Friedman’s Flat-Tax

 

The latest year for which figures are available as this is written is the taxable year 1959 in U.S. Internal Revenue Service, Statistics of Income for 1959… A flat rate of 23 ½ percent on the aggregate taxable income would have yielded (.235) X $166,540 million = $39,137 million…The final yield would have been about the same as that actually attained.Milton Friedman in Capitalism and Freedom (1962)

If you actually put a flat tax together, you’d probably…in order for it to work and replace all the revenue that we’ve got, you’d probably end up having to make it like about a 40 percent sales tax.  I mean, the value added, making it up.  Now, some people say 23 or 25, but, in truth, when you add up all the revenue that would need to be raised, you’d have to slap on a whole bunch of sales taxes on it.Barack Obama to Joe “The Plumber” Wurzelbacher (2008)

It’s no wonder a majority of Americans disapprove of Barack Obama: they don’t need a debt commission to understand how to make the federal tax code fair and simple.1

As the above “back of the napkin” diagram illustrates for the year 2007, Barack Obama’s fiscal policy is neither.  At one end of the tax spectrum was a group that earned 22.83% of total adjusted gross income, paying 40.42% of all individual income taxes, for an average income tax rate of 22.45%; at the other end was a group that paid 2.89% of all individual income taxes on 12.26% of total adjusted gross income, for an average income tax rate of 2.99%.  Closest to an equilibrium was a group with the top 6 to 10% of adjusted gross income that paid 10.59% of all individual income taxes after earning 10.61% of total adjusted gross income, for an average income tax rate of 12.66%.2

The average income tax rate for all individual taxpayers in 2007 was 12.68%, a number that’s a good starting point for modern arguments in favor of economist Milton Friedman’s idea for a fair and simple flat-tax, and drastically lower than the level needed to satisfy Obama’s tax hikes for spending, which he admitted in economic gibberish on the 2008 campaign trail (see above).3

References

1.  Peter Hart and Bill McInturff, NBC News/Wall Street Journal Survey, http://online.wsj.com/public/resources/documents/wsjnbcpoll-06232010.pdf.

2.  Gerald Prante, “Summary of Latest Federal Individual Income Tax Data,” The Tax Foundation, http://www.taxfoundation.org/news/show/250.html.

3.  “Joe the Plumber: A Transcript,” St. Petersburg Times, http://www.tampabay.com/news/perspective/article858299.ece.

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4 thoughts on “Friedman’s Flat-Tax

  1. interesting topic, not unlike many of the subjects you’ve written about this month. i’d love to sit down with you and talk about the holistic tax picture, taking more into consideration than just income tax. it’s a worthy discussion anyway.

  2. Studying the causes and effects of the Stamp Act, Shay’s and the Whiskey Rebellion, and the Tea Party movements, the American Founders would probably the first to agree with you (after me) that taxes are most worthy of discussion.

    I will search your writings to learn more about your own opinions for another stimulating conversation with you.

    Thanks for sharing your thoughts Christie!

  3. Pingback: Obama’s Class Ceiling « Ronald Grey

  4. Pingback: Middle-Class Dignity « American Renaissance

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