming a 30% flat tax, and cheap housing, food, transportation, etc costs $1,000 per month, anyone who makes less than about $1,500 per month would have to choose between paying taxes and paying for vital goods and services.
This has a lot of complex effects on the economy - for instance our taxes don't account for the cost of living, so you can find areas where you can't get vital goods a services for under $2k/month, and you can find areas where you only need $500 per month. Due to this, such a system would naturally tend to push low wage earners into the low cost of living areas, exacerbating existing class differences.
A good flat tax has ways to answer these and other issues, of course, but generally opponents of flat taxes like to assume the extreme absolute flat tax for the purposes of FUD.
What's interesting is that many states and many countries already use a flat tax for income taxes, and most states and countries use flat taxes for a variety of things including sales tax, sin taxes (alcohol, tobacco, etc), fuel taxes, etc. Why aren't critics of the flat tax demanding that all taxes become progressive? Surely the poor would be better off if their gas was $0.30 cheaper per gallon than the rich who don't have problems buying enough fuel each week to get to their job. The usual response is "complexity would be too difficult" but in an age of credit cards, electronic transactions, and federal welfare electronic payment systems this is easy to deal with. The reality is that flat taxes, when properly implemented, work very well.
stienman why do you hate poor people?
As we all know, there is absolutely no way to enact a flat tax without hating on the poor.
I finally get to use that one!
