Flat taxes

This is the presentation by Dr Benjamin Carson at The National Prayer Breakfast with the American President in attendance. It has flown around the right side of the blogs because of his attack on ObamaCare but he had this to say about tax as well:

What we need to do is come up with something simple. And when I pick up my Bible, you know what I see? I see the fairest individual in the universe, God, and he’s given us a system. It’s called a tithe.

We don’t necessarily have to do 10% but it’s the principle. He didn’t say if your crops fail, don’t give me any tithe or if you have a bumper crop, give me triple tithe. So there must be something inherently fair about proportionality. You make $10 billion, you put in a billion. You make $10 you put in one. Of course you’ve got to get rid of the loopholes. Some people say, ‘Well that’s not fair because it doesn’t hurt the guy who made $10 billion as much as the guy who made 10.’ Where does it say you’ve got to hurt the guy? He just put a billion dollars in the pot. We don’t need to hurt him. It’s that kind of thinking that has resulted in 602 banks in the Cayman Islands. That money needs to be back here building our infrastructure and creating jobs.

He not only wants low taxation he wants a flat tax. Pick the rate, drop off all exemptions and tax from the first dollar earned. Aside from those who pay no income tax now, who’d be against that?

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36 Responses to Flat taxes

  1. Aside from those who pay no income tax now, who’d be against that

    Those who want to ‘hurt the guy’.

  2. JamesK

    It was worth it just to see Obummer squirm but actually Carson made so much sense on health care, taxes and the over abundance of lawyers as pollies.

    Same problems here

  3. Mk50 of Brisbane

    I loved the look on the preshizzle’s (Paco™) ugly dial as Carson ripped into his ‘policies’, and especially into his tremendous deficit spending.

  4. candy

    Can’t help but think that say 20% tax for a person earning $600 per week (unskilled) is more devastating than for a person making say $750,000, in terms of the cost of living pressures.

  5. And Another Thing

    As well as having his heart in the right place this guy is seriously smart and seems to be one of the most complete human beings I’ve ever heard of. I hope Obama took a good look at a real leader.

  6. pete m

    Candy – does that not create incentive to earn more?

    A flat rate tax can be quite low – 5-10% if govt spent taxes raised with some more smarts.

  7. Gavin R Putland

    Pick the rate, drop off all exemptions and tax from the first dollar earned. Aside from those who pay no income tax now, who’d be against that?

    Anybody who understands the efficiency advantage of the consumption/destination base over the production/origin base.

    Anybody who understands that if you tax a poor man’s consumption, you only limit his ability to consume, whereas if you tax his income, you limit not only his ability to consume but also his ability to save or pay down debt.

    Anybody who notices that a consumption tax has fewer collection points than an income tax.

    To say nothing of the distinction between income from production and income from speculation, or the distinction between mobile and immobile factors of production.

  8. Munro

    Candy that assumes none of the government spending goes to welfare for the person on $600/wk.

    It is interesting though. Even America would only need a flat tax of about 20%. Puts Russia’s flat rate into some perspective. It doesn’t sound like much when you say they only have 12% flat.

  9. Point taken, Gavin. I suspect most are commenting in reference to the current situation rather than the absolute.

  10. Why the argument about flat taxes when we currently have a bell curve (middle to middle upper pay the highest rates normally). Try to knock the top off that baby and make it plateau.

  11. Because that was the suggestion made in the OP?

  12. tbh

    I like the idea of a flat tax but with a high-ish tax free threshold, to avoid low income earners suffering unduly. Combine that with abolishment of most (if not all) deductions and I think we have a tax system that is fairer (in that it treats nearly everyone equally) and easier to comply with. Easier compliance drives down costs and means people end up with more money in their pockets.

  13. Driftforge

    I am not sure if you were replying to me but I will answer as so. Well this causes a very significant problem in that if the very rich are paying less tax than the middle class then this is not fair is it. So first the problem has to be acknowledged by whatever side of politics wishes to win the argument and they will win because the truth is hard although not impossible to argue against.

  14. tbh: Avoiding taxing low income earners fosters the poverty mentality “I cant afford to pay tax”. As the tithe was mentioned, the greatest benefit of thee tithe is to the giver, to foster the abundance mentality “I am prosperous enough to give”. You shouldn”t deprive people of that for the Nanny-state mentality.

    There are other benefits – the buy-in to the government system for example. The current situation is that the low earners feel that “we dont care if the government is full of crooks, as long as we get a cut of the proceeds”.

    But is a flat tax a tax on the profits or the sales?

  15. sdog

    I like the idea of a flat tax but with a high-ish tax free threshold, to avoid low income earners suffering unduly.

    But then they have no skin in the game. You don’t want a perpetual dinner guest who knows he can always order the most expensive item on the menu because he’s never going to have to pay for it. You don’t want a class of people who can vote to raise taxes on everyone but themselves, in order to get themselves more free shit paid for with Other Peoples’ Money.

    The point isn’t whether people are “freeloaders” who don’t pay any taxes. It’s whether people have “skin in the game.” If you take me to an expensive restaurant for dinner but let me put money in the parking meter out front, that doesn’t provide me any incentive not to order the lobster. Splitting the check, on the other hand, will cause me to think twice. It’s like health insurance, where experience shows that even a small co-pay makes a difference in what people spend….

    I’d like to see a system where everyone pays some minimum amount of tax — enough to notice, say 2%-5% of gross income. And that amount should go up noticeably when the federal government spends more, and go down noticeably when it spends less.

    In a given year, that might only affect some individuals by a few hundred dollars, but as anyone who has followed local-government property tax fights knows, people can get pretty exercised over a few hundred dollars when they know it’s coming out of their pocket and not someone else’s.

    We’re going to have to get federal spending and borrowing under control. Making over-spending painful to the electorate is a good way to start.

  16. Leigh Lowe

    Aside from those who pay no income tax now, who’d be against that?

    Who’d be against that?
    I dunno ….. the standing army of bureaucrats who make a career out of administering complex taxes and the equally large industry of lawyers and accountants who make a living avoiding those taxes maybe?

  17. Alfonso

    “Progressive” taxation is core comrade ideology. Zero chance of changing that. End of story.

  18. “Progressive” taxation is core comrade ideology.

    But it often does not exist. Not in Australia or the US anyway. It starts off being progressive and then in reality becomes regressive at high income levels. I wish to get into the regressive zone at some stage and only pay the company tax rate on a large proportion of my income. With the US just invest overseas in a country like Australia where you will not be taxed on capital gains and not repatriate the money for a while. So only pay 15% on the gains at some point. Delaying this tax for a long time will mean you can make money in the mean time with your non taxed gains.

  19. sdog

    But it often does not exist. Not in Australia or the US anyway. It starts off being progressive and then in reality becomes regressive at high income levels. I wish to get into the regressive zone at some stage and only pay the company tax rate on a large proportion of my income.

    ???

    With the US just invest overseas in a country like Australia where you will not be taxed on capital gains and not repatriate the money for a while. So only pay 15% on the gains at some point.

    ???

  20. Aussieute

    Why not a debit tax?
    Make it 1%

    A one percent tax on all withdrawals from financial institutions would raise about $470+ billion dollars annually – twice the amount of the current Federal tax system.
     
    A one percent debit tax would eliminate every other tax, including tax returns – ending the need for a 20,000-person ATO staff and the intimidatory tactics this government department employs to enforce the current biased system.

  21. Alfonso

    “Australia where you will not be taxed on capital gains”…..I’m all agog, unless they trade in personally owned houses can’t see how that happens within the tax code. Illegal transfer pricing is illegal.

    You’re in for a shock. If you are deriving money from private franked company income, sure the company tax is effectively deducted from your tax liability (errr…because it has already been paid), when the company income passes to you you will still pay the additional tax to bring it up to, say, the 45% personal rate.
    So in your private company, effectively “you” anyway, the rate for your next $ at say $300,000 is 30% at company source plus 15% from you or 45% from you if not incorporated.

    Keating, my hero, zapped double taxation on company dividends and as they say….the rest is history.
    Companies do have other advantages.

  22. Alfonso

    Aussieute….if those figures are accurate, I’m yours.

  23. brc

    Aussieute -you’re falling into the same trap as alp politicians, thinking that slapping a tax on something will not change the use of that thing.

    A debit tax would just mean less money deposited, and more money heading to offshore banking. It sounds tempting but once you get into real figures its quite a lot.

  24. But then they have no skin in the game. You don’t want a perpetual dinner guest who knows he can always order the most expensive item on the menu because he’s never going to have to pay for it. You don’t want a class of people who can vote to raise taxes on everyone but themselves, in order to get themselves more free shit paid for with Other Peoples’ Money.

    No skin in the game, no vote in the upper houses. Only way to fix the issue.

  25. sdog

    Why not a debit tax?
    Make it 1%

    A one percent tax on all withdrawals from financial institutions would raise about $470+ billion dollars annually – twice the amount of the current Federal tax system.

    A one percent debit tax would eliminate every other tax, including tax returns – ending the need for a 20,000-person ATO taff and the intimidatory tactics this government department employs to enforce the current biased system.

    There’re a few Democrats who’ve been pushing for a 1% transaction tax -using almost word for word your argument – in the US for almost a decade now. Here’s the latest iteration.

    Don’t tell me that crackpottery has spread to Australia now?

  26. sdog

    By the way, various banana republics in Latin America have already gone the debit tax route. How’s that worked out for them?

    Oh.

  27. sdog

    No skin in the game, no vote in the upper houses. Only way to fix the issue.

    But then you’d have a class of citizens with no say in their government.

    I’d rather ensure everyone have skin in the game, and keep a robust representative democracy, than disenfranchise people.

    Maybe it’s just me, but the idea of only letting the wealthy landed gentry “rule” and then having an underclass of people who owe nothing to and have no say in their country makes me uncomfortable.

  28. Gavin R Putland

    BTW, the Old Testament prescribes tithes of various fruits of the land, but not of the wages of hired servants. And in the New Testament we find

    Woe unto you, scribes and Pharisees, hypocrites! for ye pay tithe of mint and anise and cummin, and have omitted the weightier matters of the law…

    and

    The Pharisee stood and prayed thus with himself, God, I thank thee, that I am not as other men are, extortioners, unjust, adulterers, or even as this publican. I fast twice in the week, I give tithes of all that I possess…

    and of course

    Render to Caesar the things that are Caesar’s…

  29. Chris M

    Interestingly in the Old Testament the 10% tithe was not money it was goods – food and the like. Not sure the ATO and Gillard would be so keen on that.

  30. On or after 12 December 2006, a foreign resident makes capital gains only on the disposal of taxable Australian property.

    To Dog and Alfonso capital gains made by a foreigner are only taxed on real property not for example shares.

    Dog I am not sure what the question marks are for it is pretty self explanatory I would think. Company tax rate 30%, personal tax rate up to 46.5% so when you become rich you invest through a company and it is only money you pay yourself in dividends that can be over 30% therefore effective tax rate is regressive. For the US it means investing overseas to achieve the same outcome.

  31. Chris M

    ^ just saw Gavins new post on same.

    I also find it interesting that 10% could probably be considered about optimum on the Laffer curve according to some.

  32. Aussieute

    @sdog never heard of them before.
    @brc to make a payment the money has to come from an account hence make a 1% tax contribution.

    I was trying to work out a way to remove all need for tax deductions, for entitlement claims etc.

    Didn’t think it was a prescription for all the ills of Government figuring my money was theirs.

    Problem with the GST is the states didn’t remove the taxes they promised. Typical.

    We need some way of limiting government/bureaucracy to have to suffer the pain of down turns as we slaves do.

    The real issue is one of envy and entitlement at two ends of the spectrum along with a “dividing the pie” mentality, rather than growing it.

    I have no money and you have too much or they have too much and I’d like to “curry favour” by taking it off them and giving it to you.

  33. JohnRMcD

    I started watching/listening to this speech; and then decided that it was as boring as bat shit, having to listen to all of those quotations from the christians’ bible. That is the fast way to drive me away from anything.

  34. Chris M

    Crazy how that would be the case at the National prayer breakfast. 🙂

    Acts 28v27

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