Rand Paul, a potential Republican candidate for the 2016 presidential election, favors the idea of a flat, simple tax, with tax breaks for individuals and businesses. His main issue with the current tax system is the complexity and regulation by IRS. His proposed tax system would apply to wages, salaries, pension payments, but fringe benefits would remain tax free. He would tax businesses for capital gains, dividends, and interest, but these categories would be tax free for individuals, and eliminate the estate tax an some possible tax breaks.
This tax would not raise revenue, and in fact lower the amount of revenue collected by the federal government through taxes. He would combine this with a reduction in spending to eliminate deficits. While it is a flat tax, Paul says that it would in fact be a progressive tax in terms of net income and effective tax rate, which would hypothetically rise as income rises.
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2 comments:
While the idea of simplifying the tax system makes sense because of its enormous complexity. However, this extreme complexity doesn't warrant reducing government revenues. And one man, even if he is the president will have difficulties reducing deficit spending at this time in our country. I do not understand why he is claiming that this is also a progressive tax, because then it is not a flat tax. If the tax was 20% and one family earns $100,000, and the other earns $50,000, then the first family pays $20,000 and the other pays $10,000. If he changed the way this flat tax worked, it would no longer be a flat tax. Reducing government revenue is a problem.
My initial reaction is to oppose this flat-rate tax, because I believe progressive tax would stimulate the economy and bring more revenue to the government whose budget is now in a deficit. It is not fair to tax lower-income individuals the same tax rate as wealthy individuals.
Besides, if the government uses a flat rate but still uses tax breaks, the complexity of tax return will not be reduced substantially because people still need help on tax breaks and other tax benefits. Even if complexity is a problem now, people can still figure out the way. Wealthy individuals can seek help from accounting firm and tax software, and that will create jobs for those accountants and stimulate the economy. Low income individuals, on the other hand, can prepare tax for free using IRS VITA program or local agencies.
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