The American Debt Ceiling and Arguments for a Flat Tax

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In America, the middle class and lower income brackets contribute very little or nothing at all to taxes.  This is radically different from Canada.  In the US, the federal basic tax exemption is around $45k vs Canada’s roughly $10.5k.  State tax exemptions vary drastically, with California at $55k, and Texas not collecting a state income tax.

The simply matter is progressive tax brackets are dangerous.  When the economy is booming it’s rather easy to shift the burden to the wealthy.  But when the recession comes, your tax base dries up.  Think of it this way, a person with an income of 10 million annually suddenly finds the market sour and is now only making 1 million annually.  At first, most people (being jealous bitter little things) say “so what? Poor baby has only a million dollars now.”  But the problem is you just lost 9 million in taxable revenues.  This is how massive government deficits arise during recessions.  You simply don’t have the same wealth to lay the punishing “rich pay their fair share” taxes upon.

Now, the best solution is obviously no income tax and use consumption taxes to finance the government.  Of course, this also requires fiscal restraint and a government that truly understands it’s role is to provide only the most essential of services, and it is not responsible for charity work, moral enforcement, and the like.  Good luck with the leftists elites.  A thousand Grecian style collapses could happen and they still wouldn’t understand.

Failing a consumption only tax system, a flat tax is your next best approach.  However, flat tax revenues will still swing with the fortunes and misfortunes of the rich.  Consumption taxes tend to remain pretty steady.  The requisite fiscal restraint is really the only true barrier.

Finally, do a little research on Texas.  You will find that:

  • Texas has no state income tax.
  • Texas has the strongest economy in the US.
  • Texas responsible for over 50% of all new jobs.
  • Texas has steady state revenues, even in the recession.

And here’s the article that started this post:

As is well known, the president has also drawn his line in the sand; he has insisted that the new revenues needed to close the deficit must be obtained from either raising taxes on affluent individuals or raising corporate taxes. The vulnerable and needy are to be kept free from their share of the tax burden.

more at hoover.org. ht SDA

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