Huckabee's Tax Plan

[meuge]

So unless you've been living under a rock, you probably realize the Mike Huckabee is going to be the Republican presidential nominee...

His recent suggestion involved abolishing all taxes, and instituting a federal sales tax. In other words - abolishing the graduated tax, and instituting a flat one.

I've come up with a little calculation, just to figure out for myself, how Huckabee has come to be so revered by the general population (who are currently in the low-to-mid tax bracket).

This is the difference between flat tax and graduated tax (simplified). Please note, that SIMPLIFIED means that I did not derive the precise percentages from actual figures. The numbers are for illustration purposes solely... but they will still show the trends.

Assume a population of 1000 people.

Graduated:
$30k/year - 80% of the population - pays 15% ($4.5k) Total = $3.6M; Burden = 11.0%
$100k/year - 15% of the population - pays 30% ($30k) Total = $4.5M; Burden = 13.6%
$1000k/year - 5% of the population - pays 50% ($500k) Total = $50M; Burden = 75.6%

Total income = $24M + $15M + $50M (note how close the total income is, compared to the tax burden).

Total tax = $33.1M/$89M = 37%

Flat:
$30k/year - 80% of the population - pays 37% ($11.1k) Total = $8.8M; Burden = 26.6%
$100k/year - 15% of the population - pays 37% ($37k) Total = $5.5M; Burden = 16.8%
$1000k/year - 5% of the population - pays 37% ($370k) Total = $18.5M; Burden = 55.9%

Note how everyone EXCEPT THE TOP BRACKET just got owned.


And I am not even taking into account the % of income spending habits differences between the brackets. Since the top brackets save more, because they have an easier time meeting the cost of living, they would pay even less, thus necessitating an even higher flat tax.

How did this become the tax plan of choice for the majority of americans?

 

[meuge]

I also wanted to extend my calculations to account for the effect of savings, wherefore I realized that a SALES TAX is far far WORSE than a general flat income tax, because any savings people make, reduces the effective taxable income.

Calculation extension: Effect of Savings

Assuming:

$30k/year = will likely spend 80% of their income
$100k/year = will likely spend 75% of their income
$1000k/year = will likely spend 50% of their income

Effective taxable income
Bracket 1 = $24k/year * 80% population = $19.2M
Bracket 2 = $75k/year * 15% population = $11.3M
Bracket 3 = $500k/year * 5% population = $25.0M

Total taxable income = $55.5M & $33.1M tax burden = 60% necessary flat tax.

 

[Max]

I am not in favor of Huckabee's tax plan, but you are misrepresenting it. First of all, it is not a flat tax. It is a sales tax. In other words, it taxes spending, not earning. Computing tax burden by income is a place to start, but it's wrong. Earning $100,000 per year is not equivalent to spending that amount per year.

Second, the plan includes an offset, a check from the government, that is supposed to lighten the burden of the first $x per year of spending, so in the end somebody spending $30,000 per year pays less in taxes percent-wise than somebody who spends $80,000 per year.

5% of the population is earning $1,000,000+ per year? Hah! According to the table on http://www.taxfoundation.org/news/show/250.html, to hit the top 5% in 2005, you needed an income of $145,283. Top 1% is $364,657.

Finally, this is not the tax plan of choice, at least after first glance.

 

[meuge]

I am not in favor of Huckabee's tax plan, but you are misrepresenting it. First of all, it is not a flat tax. It is a sales tax. In other words, it taxes spending, not earning. Computing tax burden by income is a place to start, but it's wrong. Earning $100,000 per year is not equivalent to spending that amount per year.

As you can see in the mockup of the second post, the fact that it's a sales tax, actually makes it worse.

5% of the population is earning $1,000,000+ per year? Hah! According to the table on http://www.taxfoundation.org/news/show/250.html, to hit the top 5% in 2005, you needed an income of $145,283. Top 1% is $364,657.

My examples were merely for illustration. If you'd like, you can redo them with actual figures, and see that the trend will remain exactly the same.

 

[Greta]

Keep this thread civil and it can stay here in the Cafe. The minute it starts to go downhill, it will be closed and you will be referred to the Underground for continuation... and with any luck no one will get banned... :ironic:

 

[meuge]

Keep this thread civil and it can stay here in the Cafe. The minute it starts to go downhill, it will be closed and you will be referred to the Underground for continuation... and with any luck no one will get banned... :ironic:

I wasn't trolling : (

If you feel that this cannot be a civil discussion, feel free to remove the thread right now.

 

[Empath]

She did say the "minute it starts to go downhill", didn't she? It didn't take long.

No one accused you of trolling, yet you respond to an administrative/moderator suggestion within the thread with such bait.

Thread closed. Take it to the Underground.