It is simple.  Let us take the United States of America.

Our current tax on income nets us about $1.4 trillion.   If divided equally upon every American (315 m) we would all owe  $4444.44 dollars.  Pretty nifty right?

But that includes children. So, if we tax every working person fairly,  that is about 131 million of us,  each of us to be fair and pay the same amount would chip in $10, 687.

It shouldn’t matter how much one makes.  Everyone in a “fair” system should bear the brunt equally, right?

But some people simply don’t make $10,000 dollars.  Should all their totals then go to the Federal Government until they at least reach that  thresh hold?  And what about state and local taxes which are on top of these? They won’t get paid?

Of course not.

So we write off those who don’t make enough.  They are off the roles.

But shouldn’t they pay something?  Fairness says they should. But what? And if they don’t pay, who then should pick up their costs?  To be fair, shouldn’t it be split among everyone else?

Let’s answer that yes and see where it takes us.

Let us write off those making less than $10,000.  They can work without getting taxed and the rest us us pick up their slack.

The number of those making less then $10,000 are  roughly 38 million of us.  So if we take the entire tax burden and spread it equally, … we get the rest of us workers (131-38 ) 94 million of us share the $1.4 trillion dollar burden to the tune of $14,893 assessed upon each one….

We have two problems with this fairness model.  The first is that now, those making $15,000 a year, are working strictly for the Federal Government.  They have $0 dollars to spend.  The second fairness issue, is that those making only up to $10,000 in earnings keep all their money, but those between $10,000 and $15,000 now have nothing!  And of course those making $20,000 are scrapping to live off the $5,000 they have left, which is half of what those making only $10,000 have to spend.

Something is wrong with this “fair tax”.  It doesn’t  seem very fair now, does it?

Ok, so let’s jump it to $30,000.  A single person can live on $27,000 so let us make that the cut off point.  After all, they can get a cheap apartment at $1250 a month, pay off the utilities at $500 a month,  eat on $500 a month, and at $30,000  they can have $3000 for “others”….

So if the cut off is $30,000 then that wipes off the taxpaying roles  of 82,340,000 of us…  So those that are now left,  (131 – 82) .. 49,000,000 must bear the shared amount of  the rest.  Our shared total is ($1.4 trillion divided by 49 million)  or $28,571, well below the $30,000 threshold…

Well, now we are on to something!

If we divided the assessment up  according to the fair tax principals  every American making over $30,000 would pay $28,571… each.

We are told “this is fair” by the Flat Taxers, of which Huckabee is one.   From the rich man’s perspective it seems fair that the 81 of us making over $50,000,000 a year pay the same as everyone else making $30,000 a year or more.

for them it is like a community assessment fee.  Everyone who buys into America pays the same total into the same fund.

But,  from the bottom there are problems.  Again those making $30,000 a year have $30,000 in disposable income; those making $30,001 have $1430 to live off of for one whole year.  Likewise as one goes up the ladder the same imbalance continues.  Only until ones income has cross the $58,571 dollar mark, is he bringing home as much as is that person making $30,000 a year.  In fact, someone making $40,000 a year is bringing home the exact equivalent of someone making $11,430 a year…

And this is supposed to be fair….

To hide this fact from you, those advocating a fair tax coach the terms in percentages….  that for one, makes it hard for all of us non-math majors to see how unfair their proposal is, and two,  one can accept that paying the same percentage is fair because it sounds more fair…

Unfortunately whether you coach it in percentages or dollars, it is still the same principle…

The US has $5.8 trillion in annual taxable compensation…..  We need $1.4 Trillion of that each year for discretionary spending.  Do the percentage and we find that it is….. 24.13%….

So everyone pays one quarter for every dollar earned.   If you are rich, that’s a lot of money.  Presidential Romney pays less than 13% on the one year he would show us.  It is a 11% jump for him.  (Remember this is what gets paid; there are no other deductions to diminish the totals in a flat tax scheme).  An 11% jump?  About time he paid his fair share!!!

Again, that sounds great.  But of those 81 making over $50,000,000 a year… only make up 0.00005% of the population.

On the other hand, these starting from the bottom, get hit pretty hard…..

  • <$10,000  = $7500 live on income
  • <$20,000  = $15,000 live on income
  • <$30,000  = $22,500 live on income
  • <$40,000  = $30,000 live on income
  • <$50,000  = $37,500 live on income
  • <$60,000  = $45,000 live on income

So what we are saying is that it would be fair to simply suck 25% of taxable wages right out of our economy.

A curious question.  So how does a “fair tax” impact ones economy? Aside from the obvious that we now have to step up assistance payment to the lower echelons thereby incurring even more of an expense,  sucking this much money out that was previously untaxed,  actually makes quite a dent.

If  we are taxing 25% of all wages under $60,000, those 122 million of us are turning over $432 billion out of the $2.73 trillion all of us making under $60,000 earned…. sucking it out from our economy into the coffers of the US Treasury.

The cumulative wages of those few (42,000) making over $450,000 come up to close to $426 billion…  We take that amount and cull our 25% , the government gets $106 billion  and those few get to keep  the remainder, $320 billion .

So if you believe the “fair” tax is truly “fair” you subscribe to the belief that it is “fair” for someone to live off $7500, well under the cost of living,  and then get reimbursed with food stamps, Medicaid, and Earned Income Tax Credit, simply so that someone making $50,000,000 each year gets to pay the same rate because saying so makes it “fair”…

If we decided to give a tax break again to those making under $10,000,  all of those 38 million earning an aggregate of  $152 billion would have their portion of  income tax spread out across the rest of America’s taxpayers.  Just to only spread that to the top echelon alone, if those earning over $400,000 paid the entire amount of the $38 billion taken from those earning under $10,000, it would amount to only a total cumulative tax rate of 33.8%…

Which is pretty fair….

Because the truth is, that through manipulation of tax laws and the politicization of deductions within the tax structure, we don’t really have an income tax here in the United States of America.  What we do have, is a tax on income over those amounts required for deemed necessary expenses.

If you are wealthy and you still feel you are paying more of your money out in taxes, there is something fair you can do about that…. pay your employees a lot more.  The more they make, the more of the burden of the tax load they can afford to take away from you.   There is a very good reason right now, they are now paying less in taxes.

They are making a lot less ….  Likewise, you should be paying a lot more in taxes, because…. you are making a lot more.

That is fair.

 

 

 

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