The Ultimate Tax Reform Poll
Flat Tax vs Fair Tax vs Tax the States
Poll Closed 1/27/07 @ 12:00AM CST
We call this the "Ultimate Tax Reform Poll," because we didn't just create a poll and select options, based upon our own unfounded beliefs, but rather, we conducted our own much broader poll, with every conceivable option, to determine what options were even worth including in a narrowly focused poll. That first poll revealed something that we did not expect.
For the first two weeks in January, we asked our readers, "What kind of tax reform will serve all Americans best?" In that poll, we included every reasonable and even some unreasonable options, so as to confirm our belief that the only two options that had any real support were the Fair Tax and the Flat Tax, before posting a poll that included just those two options.
As it turned out, another option surprised us and essentially tied for second place in that poll. So to be fair, our follow-up poll included three options, the Flat Tax, the Fair Tax and Taxing the States. Also from that earlier poll, nobody wanted to keep the current progressive income tax, without any changes and only a handful wanted to keep the progressive income tax, in any form, so did not include keeping the current system as an option in this poll.
We encouraged everyone to understand each of the options, before voting. In that regard, we included the following brief descriptions of each option. Furthermore, to avoid bias, we also provided links to the sites of the most significant advocates of the Flat Tax and the Fair Tax. There is no site of which we are aware that advocates for taxing the states, so we attempted to explain that option the best that we could. The order of the options in this poll were determined by a random number generator.
The Flat Tax refers to a "flat" or single-rate income tax, with no deductions. Proponents emphasize that since everyone would pay tax at the same rate, income tax preparation would be immensely easier and because there would be no deductions, everyone would be on equal footing. They also point out that double taxation of income, dividends and capital gains would be eliminated under this plan. Flat Tax detractors point out that since lower income earners are protected by a nice sized personal exemption and upper income earners will reap a huge windfall, from a lower tax rate and an end to taxation on dividends and capital gains, it is middle income earners who will suffer. They also point out that under the Flat Tax, the IRS and withholding would still exist. For more detail on the Flat Tax, from a proponent's viewpoint, visit FreedomWorks, The Flat Tax : Issue Homepage.
The Fair Tax refers to eliminating the IRS and replacing personal and corporate income taxes and social security taxes, with a national retail sales tax, collected only at the point of final retail sales of new items or services. Fair Tax proponents emphasize that since withholding is eliminated, you take home your entire pay check and pay tax only when you spend. Since the wealthy have more disposable income, they spend more and thus, pay more tax, while the poor are protected by a rebate that makes spending up to the poverty level tax free. Fair Tax supporters also point out that it would allow US products to compete in ways that no income tax ever could. The primary concern of Fair Tax detractors is that they fear that when the income tax cost to businesses is eliminated, those businesses will not pass those savings on to consumers and the cost of living will rise substantially. For more detail on the Fair Tax, from a proponent's viewpoint, visit Americans for Fair Taxation.
Taxing the States refers to eliminating the IRS and replacing personal and corporate income taxes and social security taxes, with an apportioned tax on the states. Each state would be responsible for paying federal tax, based upon that state's gross domestic product or some other agreed upon economic measure. Each state would then determine how best to collect taxes, within the state, to raise the money to pay to their federal tax bill. Since there are no specific proposals for such a method of tax collection, I will speculate on some benefits and problems. I'm sure that some of you will think of issues that I did not present here. But this concept is totally new to us, so just know that we tried. First, taxation would be closer to the taxpayer and state governments are considered more responsive. Competition between the states and the fact that various states would try different tax proposals, would soon reveal what taxation method works best for the states. Also, since taxes would be collected at the state level, the federal government would no longer be looking into your finances every year and depending on your state's taxation method, your state might not be looking into your finances, either. On the negative side, some people might think that the different standards of living among the states might make such a tax unfair to some states, while benefiting others. Some might point out that since most states have an income tax, there will still be government people looking into your finances. Since we are unaware of any site that promotes this alternative, we have made this description a little longer than the other two, just to try to be fair. At least you have an idea what such a method of taxation would entail.
Before moving on to the poll question, we asked respondents to remember that this question only concerns tax collection and has nothing to do with how the money collected is spent. That's an entirely different issue. So here is the question that we posed.
Keeping in mind that regardless of tax method implemented, the amount collected will have to be roughly the same, if you had to choose between the following three methods of tax collection, which do you think will benefit all taxpayers most?
Copyright 2013 John Gaver
All rights reserved
See related articles and supporting documents:
1986-2008 IRS Collections Data by Income Category
Obama agenda drives record expatriation
Tick - Tick - Tick / The Economy Bomb
Tax Freedom Day Builds Case for FairTax
US Tax Freedom Day Clock Web Widget
UK Tax Freedom Day Clock Web Widget
US Tax Freedom Day Clock
US Tax Freedom Day Clock Widget (for Mac)
UK Tax Freedom Day Clock Widget (for Mac)
The Privacy Factor
More Attacks on the Wealthy
US Taxpatriates List
2000 Statistical Yearbook of the Immigration & Naturalization Service (6.2mb PDF)
2003 World Wealth Report (Press Release)
American Citizens Residing Abroad (US Bureau of Consular Affairs)
Health Insurance Portability & Accountability Act of 1996 (26 USC 877(a)(1))
Immigration Reform and Immigrant Responsibility Act of 1996 (8 USC 1182(a)(10)(E))
Heroes Earnings Assistance & Relief Tax Act (Public Law 110-245) (8 USC 1182(a)(10)(E))
The Economic Impact of Replacing Federal Income Taxes
with a Sales Tax (CATO)
Fair Tax Act of 2011 (H.R. 25)
Americans for Fair Taxation
National Retail Sales Tax Alliance
See Expatriate sites: