Quote:
Originally Posted by Derwood
a flat tax (ie the same rate across all income levels) is actually regressively punishes the poor
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A flat tax system could be set up to exclude the poor. Or include allowances for things like basic food, shelter, out-of-pocket health care, and other basic necessities. I would prefer a tax code be as simple as possible but a flat tax rate does not have to be punitive to anyone or it could be set-up to be punitive. The biggest advantage to a flat-tax is the predictability across all income levels. It minimizes the incentive to shelter income from taxation because of excessive marginal rates as a person goes from on rate to another, or as they lose tax credits and deductions. For example a poor person with the earned income tax credit can take a big hit if they make too much money and lose the credit - people should not be faced with staying poor with the credit or earning a little more money from year to year to get out of "poverty". Why do we have a tax code where people can lose thousands, just because they earn $1 over a cut-off?