GOP candidates Rick Perry and Herman Cain both preach that the United States must cut spending and impose flat taxes. They believe that they have the solution to balance America’s budget and secure a financially stable future that embraces economic freedom and equality. Because the majority of taxes are taken from the rich, much tax revenue would be lost. These candidates make a mistake in losing tax income through their flat tax rates prior to giving a plan as to how they will adequately cut spending to accommodate for their plans.
The inherent problem of a flat tax is that it would earn a much lower amount of income and could shift much of the tax burden to lower and middle class Americans. This is a problem. According to the Heritage Foundation, in 2008 the top 1 percent paid 38 percent of America’s income tax while the top 10 percent as a whole paid 71 percent. This contrasts sharply with the 3 percent paid by the bottom 50 percent.
Due to the nature of a progressive tax, ordered by tax as a percentage of income, it makes sense that higher income families can produce much more wealth at a lower percent. The tax rate would have to be much higher than 35 percent on a poorer family to get even close to matching the income that would be raised from a rich family at the same rate.
Of course, these short-sighted plans obviously do not propose raising the taxes on the poor. Rick Perry’s plan intends to essentially cap taxes at 20 percent for all citizens with those currently being taxed less keeping their current percentage. Herman Cain’s “9-9-9” plan would lower everyone’s income tax to 9 percent while supposedly making up for the losses in a 9 percent corporate tax and a 9 percent national sales tax.
It does not take much math that to realize that this loss of income would be catastrophic without drastic and grossly unrealistic sudden spending cuts. These plans do not provide a way to balance the budget; they simply would make it dramatically worse.
Furthermore, ABC News reports that these tax plans would primarily help the wealthy who are thriving. According to a study done by the Congressional Budget Office, the wealth of the top 1 percent, the most wealthy, has grown 275 percent. This contrasts with the next 20 percent who grew only 64 percent. The divide widens even more with the bottom 20 percent, who only grew 18 percent. If anything, the rich should receive more taxes due to their huge amount of growth, in order to take the burden off of the poorer who are lagging behind economically.
A flat tax simply does not make sense when the rich are growing wildly wealthier while the middle class and poor suffer under the weight of a suffering economy. So why are flat taxes appealing to conservatives? Their reasoning is often that if we apply additional tax burdens on the rich, they will not invest in the lower classes of society and create wealth. The simple fact of the matter is that even with current taxes, much of the money being earned by the wealthy is not trickling down like they would assume.
Sure, we need to cut spending, and if possible, cut taxes. In our current situation, there is nothing wrong with taxing those who are growing at a far higher rate financially than those who are struggling. it’s certainly the obvious answer. Supporters of Cain’s and Perry’s tax plans grossly miscalculate the effects. Nothing good will come of a plan that will inevitably result in an inadequate tax base prior to cutting spending when we are already drowning in debt.
