Robert Reich: What's wrong with the "flat tax"

The flat tax has been making a popular comeback in the GOP debates - Herman Cain's 9-9-9 plan and Rick Perry's proposed flat tax are being tossed around as a "fair" approach to taxation. That a flat tax could ever be fair is false.  Check out Robert Reich's explanation:Reich breaks down the flat tax.  

"The flat tax is a fraud. It raises taxes on the poor and lowers them on the rich.

We don’t know exactly what Perry will propose, but the non-partisan Tax Policy Center estimates that Cain’s plan (the only one out there so far) would lower the after-tax incomes of poor households (incomes below $30,000) by 16 to 20 percent, while increasing the incomes of wealthier households (incomes above $200,000) by 5 to 22 percent, on average.

Under Cain’s plan, fully 95 percent of households with more than $1 million in income would get an average tax cut of $487,300. And capital gains (a major source of income for the very rich) would be tax free.

The details of flat-tax proposals vary, of course. But all of them end up benefitting the rich more than the poor for one simple reason: Today’s tax code is still at least moderately progressive. The rich usually pay a higher percent of their incomes in income taxes than do the poor. A flat tax would eliminate that slight progressivity.

Nowadays most low-income households pay no federal income tax at all – a fact that sends many regressives into spasms of indignation. They conveniently ignore the fact that poor households pay a much larger share of their incomes in payroll taxes, sales taxes, and property taxes (directly, if they own their homes; indirectly, if they rent) than do people with high incomes."

Read the rest of Reich's explanation here.

Be the first to comment

Please check your e-mail for a link to activate your account.