Reply #14: Income taxes keep people out of jobs [View All]

[dcfirefighter]

Though I do support a progressive income tax over a flat consumption tax.

The Fairtax addresses the necessity / luxury argument fairly well, I think. It does this by not being flat. Rather than exempting food & clothing, which would also exempt luxury food and luxury clothing or trying to determine where the dividing lines laid, which would open itself up to lobbying, it taxes all of them. However, it determines the effect of it's tax on a family spending at the poverty level, and gives each family that amount of money back as a rebate each month (i.e. all families of four receive ~$600 dollars each month)

Writing off portions of your taxes only allows people to spend their post- payroll tax but pre-income tax paycheck on charitable causes. The fairtax would allow people to spend their complete paycheck on charitable causes, without paying an income tax or a payroll tax. Likewise, determining what is and what isn't deductible leaves lots of room for special (i.e. undemocratic) interest lobbying.

I don't really have any problem with taxing incomes over ~$250,000 - these incomes aren't typically earned by merit, risk, or hard work, but rather by manipulation of the legal / economic system.

Problems with a progressive income tax:
Any tax that falls on income from the wages and salaries of the majority of workers rasises the cost of employment. For example, I take home $35,000 a year, this is what I'm willing to work for. However, it costs my employer $50,000 a year to employ me. Therefore, I must bring more than $50,000 worth of productivity to my employer in order to receive my $35,000. The demand for labor is elastic, removing the 'tax' wedge from income taxes (payroll taxes are much worse) would increase employment. Increased employment would require employers to pay higher wages in order to attract talented employees.

My salary is $50,000, which doesn't get me much in Washington, DC. I pay 15.8% of my salary as a federal income tax. Someone doing a similar job in a less expensive area might make $35,000 a year, and pay only 11.9% of his salary. Progressive income taxes place an undue burdon on people working in high cost of living areas - usually 'blue' areas on the coasts.