The flat tax is one of the GOP’s hottest accessories this election season!
Whether it’s Rand Paul, Ted Cruz, or even Ben Carson, flat tax plans look to all the current rage with the GOP. But what is it and how does it differ from traditional tax plans? Here’s out 10-Point Expert on flat tax plans!
Point 1: The general idea of a flat tax plan is very simple. Basically every tax payer, regardless of their financial bracket, pays the same tax rate with no deductions or exemptions. That means a guy who is working at McDonalds making minimum wage and a CEO of a Fortune 500 company worth billions would be paying the same percentage rate in taxes.
Point 2: A flat tax plan is very different from the current tax system in the US; a progressive tax system. In a progressive tax system, individuals in higher income brackets pay a larger tax rate. So in a progressive tax system, the guy who works for minimum wage at McDonalds has a 10% tax rate while the CEO of a Fortune 500 company worth billions has a 35% tax rate.
Point 3: Proponents of a flat tax preach that it not only simplifies the tax code – a progressive tax code can become very complicated with the adding of deductions and exemptions over time – but it also creates a fairer tax system because it doesn’t penalize those in the higher income bracket.
Point 4: Opponents of a flat tax however argue that it creates an uneven economic landscape by making those with lower incomes take a greater financial burden due to the lack of liquidity in their budgets. In other words, paying $500 in taxes means more to the guy that works at McDonalds making minimum wage than to the CEO worth billions, because for the McDonalds worker, that $500 could be the difference between paying his rent on time or becoming homeless. While for the CEO, $500 could be something he drops on a very expensive dinner and not affect his overall financial standing.
Point 5: Currently there are over 40 countries (which include Russia and Saudi Arabia) that institute a flat tax. As for the US, 10 states currently have instituted flat tax systems which include Pennsylvania, Illinois, Michigan, and Massachusetts.
Point 6: Out of the many GOP candidates running for president in 2016, four candidates – Mike Huckabee, Ben Carson, Ted Cruz, and Rand Paul – have brought forth plans calling for a flat tax system.
Point 7: Out of all the candidates, Ben Carson has the most traditional flat tax plan. His plan comes from the biblical concept of tithing, in which everyone would pay a flat income tax rate of 10% with all deductions and loopholes eliminated from the tax code.
Point 8: Mike Huckabee also follows a traditional flat tax plan, in elimination of all deductions and loopholes. However in his tax plan, a flat tax would be implemented in the form of a national sales tax rather than a tax on income. Now based on the US tax system – which has always taxed based on incomes – Huckabee’s tax plan would undoubtedly be the most drastic change to the current tax code.
Point 9: Rand Paul and Ted Cruz also have proposed flat tax plans if they were elected. Both candidates would have different rates – Ted Cruz with 10% and Rand Paul with 14.5% – but the real divergence from their flat tax plans come in the idea that deductions and exemptions would be part of both tax systems.
Point 10: While there are those that insist implementing a flat tax system would simplify the tax code when compared to the US’ current tax system, it’s important to note that many others have noted that a flat tax would just depress the economy due to the extra financial burden put on lower and middle-income brackets. It’s hard to say how a flat tax system would fan-out on a federal level, but one thing is for certain; a flat tax would drastically alter how we currently pay for taxes. For better or for worse? No one really knows for sure.
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