>>This is exactly why I believe in the idea of a flat tax based on gross income. Your income is higher, you pay more tax. No loopholes to find, no shelters to hide under.
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>The problem with a flat tax is that even if rich and poor pay the same percentage, the impact on the poor is much, much higher.
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>Pick an arbitrary number. I've heard 10% kicked around a fair amount.
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>So, consider three families of four. One earns $40,000 a year (I think that's actually above the federal poverty limit, but I sure wouldn't want to live on 40K), one earns $120,000 a year, and third earns $1,500,000 a year.
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>Family 1 pays $4,000 of taxes, leaving them $36,000 to live on.
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>Family 2 pays $12,000 of taxes, leaving them $108,000 to live on.
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>Family 3 pays $150,000 of taxes, leaving them $1,350,000 to live on.
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>Surely you can see that for family 1, the impact of the taxes in terms of their ability to survive is much, much larger than for the other two families.
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>Tamar

First of all, I'd expect there to be an exemption limit. Secondly, how is this then different from the complicated scenario that now exists? I think a flat tax based on gross income is far fairer to everyone.

I certainly don't see the point in trying to even things out so that all three of your families above have to be brought down to the lowest common denominator. However you structure it, your family 3 will always have more (a lot more) to live on than families 1 and 2. At least this way, family 3 pays what the tax law expects. No tax shelters, and no hiding income. Gross is simply what comes in. It's when you start complicating things with loopholes and net incomes etc that things begin to go awry.