What if There Were a Flat Tax?

Flat tax means that everyone pays the same set percentage of their income in tax. There are at present several flat tax proposals, all of them from Republicans.

A flat tax punishes people at the low end of the income scale. With a flat tax, people who are earning at the poverty line would suddenly be below the poverty line, because they are already too poor to pay income tax. Those a bit above would be reduced to the poverty line. The higher one’s income is, the less effect of a flat tax there is, until a point of equilibrium, at which point the new tax would make no difference. Everyone above the point of equilibrium would become more wealthy because their already small contribution to the national wealth would be reduced.

In other words, the lower your income, the greater the negative effect of a flat tax on your wellbeing; the higher your income, the greater the positive effect. That’s why flat tax proposals always come from the rich.

Let’s look at it from another angle. Is it be possible for a flat tax to be fair?

The typical flat tax proposal suggests about 10% of gross income as the tax. Some suggest 20%. We won’t worry about the upper end earners, whom we know will actually gain from a flat tax, and never lack for money anyway. But if a flat tax has any possibility at all of being fair—which I don’t believe it does—it must not reduce the income of people at lower income levels.

Therefore, in order to be at all fair, the minimum income must be no lower than the level of a generous Living Wage. The government’s poverty level is the absolute lowest pay level that provides for all the essentials of life: shelter, food, clothing, medicine, transportation, and so on. You can squeak by on this money, but barely, and not in the long run.

What is the proper level for Living Wage? Health care insurance alone costs at least $10,000 per year, which puts it out of reach of the poverty line income of $22,000 (for a family of four). Nor is poverty line income sufficient to allow retirement savings. By the time we add in all essential factors, Living Wage for a family of four with one wage earner is in the range of $40,000 per year, or a bit more than $19 per hour. That’s Living Wage, not affluence.

Walmart pays $8.75 beginning wage, I believe, and new automotive workers are getting $14 an hour, with few bennies. This will probably be the situation for some time: high unemployment and new jobs paying bottom dollar with few bennies. A flat tax can only make this situation worse, unless you are rich, of course, in which case you benefit regardless. Or unless we enact a Living Wage minimum of $19 per hour. Don’t hold your breath.


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