Rand Paul Outlines Plan for 14.5% Federal Flat Tax

[Dave Stalwart]

What exactly are partisan politics?

[Rlh04d]

What exactly are partisan politics?

A fundamental inability to criticize people who are on your side of the ideological spectrum while attacking those on the other side, often for nearly the exact same behavior.

See: Russia illegally occupies Transnistria and invades Georgia during President Bush's time in office. Russia continues to illegally occupy Transnistria, Abkhazia, and South Ossetia, and illegally annexes Crimea during President Obama's time in office. Any logical person would obviously assess those events as nearly identical. Yet somehow it becomes a matter of politics to attack only the person that disagrees with your political ideology.

You can't have an actual discussion about anything with people who just want to make everything into a "Your party is the worst! No your party is!" fight. I'm tired of all of these fights where people make everything into an issue about which leader or party is worse. Every party sucks. Every leader has made poor decisions. These aren't sports teams, there's no reason to play cheerleader.

Russia didn't become a problem in January 2009. The Middle East didn't become a problem in January 2001. Both problems go back generations and transcend political party grandstanding.

[shockmonster]

A fundamental inability to criticize people who are on your side of the ideological spectrum while attacking those on the other side, often for nearly the exact same behavior.

See: Russia illegally occupies Transnistria and invades Georgia during President Bush's time in office. Russia continues to illegally occupy Transnistria, Abkhazia, and South Ossetia, and illegally annexes Crimea during President Obama's time in office. Any logical person would obviously assess those events as nearly identical. Yet somehow it becomes a matter of politics to attack only the person that disagrees with your political ideology.

Russia didn't become a problem in January 2009. The Middle East didn't become a problem in January 2001. Both problems go back generations and transcend political party grandstanding.

Please explain the time line for the develop of the middle east problem that exists today (prior to 2001). When did it begin? Was it in the 90's (during Clinton's time) when Bin Laden began to organize fighters in Afghanistan or was it before that? Also, did Russia begin these aggressions against the Georgians prior to Putin?

[Rlh04d]

Please explain the time line for the develop of the middle east problem that exists today (prior to 2001). When did it begin? Was it in the 90's (during Clinton's time) when Bin Laden began to organize fighters in Afghanistan or was it before that? Also, did Russia begin these aggressions against the Georgians prior to Putin?

Do you want something in real detail or a quick overview? I can give an overview ... if you want true detail, I can create a reading list.

Russia prior to Putin was an absolute mess, so for all intents and purposes you would have to say the modern issue only began with Putin, who inherited a crumbling Russia with little central government power and rebuilt it into its current state. But there were also issues in Georgia immediately falling the fall of the USSR, like with most former soviet states -- civil war, lawlessness, rampant corruption -- and that ended up with the South Ossetia and Abkhazia defacto-independence in 1992 and 1993, just without Russian troops guaranteeing their "independence." Medium term the issues are Soviet era population control policies, namely under Stalin, which moved large groups of ethnic Russians into Soviet areas (and out), as a method of extending Russian control throughout the USSR and weakening local ethnic groups that caused problems, creating the trumped up "protecting ethnic Russians" justification Putin uses today to expand territory (partly as an outward distraction for the Russian people to maintain Putin's popularity despite clear domestic problems and destruction of the democratic process, partly from greed, partly from the very real population decline going on in Russia right now which will slowly cripple them). Long term Georgia and all of the Caucasus has a long and convoluted history with Russia, making the issue truly go back to the late 1700s. Georgia appealed to Russia for protection as another Christian nation for protection against the Persian and Ottoman empires surrounding them, and instead they were absorbed. In fact Russia ignored a defense treaty with Georgia and allowed Persia to burn Tbilisi, and then absorbed Georgia completely as their property rather than a Christian ally. They also practiced outright genocide and brutal forced migration towards many of the ethnic groups throughout modern Georgia, but those people aren't what we'd consider ethnic Georgians today. It's worth noting Georgia is very much what we'd consider a "Western" country culturally, are developing well into a responsible democratic country over the last 10-15 years, and are very anti-Russia.

I can recommend a few good books on Caucasus' history :) The Caucasus was one area I had a big blind spot on until recently.

I wouldn't even know where to begin with the Middle East. You could go with the invasion of Iraq, which is where the current ISIL threat began, both as an insurgency in Iraq and with members of Iraq's military regime. You could go with the 1990s, where we didn't respond quickly enough to the organization of Afghan fighters under Bin Laden and other groups with obvious vendettas against the US. You could go to the 80s, where we were training and arming most of the groups we would later fight. You could go with the breakup of the Ottoman Empire after they were on the wrong side of WWI, dissolving a political entity that had controlled most of the Middle East for ~600 years and replacing it with crudely manufactured states with little regard to religious and ethnic divisions to prevent future conflict. You could go with the rise and fall of various Persian Empire eras, which controlled most of the rest of the Arabic world. You could go back to the death of Muhammed in 632 and the resulting Shia/Sunni split over who would succeed him in the Caliphate, creating the real conflict that defines the Middle East today, and divides most of what we see as "the Arabic countries" in half, and generates proxy wars between Iran (Shia) and Saudi Arabia (Sunni).

I'd probably go with the breakup of the Ottoman Empire as having the single biggest impact on where we're at today with the Middle East from the US perspective, but it's damn hard to point at just the entire region without getting into the histories of the individual countries, ethnic groups, religious sects, etc. We had some role in the fall of the empire, but we weren't a true member of the Allies in WW1 (see Kung Wu's comment about Washington; we were smarter then), and we were never actually at war with the Ottomans, despite them being a Central Power aligned with Germany. The majority of our problematic intervention which creates so much ill will today is likely the use of the Middle East as a proxy-war during the Cold War. But really the Middle East will always be a mess until the Shia/Sunni split is solved, either with religious reconciliation, diplomatic division, or genocide.

Which is all part of why shouting about Bush or Obama is a childish understanding of foreign policy. The problems of the world run deep. Politicians speak in simplistic sound bites because they know most Americans don't care about the true causes.

[Dave Stalwart]

Rand Paul gains more of my interest every time he speaks.

[Aargh]

Pardon me for going back to the original topic.

I have always been a strong supporter of a flat tax, but I have serious doubts about the practicality of attempting a flat tax. The main concern is that it will never be allowed to be "flat".

I have no doubt it will be "flat" for the middle class and those below that financial level. That will result in a tax increase for those groups. Special interests and lobbyists will wrangle exceptions on any flat tax. That will result in the middle class and the lower classes seeing a tax increase, while those above that level will get exemptions that will keep them below the "flat tax" level. Poor people don't hire lobbyists. Rich people hire lobbyists.

When I was earning "middle class" wages and had a house payment (itemized deductions), I was paying about 8% of my income to Federal taxes. Since I got cancer, I've been unable to find "middle class" wages. I'm working part time for about $18K a year. My house and both cars, are paid for. I have no credit card debt. I do not file itemized deductions.

I'm paying about 2.5% of my gross to Federal taxes. $18K x 2.5% = $450 a year I pay in taxes. With a 14.5% flat tax rate, I'd be paying $2,610 in federal taxes.

[wufan]

One of the issues with creating a flat tax is implementation without compromise. Some will be better off for it, while others will be worse. A simple fix to the issue you describe above is to start the tax at the poverty level, or at the minimum wage level. If minimum wage is $8 an hour, then a worker can expect to make $16640/year (2080 working hours in a year with a full time/40 hour per week job). Any earnings below $16640 are not taxed. Once you hit the pre-determined threshold, the tax is implemented. In your case, the extra $1360 would be taxed at at a rate of say 15% (to make up for the lost taxes and to make the math easier) and you would pay $204 annually. Even if it was raised to 20% to make up for lost tax revenue, you would only pay $272.00. That's less than $1 per pay period assuming you get paid every two weeks.

As one moves up in pay, the impact of the immediate "poverty" deduction is lessened, and becomes negligible for the 1%ers. This also protects the poor and encourages upward movement in wages as you will always keep a certain percentage and improve your net earnings without fear of jumping tax brackets.

[wufan]

As things become more complex with larger families, the "poverty" deduction could be increased based on number of dependents as well. For instance, perhaps the level is set at $5/hour for a single individual, $5/hr for second individual, and $2/hr for each additional dependent. Just rough numbers...

In this hypothetical, a family of 4 earning a combined wage of $40000 would pay ~ $2000 in federal tax (each would claim $7 an hour in poverty exemptions) and about $7000 in state and SS taxes. With $31000 remaining for annual expenses, this equates to ~ $2600/month.

That's not a lot, but at that point, it's not the federal governments fault.

For the same scenario, but with an income of $100K, the federal tax would be $14K. At $1M it would be $194K.

[Play Angry]

Yep, there is always a progressive phase-in at lower income levels for the reasons @wufan: and @Aargh: point out above.

Surprisingly there has been a lot of support on both sides of the aisle in the past - Jerry Brown had it in his '92 platform and Steve Forbes advocated for it in his '96 bid. The real rockfight involves:

-recharacterizing categories of income - do dividends and capital gains get lumped in with wages?

-the actual rate itself (14.7% vs., say, 20%) and whether any sort of federal VAT/sales tax accompanies it

-the steepness of the phase-in and exemption for low income earners

-the most difficult, closing all (or as many as possible) loopholes and deductions. Mortgage interest will always be the 800 lb gorilla at the personal income tax level of the fight.

[Dave Stalwart]

I think people are willing to support it because deep down everyone knows it's going to take some actual work to begin to fix our mass amounts of debt.

It works against common sense every time you get promised the world by the government and you may enjoy the promises but people kinda know at some point we have to stop pretending. When a guy comes along and admits what has to be done to get out of debt, it's okay to just go ahead and admit that it's still necessary even if it's hard. No one ever gets behind anyone that says something might be hard. As long is MY life is perfect and great, you can tax the pants or regulate the pants off someone ELSE and I don't care. That's wrong. I'm in the camp of people who would be willing to see my taxes INCREASED if I were underneath the flat tax rate if it meant we were being honest with ourselves about what an American needs to be paying. I am only in that camp if I know everyone is participating. The flat tax idea means everyone is participating. I think something about that helps people to be willing to hear it out.

[Dave Stalwart]

And I actually bumped this thread because I saw a newer article about Rand Paul and something called sanctuary cities. He is just very "common sense" about identifying problem areas. I think I appreciate hearing from a guy who really doesn't have much of a party line at all. He just points out stuff and theorizes ideas on fixing them without filtering everything to make it sound easy or accommodating.

If nothing else, whether he gets elected or not, I think he is having an impact on the next election because he is educating voters and he's not beating around the bush.

[Aargh]

At some point we are going to require a significant tax increase. It will have to be across the board. It's probably going to have to hit upper classes harder than lower classes unless we are willing to accept Rio de Janeiro types of ghettos in our cities. The people earning $8 - $15 an hour do not have the money to help out much in reducing our debt.

American capital investment in manufacturing is putting that money into Asia, so increasing our manufacturing output to raise money to reduce the debt isn't going to happen. In fact, the outsourcing of manufacturing to the 3rd world is increasing corporate profits, but it's also driving trade imbalances, which contribute to increasing national debt.

I can see a legitimate argument for higher taxes on profits based on foreign manufacturing. If some entity is taking money out of the USA economy and putting it into the economy of a foreign country in order to increase their profits, I think it's fair to penalize them for that.

Sam Walton insisted he could provide value to consumers by selling products made in America. After he died, his successors got insanely rich by sending all their purchasing dollars to China instead of leaving them in America. That does 2 things. It reduces the money available in the American economy and increases the money the American economy sends to foreign countries. Not only is Wal-Mart not penalized for those practices, Wal-Mart actually includes instruction for applying for government assistance for their new hires.

I'm all for free markets and capitalism, but that ship sailed some time after the robber barons of the 19th century showed us exactly what would happen if they were unregulated. Now we have Wal-Mart stockholders profiting from increasing the national debt while relying on either the national debt or the taxpayers to subsidize their employees.

If that's capitalism, then I'm opposed to capitalism.

[Dave Stalwart]

I can see a legitimate argument for higher taxes on profits based on foreign manufacturing. If some entity is taking money out of the USA economy and putting it into the economy of a foreign country in order to increase their profits, I think it's fair to penalize them for that.

Now we're talking

[Play Angry]

I am probably less informed than you guys on this topic so I need your help.

U.S. corporate income tax rates are already 35% and are imposed on a global (as opposed to territorial) basis, right? This results in an effective tax bracket that is one of, if not the, highest in the world for multinational corporations HQ'd here.

This proposal is to raise that already-high 35% up to something even higher (40-50%) if the product or service originates in, say, India?

I might be misunderstanding the argument, but this seems like a recipe for further acceleration of inversions. And how would you impose such a penalty tax? Simply by taxing the foreign subsidiary more? Or something more burdensome from a bookkeeping standpoint?

I'm trying to figure out how this is any different from the protectionist union-backed proposals that were rejected in the 70s and 80s.

[wufan]

I am probably less informed than you guys on this topic so I need your help.

U.S. corporate income tax rates are already 35% and are imposed on a global (as opposed to territorial) basis, right? This results in an effective tax bracket that is one of, if not the, highest in the world for multinational corporations HQ'd here.

This proposal is to raise that already-high 35% up to something even higher (40-50%) if the product or service originates in, say, India?

I might be misunderstanding the argument, but this seems like a recipe for further acceleration of inversions. And how would you impose such a penalty tax? Simply by taxing the foreign subsidiary more? Or something more burdensome from a bookkeeping standpoint?

I'm trying to figure out how this is any different from the protectionist union-backed proposals that were rejected in the 70s and 80s.

That's what this sounds like to me.