A flat tax

This has become a huge issue in this election cycle, and the two tax ideologies entering the battle in this 2012 election is the flat tax, and the progressive tax. Here are the proposals so far on wither side:

Herman Cain (drop out)-999 plan. It is a great flat tax system
Rick Perry-20% flat tax
vs.
Obama tax plan: same thing as what we have now but higher taxes.
Romney tax reduction: same as we have now but lower taxes.

Those 4 plans are what we hear the most of today. Now let's define the 2 types of tax:

 A single tax rate that applies to everyone obligated to pay the tax.
http://dictionary.reference.com/browse/flat+tax


A tax that takes a higher proportion of large incomes than of small ones.
http://dictionary.reference.com/browse/progressive+tax

By looking at the definitions a progressive tax sounds more fair, but that is false. Now I will begin the biassed phase, a flat tax trumps a progressive one. 

Our tax system is broke, and I do not see how one can argue against that. Who want to go through 80,000 pages of legislation that have many loopholes and such. So one of the ways we can fis this so with a flat tax. 

A Single Flat Rate. All flat tax proposals have a single rate, usually less than 20 percent. The low, flat rate solves the problem of high marginal tax rates by reducing penalties against productive behavior, such as work, risk taking, and entrepreneurship. [1]

Elimination of Special Preferences. Flat tax proposals would eliminate provisions of the tax code that bestow preferential tax treatment on certain behaviors and activities. Getting rid of deductions, credits, exemptions, and other loopholes also helps solve the problem of complexity, allowing taxpayers to file their tax returns on a postcard-sized form. [1]

No Double Taxation of Saving and Investment. Flat tax proposals would eliminate the tax code's bias against capital formation by ending the double taxation of income that is saved and invested. This means no death tax, no capital gains tax, no double taxation of saving, and no double tax on dividends. By taxing income only one time, a flat tax is easier to enforce and more conducive to job creation and capital formation. [1]

Territorial Taxation. Flat tax proposals are based on the commonsense notion of "territorial taxation," meaning that governments should tax only income that is earned inside national borders. By getting rid of "worldwide taxation," a flat tax enables U.S. taxpayers and companies to compete on a level playing field around the world. [1]

Family-Friendly. All flat tax proposals have one "loophole." Households receive a generous exemption based on family size. For instance, a family of four would not begin to pay tax until its annual income reached more than $30,000 [1]

Consumption-Based. A tax code that does not discriminate against saving and investment is considered a consumption-based tax system, regardless of whether taxes are deducted from the paycheck or collected at the cash register. In this respect, a flat tax is a type of consumption tax. The difference between a flat tax and a national sales tax is where the tax is collected. A flat tax is levied on income-but only once and at one low rate-as it is earned. A sales tax is levied on income-but only once and at one low rate-as it is spent. [1]

Those are the benefits of a flat tax. It is fair and simple. I will now show you it from an economists point of view. 

On the private side, a flat tax reduces the distortions that otherwise arise when two individuals receive different after-tax returns on their labor or investment. The flat tax also eliminates private incentives to concoct wasteful schemes to shift their income onto the ledger of their poorer relatives. [2]

On the public side, the flat tax limits political discretion by making it harder for the government to single out "the rich" for special treatment. It also crimps government spending by denying any group the luxury of supporting government expenditures entirely at someone else's expense. [2]

I find this amusing because the liberals say that a flat tax favors the rich, yet this says opposite actually making it harder for wealthy people to get benefits. So a large portion of their argument, killed. 

Now lest talk about the Obama plan, same perspective: 

His pledge: The median voter need not pay one dime in higher taxes. That honor falls solely on the rich--arbitrarily defined as individuals with $200,000 or families with $250,000 in income. [2]

Worse still, the higher taxes will only compound the problem by inducing the highly-productive people to spend more time on the sidelines. And it will lead ablest foreigners in the U.S. to return home, and those who are at home to stay there. [2]

In addition, by focusing exclusively on annual income the Obama plan creates gratuitous inequities. His tax plan takes no notice that many affluent taxpayers have suffered huge declines in asset value and thus feel just as vulnerable as everyone else. [2]

So basically the obama plan is terrible. So that comparison, the flat tax trumps the progressive tax, especially the Obama plan. And same with the Romney plan, his plan uses the same old system that has the same loopholes and regulations. His plan is the best progressive plan out there, but isn't as good as the other 2 proposals. 

999 plan:

This plan is better than the others, but has a few flaws:

Here are the Cain plan's good qualities: 

• It ends nearly all deductions and special interest favors. 
• It ends all payroll taxes. 
• It ends the death tax. 
• It eliminates the double taxation of dividends. 
• It eliminates the taxation of capital gains and repatriated profits. 
• It allows immediate expensing of business investments. 
• It shifts the burden of taxation from production to consumption. 
• It increases capital formation, which will fuel productivity and wage growth.

In short, Cain's plan would be more fair, neutral, transparent, efficient, and pro-growth than today's system. Good stuff!  [3]

The bad:

Cain doesn't get rid of the income tax. Instead, he reforms it. And then he adds a new levy -- a national retail sales tax -- on top of it.  [3]

So he lowers the income tax dramatically on small business owners and the rich, but not the poor. Bu there's the thing, lowering taxes on those people allows them to hire more people because they have more money, so in theory it would help the economy. SO his plan would help the economy, but raise taxes on the poor. So it has that small downside. 

Also it would increase deficits

We have a spending problem in america, but lowering taxes so much may raise the debt. It is a great plan except for this and the problem above. This plan would work here if he proposed spending cuts to handel this problem. So his plan would work, but he needs to add deficit control to fix the problem. 

Perry's plan

Trumps the current system, but is the worst flat tax proposal ever, so better than what we've got, but worse than all other flat taxes. (sorry  Rick). So basically, good plan compared to Obama's or Romney's, but worse than 999 and other flat tax proposals. 

Conclusion:

The flat tax is beneficial for our economy and tax system. It is fair and growth promoting, and eliminates special preferences and loop holes. SO all in all a flat tax trumps a progressive tax. If you want more info go to my 4 source. 

http://www.heritage.org/research/reports/2005/07/a-brief-guide-to-the-flat-tax [1]

http://www.forbes.com/2009/03/09/flat-tax-plan-obama-opinions-columnists-taxes.html [2]

http://www.freedomworks.org/blog/dean-clancy/herman-cains-999-plan-the-good-the-bad-and-the-ugl [3]

http://www.freedomworks.org/issues/flat-tax [4]