The concept of a “People’s Flat Tax” is intriguing.  This flat tax would keep the feature of one rate for income, one rate for sales, and one rate for corporate tax that is included in other flat tax proposals to replace our current federal income tax system.

The difference for the People’s Flat Tax is in the base it will be applied to and what it will cover.

To set the stage, according to the Citizens for Tax Justice, the wealthy and the middle class pay nearly the same percentage of their income in total taxes. (top 1%  of income pay 30.8% in total tax; $66,000 in income pay 28.5% in total tax).  

What’s missing from this picture is the impact of the cost of health care.

According to the US Department of Health and Human Services, health care cost is about $8,000 a person or $24,000 for a family of three.  This cost is either paid out of pocket, through insurance, or by an employer with money that could have been in the employees paycheck.  This health care “tax”  adds an additional 33% tax burden on a family of three earning $72,000 per year and a 2.4% tax on a million dollar income.

So, together we have a combined tax and health care cost of about 61.5% for the $72,000 wage earner as compared to a combined tax and health care cost of about 33% for the people making a million dollars a year.

Our current tax system, when health care is considered, is very regressive.  

To correct this inequity and fix other problems in our tax structure the People’s Flat Tax would pay for the following items (in addition to providing general revenue):

• Basic Social Security for all retirees.  One dollar amount in retirement for everyone.  This is an amount that would allow for a basic safe, healthy lifestyle for the elderly.

• Basic health coverage, including long-term care for everyone.  

• A payment to the states of $10,000 for each K-12 student to be used for education.

In order to pay for all of this without it being too large a percentage, it is important to spread the costs over the broadest base possible.  All income, starting at a value that exempts an amount that allows for necessities, would be included in the flat rate with no deductions.  Taxed income would include earned income, unearned income, income from estates, income from insurance, etc. All sales would be taxed including services, energy, and goods.  Corporations would also be taxed at the same rate.

The People’s Flat Tax would be simple and much more fair than our current system.  Importantly, it will remove the albatross of payroll taxes and medical insurance costs on businesses, unleashing the amazing ability of our entrepreneurs to innovate, and allowing us to be more competitive in the international marketplace.  

There would also be a significant cut in property taxes when most of the cost of education is paid for through the flat tax.  The education payments will substantially reduce the competition for the bottom among states when it comes to education funding. Our children will finally be able to get the education they need.  

Our tax code is riddled with foolish and counter-productive deductions and credits as well as some that have merit.  When deductions and tax credits are eliminated, money would be appropriated for those things that are needed.

Of course there are many details to work out and a new system like this would have to be phased in over several years.  The amount of progressiveness would be transparent and would depend primarily on the dollar amount of the personal exemption.  There is also the possibility of having a second tier level on the income tax over a certain income.  

(There is a hearing tonight via interactive TV link on H.202, the Health Care bill. Find a site near you. Also a presentation at 6 pm tonight with Anya Rader Wallach & Deb Richter in Grand Isle, call 372-5760 for info. – promoted by NanuqFC)

Two major issues vigorously debated today are the controversies over taxes and health care.  But few seem to consider how closely they are inter-related.

We know the wealthy pay a lot of money in income taxes for the simple reason that they have such large incomes.  But when all taxes are considered, according to the Citizens for Tax Justice, the wealthy and the middle class pay nearly the same percentage of their income for taxes (top 1%  of income pay 30.8% in total tax; $66,000 in income pay 28.5% in total tax).

But then we  have to pay for our health care. (more below)  

According to the US Department of Health and Human Services, the per person cost of health care in this country is $8,000.  Instead of paying for health care with some broad based tax based on ability to pay, working people either pay out of pocket, buy insurance, or have our employer cover this cost out of money that could be in our paycheck.  This health care “tax” is the most regressive major tax there is, adding an additional 33% tax burden on a family of three earning $72,000 per year.

Added together we have a combined tax and health care cost of about 61.5% for the $72,000 wage earner and a combined cost of only 33% for the people making about a million dollars a year.  No wonder the middle class feels strapped.

The wealthy are content with this situation in spite of the runaway health care costs because they get great health care and it only costs about two percent of their million dollar income. Any just system would have the wealthy pay more – – much more.  It’s no surprise then that many of the wealthy enlist their minions in the media and the halls of congress to fight real health care reform.

We won’t have a fair tax policy or fix our health care system unless and until we address this over-arching fairness issue and have a system for paying for health care that relies primarily on ability to pay.  

A battle will soon be fought that may well determine the economic future of our country.  Is the United States a country by and for its rich people or is it a country for all its people?  

We can provide, once again, massive tax benefits to the wealthiest people in the US while many suffer, or we can decide that the maximization of the super-wealthy class is not in the best interest of the country.

We have all seen the numbers about how the wealthy in the US have seen an enormous expansion of wealth while wages have been stagnant.

What’s new is that President Obama seems to be wavering on the extension of the tax benefits to the wealthy.  

We need to demand that our President, Senators Leahy and Sanders and Congressman Welch strongly oppose any attempt to extend those benefits. They need to hear from us on this issue.

Feel free to add your own

“Our biggest liability as a state should really be touted as our greatest asset.

Instead of fighting the somewhat incorrect notion that we have the highest taxes in the  country we should embrace it.

We have great schools, we have a great environment, we have great (low) crime rates, we have top notch or better health care facilities, we treat our poor people better than most other states, our state government works with our citizens to help make their lives better.  We have great communities.   And, we damn well have the best entrepreneurial environment that you’ll find anywhere in the country and our relatively low unemployment rates reflect that.

We know this costs money, so we’re not going to be the best of the best on the Forbes list.  If you want low taxes and a lousy state, go somewhere else.  If you want the best state, Vermont’s the place.”