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February 2022

Topical Essay: O’Brien

Flat Tax

Why a Flat Tax Is the Way of the Future

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~Will O’Brien

 

A flat tax rate percentage is so much more just, simple and effective than any other tax collecting strategy, including the progressive tax rate we have right now. Taxing the rich and taking lots of their money that they worked extremely hard for doesn’t sound fair to me, does it to you? That is exactly what is happening right now. A flat tax rate would not require the poor paying any taxes which would help them back onto their feet. A flat tax is the future economically as well. When reading this essay, you will understand all of the benefits to a flat tax rate, and why it has the potential to change so many families' lives. 

 

    Imagine you and your family work your asses off for fifty years. You guys work so hard that your family would essentially never have to work again for money. Then you have to pay nearly half of it away in taxes. That is essentially what is happening to some families. To put it simply, it is extremely unjust and downright wrong. Taxing the rich doesn’t make any sense, because somebody had to work super hard for their family to be rich in the first place. Even though there may be some people who are just born into a rich family, someone had to work hard for that money at one point. Of all of the ways to collect taxes, taxing the rich (wealth taxes) is the least desirable. Wealth taxes are inefficient and ineffective because wealth is inherently difficult to measure. Financial assets can be hidden or moved with the click of a mouse nowadays that are very hard to value. About a dozen European countries had a strategy similar to today, in 1990, and it ended up with most abandoning the strategy because it was ineffective and expensive to administer. There are multiple examples like this one about why taxing the rich eventually doesn’t work. 

 

    The progressive tax rate may be the most complicated tax rate we in America have ever had, a flat tax rate, may be the most simple tax rate that America could ever have. Households would only get one exemption, which would be an allowance based on family size, and then they would pay a low rate on any income above that amount. There would be no more need to worry about reporting dividends, interest, and any other forms of capital income or business income. A flat tax rate would be twice as easy to calculate as a progressive tax rate, or any other form of tax strategy, usually a flat tax rate proposal includes eliminating deductions, and other loopholes that the rich can access much easier than the poor. Heritage argues that all businesses from a pub to a large amazon warehouse, would play by the same rules, companies add up receipts and then subtract their costs, (salaries, expenses for new tools, cost of raw materials). This would then give them their taxable income which would be taxed at the low rate of a flat tax percentage. A flat tax would be so much more simple than any other tax strategy we could even think of, it would put much less stress on the government workers, and much less stress on businesses and families. 

 

    Many that are in favor of a progressive tax rate, or not in favor of a flat tax rate percentage may argue that a flat tax rate percentage would completely drive the middle class and the poor into the ground. This is just simply untrue. Let’s take an example number such as 40,000. If your household annual income is above 40,000, you have to pay this flat tax percentage which would be roughly 30% of your annual income. If you make under this 40,000, you don’t have to pay any taxes! Or very little. This if anything helps those in poverty up on their feet, and helps them make more money, and not have to worry about paying any of it away to the government through taxes. Add in the fact that if you don’t make a lot of money and are poor, there is a wide variety of government programs that specialize in working with low-income families according to Arnold Ventures. If you think about it in the grand scheme of things, the flat tax rate is helping out multiple classes. The rich aren’t paying nearly half of their money to the government, and the poor who are trying to get back on their feet are being government funded, and are not being taxed. 

 

    A flat tax is the way of the future. If we as Americans value economic growth, we should really look into a flat tax rate percentage. Many economists believe that the flat tax rate would be ideal for America because our current tax rate is not helping the cause of economic growth. The current tax system causes high rates, discriminatory taxation of saving and investment, reduce growth and practically destroy jobs and lower income. A flat tax would eliminate the impact of damaging taxes altogether, and a flat tax would do this by drastically lowering rates and ending the tax bias against saving and investments. It would boost the economy’s performance. A flat tax would also essentially get rid of sources of conflict between taxpayers and the government. With a flat tax, there would be no more deductions, loopholes, credits, and there would be no more penalizing success and discriminating against citizens on their annual income. The flat tax revolution has been successful before as well. Estonia is lowering their tax rate to keep pace with other nations, it was down to 24 per cent, and in 2007 it dropped to 20 per cent. Lithuania also lowered its 33 per cent flat tax rate to 24 per cent. According to Investopedia, Ukraine, Georgia and Romania all had flat tax rates of 13%, 12%, and 16%. All of these countries saw their economies grow RAPIDLY. With all of the success that countries who have tried a flat tax rate have had, there is no denying that a flat tax rate is the way of the future. 



    In the grand scheme of things, it may take a little while for things to get going with the flat tax rate, but if the US were to adopt it, after we started to get the ball rolling, I know we would do just fine with it. The flat tax rate is truly something that America should look into, as it could change many families' lives for the better, and shape America for a better future.