Republicans want to change the tax system with a “flatter, fairer tax.” That may sound good. After all, a flat tax is when all of us pay the same percent of our income in taxes. It seems fair. Why should one group pay a higher percent than another? Plenty of reasons.
Here’s how a flat tax works.
Say we had a flat tax of 20%. If you and your spouse earned $50,000, you’d pay $10,000 in taxes. That would leave you $40,000 to pay for necessities like food, clothing, and everything else for your family. Suppose someone else earns $500,000. That person would pay $100,000 and have $400,000 left back.
The percent you both pay is the same. But the consequences are not: That $10,000 likely means more to you and your family than the $100,000 means to the other guy. You would probably spend all of it on necessities and may even come up short; the other guy would have enough for lots of “extras.”
Currently, we have a progressive tax, which means the tax rate progresses from lower to higher. People who earn less pay a lower rate. People who earn more pay a higher rate.
Say you earn that same $50,000. In the current system, you would pay 10% in taxes ($5,000) and have $45,000 left. The guy who earns $500,000 would pay 39.6% in taxes ($198,000) and have $302,000 left.
The extra money in your pocket might allow you to pay for all your necessities. The other guy would still have plenty of money to spend on luxuries.
Our present system has seven income levels, or brackets. The tax rate ranges from 10% to 39.6%.
The Republican tax plan would have three brackets. People in the top bracket would pay 33%. People in the lowest bracket would pay 12%.
Thirty-three percent: That’s actually a tax cut for the richest people.
Twelve percent: That’s actually a tax increase for people with moderate income.
Republicans are not looking out for us when they support a tax increase for working people.