The debate on income taxes in the 2016 presidential election reveals a familiar dichotomy: Republicans support lower taxes across the board, while Democrats advocate higher taxes on the wealthy and on capital gains to finance social programs and tax cuts for the middle and lower class. In this election, as in the past, a second rift has also appeared, this time between flat and progressive taxes. Simply put, a flat income tax prescribes a single, usually fairly low percentage rate on the income of all Americans, regardless of the size of that income. Three GOP candidates have proposed a single rate tax for all income earners: Ted Cruz at 10 percent, Rand Paul at 14.5 percent, and Ben Carson, whose tithing-based system should fall somewhere in between the two. By contrast, progressive taxes establish different marginal rates for different levels of income. Under our current progressive system, low-income earners pay around 10 percent in federal taxes, while high earners pay up to about 40 percent . Flat taxes are a favorite policy proposal among small-government conservatives and Republican primary voters. In the past, Republican presidential candidates Steve Forbes, Rick Perry, Newt Gingrich and Herman Cain have all ran on flat taxes. Some, like Mike Huckabee, have advocated scrapping the income tax entirely in favor of a form of value-added tax, or consumption tax . Proponents cite the supposed fairness and simplicity of these taxes as compared to the current multi-tiered system. Such a tax would strip away deductions and loopholes and ensure that each earner pays the same share of his or her income to the federal government. While this system would certainly be simpler, its “fairness” is subjective, and its economic underpinnings are questionable. Candidates pushing flat taxes suggest that such a reduced rate would produce such a boon to economic growth that it would be revenue neutral, but few economists see this as plausible . Most recognize that any transition to a flat tax system would necessitate drastic spending cuts and a decrease in the size of the federal government . Needless to say, no flat tax proposal has gained traction among Democratic candidates or voters in recent elections, and Democrats are likely to favor an even more progressive system than what we have today. While the debate over the federal tax structure will continue to rage in the Republican primary, if history provides any indication, the party is more likely to nominate a candidate supporting tax cuts and lower progressive rates, as has each Republican presidential candidate following Ronald Reagan. While the flat tax idea is not likely to disappear in the near future, America has embraced progressive tax rates since the introduction of the federal income tax in 1913, and will in all likelihood continue to do so.
Like almost every other developed nation in the world, the United States follows a progressive tax system. This means that our income tax rate tiers itself such that individuals who are able to pay more pay a larger percentage of their income. Essentially, the amount of money that the government demands out of a person’s paycheck every month increases proportionally to his or her income level. Despite heavy criticism from many presidential candidates and conservative economists, the progressive tax system entails large benefits for society in two respects: equality and its lack of regressiveness.
First, through a purely philosophical lens, progressive taxes match the ideal of equality upon which much of our nation was founded. Government in its most basic form–security–ensures a strong national defense, which is a public good to be used by all citizens. Because wealthier individuals have more assets than poorer individuals, whom all require protection, the government is required to pay more in terms of defense to adequately protect America’s rich and their property. Progressive taxes enable governments to differentiate tax revenue between those who consume more or less of the public good to account for the extra money required by certain individuals.
"Progressive tax systems don’t burden lower-income individuals as much as a flat tax system and thus, allow disadvantaged citizens to have less costs when it comes to promoting a meaningful standard of living."
While on the surface flat taxes seem most “fair”, advocates of flat taxes ignore that progressive taxes are designed to combat the regressiveness of America’s other tax codes. Conservatives often claim that a flat income tax will cause everyone to pay the same percentage of their earnings, but proponents of flat income tax, oddly, do not see the need to adjust the regressive sales tax system. Sales taxes disproportionately target the poor, who are required to spend almost if not all of their money earned, yet are charged the exact same rate per purchase as people who can save the majority of their income . For example, in Claremont sales taxes are 9%, a family in Claremont making $50,000 a year which needs to spend $45,000 will lose 8.1% of their income to sales tax . Meanwhile, a similar family earning $250,000 which spends $100,000 per year will lose only 3.6% of their income to sales tax, a regressive system which targets the poor. To combat this, most modern countries utilize a progressive income tax. Progressive tax systems don’t burden lower-income individuals as much as a flat tax system and thus, allow disadvantaged citizens to have less costs when it comes to promoting a meaningful standard of living . For example, taking a tenth of a poor individual’s income has vastly greater effects on that individual’s standard of living than a government taking a tenth of a millionaire’s income. When you rely on every penny to survive, you simply cannot afford to pay the same flat tax rate, because the difference of a few percentage points is no longer the difference between a good car and a great car; it becomes the difference between whether or not you can pay rent. From a moral standpoint, many individuals in the United States have decided that there is a societal benefit to preventing lower-income individuals from living in abject poverty. A progressive tax system allows for flexibility in determining how not only tax revenues are conceived but also who gets greater leeway in society.
In this sense, the progressive tax system is the most practical. In terms of efficiency, progressive tax systems allow the government to have a greater revenue across the board. The logic behind this comes from the fact that, given capital gains taxes remain the same, a flat tax would be limited by how much the poorest person would be able to pay. Essentially, the rate at which a flat tax could be enacted depends on the rate that the lowest earning workers can afford . In a country characterized by class and racial divides, the progressive tax system not only promotes equality in the greater sense of national income but also accounts for the multifaceted nature of struggling and affluent communities nationwide.
One policy that presidential candidates Ben Carson and Ted Cruz propose is a flat tax system of 10% for all income levels. While they were quickly ridiculed by pundits and the liberal media, their idea is neither new nor unique. Proponents of the flat tax believe it is a tax that is most fair, promotes economic growth, and simplifies a bloated tax code.
A flat tax system would impose a single income tax rate on every taxpayer in the system, assuming no exceptions, credits, or incentives are integrated into the system. This differs from the current progressive structure which taxes citizens at different levels based on income level. The more income a person makes, the higher their nominal tax rate is.
"It would be hard to argue that the top 2.5% of taxpayers consume half the total benefit of public services like Medicare, the military, or national parks."
Some people believe that this progressive system is unfair. According to the Pew Research Center, the top 2.5% of taxpayers pay 48.9% of all federal income tax  while the bottom 25.1% pay just 0.2% of the total. Because the utility of (or, at the very least, access to) public services is largely distributed equally, presidential hopefuls rightfully call this system into question. It would be hard to argue that the top 2.5% of taxpayers consume half the total benefit of public services like Medicare, the military, or national parks. Similarly, 25.1% of the taxpayers don’t use only 0.2% of the same services; rather, people largely receive equivalent benefits from the public services federal taxes pay for. The discrepancy between funding contributed and proportional utility received displays that a progressive tax system is unfair, and that a flat tax can solve the inequity it creates.
Proponents of the flat tax also argue that such a system would promote economic growth by eliminating disincentives to produce . In a bull market, citizens make more money than normal and are subsequently taxed at a higher rate. This extra taxation removes incentives to work–this is especially problematic for those in the highest tax bracket who experience the greatest tax burden. Proponents of a progressive income tax recognize this mechanism, but they argue that the progressive rates reign in runaway economic growth (and inflation that may follow) and contribute to a stabler business cycle overall.
The final argument for a flat tax system is an argument for simplicity. The 2013 edition of the Internal Revenue Code was 5,036 pages and 4 million words long. A flat tax system is supposed to be simpler with less loopholes , making it easier (and cheaper, if you use an accountant) to pay taxes. Others argue that complicated tax codes make it easier for the rich, who have the resources to employ teams of lawyers, accountants, and assistants , to pursue every loophole and escape paying their fair share of taxes.
REBUTTAL - PROGRESSIVE
Mr. Quaoser argues that because the rich own significantly more property than the poor, the rich have more to protect and should thus contribute more tax revenue. However, his entire argument is based on the premise that the only service the government provides is national defense. While that might have been true in 1789, the national government has expanded significantly beyond its initial boundaries. The government now spends money on services like nationwide mail service, corn subsidies, forest trail maintenance, science research, road construction, space exploration, intelligence gathering, and green energy promotion. Even comparisons with 1789 fall short as the federal income tax was not commonly instituted until 1913 .
Overall, much of the argument for a progressive tax system relies on the premise that the rich should pay more because they can. However, such a system is fundamentally unfair, especially at the extreme in which it currently exists. Although the rich contribute the most to national GDP, business growth, and economic growth, they are demanded to pay the overwhelming proportion of income tax revenue as well.
REBUTTAL - FLAT
Mr. Wong argues that the progressive tax system is largely perceived as unfair. While many may see tiered tax rates as unfair, the progressive tax system holistically promotes greater equality across the board. A flat tax system would be highly regressive and burdensome on the poorest individuals in our society, thereby greatly affecting their standard of living. If we wanted our communities to enjoy equality in terms of living, a progressive tax system better encourages this. On a cost-benefit point, the benefit to promoting tax equality would have the detriment of lower government revenues and greater poverty.
Furthermore, the argument that taxes reduce incentive to work hasn’t been shown to be the case for higher-income workers . The evidence on correlation between taxation and hours worked is largely apprehensive for high-income workers . For lower-income individuals, taxes play a huge role in incentives to work. A flat tax system would encourage unemployment over employment as the proportion of income brought home dramatically decreases. If taxes become too regressive, many poorer individuals will choose to stay at home and live under the safety net of welfare rather than working. These incentives promoted in a flat tax system would only expand the rift between the rich and the poor and would not encourage healthy local economies.
While I agree that a flat tax system would be simpler, the benefit of a simple tax code should not preclude the ability of many individuals in our society to have a proper standard of living. In reality, a flat tax system cannot be implemented without especially burdening lower-income individuals. A progressive tax system, on the other hand, discourages income inequality, engenders acceptable standards of living, and therefore is currently the most practical tax system.
Sources and Notes
Featured Image Source: "Tax Calculator" by 401(K) 2012 - Own work. Licensed under CC via Flickr Creative Commons - https://c2.staticflickr.com/8/7017/6757824757_69f6400558_o.jpg