> The flat tax is regressive.

Strictly speaking, a flat tax is the border between progressive and regressive taxation and is neither progressive nor regressive.

I think that's only true in a very academic sense.

Ideally you would want to exclude the expenses incurred to sustain a reasonable minimum quality of life and only consider taxation on income in excess of that. A truly flat tax rate is still regressive in the sense that it is a significantly higher burden on that expendable income at the lower end of the scale.

Even ignoring the disposal income question, it's regressive in utilitarian terms because money, like most commodities, has declining marginal utility, so taking 20% of $1,000,000 takes a lower percentage of the utility of that $1,000,000 than taking 20% of $100,000 does of the $100,000.

(A lot of analysis gets based on the misuse of $ as a flat measure of utility, which is deeply flawed.)

EDIT: more accurately, this subsumes and generalizes the disposable income issue, rather than ignoring it, since the concept of "necessities" that come out before income is "disposable" is really a simplification of the "low hanging fruit" of high-utility spending to a binary category, rather than a continuum.

> Ideally you would want to exclude the expenses incurred to sustain a reasonable minimum quality of life and only consider taxation on income in excess of that

I don't agree that is ideal. Ideally, everyone makes an equal sacrifice. What is an equal sacrifice?

* Everyone could pay the exact same amount of tax, let's say $15K. But that is not equal sacrifice; some people can afford $15K much more easily than others (especially those who don't have $15K).

* Everyone could pay the same percentage of their income, let's say 17%. That also is not equal sacrifice: If you earn $1 million, you can afford to give up 17% of it much more easily than if you earn $10,000.

* Tiered progressive tax rates: These can be equal, if calibrated effectively. It will never be perfect and always up for debate, but it can be done pretty well.

It's generally accepted that the value of money is roughly logarithmic as it increases. A logarithmic flat tax could look something like this:

1) Figure how many times poverty rate you make in revenue (2x, 3x, whatever)

2) Take the log base 10

3) Multiply by some flat constant that is the same for everyone, so that the total national amount taxed is how much the US needs. Last I checked, that flat constant would be around 9.

4) The result is what percentage of your revenue you should pay in taxes.

Currently, we are far from logarithmic. Under this scheme, pretty much everyone reading this board would pay less taxes. Bill Gates pays about the right amount. Exxon would pay more.

Useful as a thought experiment to explore how far away we are from a fair level of progressive taxation.

Thanks.

> It's generally accepted that the value of money is roughly logarithmic as it increases

I assume that is economic theory; do you remember whose or have any pointers to where I can read more?

I think it was Bernoulli that first talked about the logarithmic relationship of utility and value. That was back in the 1700's. I believe there have also been empirical studies that suggest that it holds up in experiments, etc.

It is regressive when compared to the idea that the value of money is roughly logarithmic as it increases.

$5000 means more to a working class person than a billionaire. If taxation should take an equal amount of value from each, then a flat percentage is comparatively regressive.

While you ARE technically correct, the alternative in the wild is progressive taxation. That makes flat taxation a de facto regressive tax, as it will be more regressive than the current taxation regime.

I think this whole tax debate misses an important point. Taxes are viewed as revenue in terms of budget and there is a business tendency to make more revenue to cover expenses. If you stop seeing Tax as a major source of revenue and start having Govt invest money in different ways to make money other than just taxes, we can start actually having a real debate around what is a fair tax rate for govt to cover their expenses and figure out a way to make it progressive.

>Please resist the urge to argue that the trust fund doesn't exist.

Except it doesn't. The only way to for SS to collect from the trust fund is from the general fund. That means that in order for SS to get $1 from the general fund:

A) Raise non-SS taxes $1 to go into the general fund.

B) Cut $1 of other spending from the general fund.

C) Increase the deficit by $1

For the benefit of those who actually don't know, the reason this doesn't hold water is because:

A) The trust fund is in surplus from payroll (FICA) taxes.

B) The general fund is in deficit from income tax cuts.

C) Most income tax cut benefits go to richer people.

So if someone argues that trust fund doesn't exist, they are arguing that revenue from payroll taxes should finance tax cuts for those richer than them. Effectively transferring money from poor to rich.

Keep this in mind as the Social Security caterwauling starts to increase around 2019 (when SS is expected to start needing money from the trust fund). People will argue that Social Security needs to be cut because of that deficit. Most of those people know better and are being intellectually dishonest.

2034 is the actual challenge, but again, there are reasonable fixes to that - for instance, gradually raising the maximum amount of earnings covered by Social Security, or creating a new residual estate tax and dedicating it to Social Security. Democrats also like the idea of raising the upper limit, which will also work and is an easier sell but less defensible philosophically.

A) That surplus money was already been spent in the 1990s.

B) Not true or relevant.

B) Not true or relevant.

>So if someone argues that trust fund doesn't exist, they are arguing that revenue from payroll taxes should finance tax cuts for those richer than them. Effectively transferring money from poor to rich.

Again, not true at all. Notice how you can't actually answer the question I posed about how SS can actually get the money out of the trust "fund." The fund is empty and is quite literally only made of a IOUs from the general fund.

Again, for the benefit of others, since this commenter has an agenda and won't be convinced - commenter also can't answer the question about how he can actually get money out of his own savings account. That account is empty and is quite literally only made of IOUs from the bank it is held at.

It's actually a lousy question because it proves nothing. Money is held in different accounts not because they are actually stored in physically different places, but because they are conceptually different, and because the concepts are not fungible. I do not (and in some cases cannot) transfer money between some of my different accounts at my brokerage even though all that money is ultimately in the same pool somewhere.

In the case of the general fund and the trust fund, the trust fund surplus money was not spend in the 90s or at any other time since the surplus started growing again; it remained in surplus, and - counting its interest income - it remains in growing surplus until about 2019, at which point that surplus starts being dipped into until 2034.

(Also note that historically, this has already happened. [1] There was a social security surplus, and then it got spent down partially in the late 70s, and then started growing again in the early 80s. Everyone got their checks.)

Why is this distinction necessary? Again, because the general fund has gone into deficit. People like mason240 try to pretend that it hasn't gone into deficit as much as it has, because the people that are advantaged by the general fund deficit have a higher tax base than the people that have paid into payroll tax (on average). So why do we make this distinction? To protect against the transfer of money from the poor to the rich. Why do people like mason240 insist otherwise? For not other reason than to keep that money, and to weaken social security.

[1]: https://www.ssa.gov/history/tftable.html

>Again, for the benefit of others, since this commenter has an agenda and won't be convinced - commenter also can't answer the question about how he can actually get money out of his own savings account. That account is empty and is quite literally only made of IOUs from the bank it is held at.

These are two completely separate concepts, but if you insist on equating them, here we go:

Imagine you borrowed money to a business. That business then spent the money and gave you an IOU.

How is the business going to repay you when you want to withdraw? Like I said in my original comment, it will have to:

A) Raise their prices.

B) Cut spending (like employee benefits).

C) Borrow from somewhere else.

So much nonsense here in the rest of you comment. I think the best part is where you claim I have an agenda because I'm being factual, but you keep trying to shift the topic into taxing the rich.

The nonsense is that your comparison again has no relevance to the social security trust fund. Your scenario is based on the assumption that "the business spent the money" and "gave you an IOU". When the fact is that the government did not "spend the trust fund", and there is no such thing as a social security IOU.

As far as the general fund being in deficit, how they resolve that has nothing to do with social security, which has a healthy trust fund to draw upon until 2034, after which benefits will automatically shrink until payroll contributions are enough to fund the trust fund again.

https://www.ssa.gov/oact/progdata/fundFAQ.html

If on the very small chance you are not in favor of cutting social security in any sense, know that the argument that there "is no trust fund" and "it's just IOUs" is a right-wing argument, a right-wing frame, that is typically only advanced to justify cutting social security in some way. If you are not in favor of cutting social security, find different language. If you are, then be intellectually honest about your views that government has no role in doing what social security does, rather than engaging in myths about non-existence of trust funds.

Oh wow, you really dug out a sockpuppet to downvote me for pointing out that comparison you shredding was YOUR comparision?

That's really sad.

>The nonsense is that your comparison again has no relevance to the social security trust fund.

It's YOUR comparison.

What a troll.

The time for fixing Social Security with "minor tweaks" has passed, the problem moving forward is Demographics

>Social Security's total income is projected to exceed its total cost through 2019, as it has since 1982. The 2015 surplus of total income relative to cost was $23 billion. However, when interest income is excluded, Social Security's cost is projected to exceed its non-interest income throughout the projection period, as it has since 2010. The Trustees project that this annual non-interest deficit will average about $69 billion between 2016 and 2019. It will then rise steeply as income growth slows to its sustainable trend rate as the economic recovery is complete while the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.

> The time for fixing Social Security with "minor tweaks" has passed, the problem moving forward is Demographics

Eh, if it makes it past the Boomers (which it does in the low-cost estimate in recent trustees reports, but not in the intermediate- or high-cost estimates; so risky-but-plausible with no intervention, certainly achievable with minor tweaks) it's fine, demographically, for the foreseeable future; Gen X is a demographic trough, and the Millennial generation is a gentler boom than the Boomers.

It's also the case that (most) boomers benefit from a lower retirement age than subsequent generations, so getting clear of them reduces pressure on the system for other reasons.

I'm sorry, but quite frankly the low-cost estimate is about as Rosy a prediction as one can hope for, and is decoupled from current and past demographic and economic trends.

1) To get to that number the Trustees assume fertility rates will rise to over 2.2, a rate not seen since 1970 which completely goes against the trend of the last 50 years.

2) They continue to assume 1 million migrants a year to the US, despite active legislation seeking to limit migration to half a million a year.

https://www.ssa.gov/oact/TR/2016/2016_Long-Range_Demographic...

All of this is dependent upon a Labor Force Participation Rate not encumbered by automation and a general lack of skills by the populace. Which may not be a problem but the BLS has been underestimating the decline in LFPR in their projections for the last 20 years. We're decades a head of where we should be based on Demographics alone, according to all of their predictions.

https://www.stlouisfed.org/publications/regional-economist/o...