A Tax Compromise
6/1/11 06:31American conservatives who complain that the bottom 50% of households don't pay enough of their fair share of taxes often also advocate for a flat tax. What advocates of a flat tax don't often address, consider, or even care about is— (1) the plight of low-income and impoverished households, (2) the fact that the 1.45% Medicare tax is flat, and (3) the fact that the 6.2% Social Security tax is regressive.
I would gladly forfeit the current flat Medicare tax, regressive Social Security tax, and progressive federal income tax structure for an all-three-in-one flat tax on discretionary income, defined as:
(Image links to source)
Despite the flat rate, the tax paid under a flat tax on discretionary income would be effectively similar to taxes paid under the current system for all current tax brackets— with the notable exception that the roughly third to half of American households without any discretionary income (i.e., impoverished and low-income households) would not be burdened with any federal taxes.
Also, if anyone has or can access better data on discretionary income in the U.S., I'm interested.
I would gladly forfeit the current flat Medicare tax, regressive Social Security tax, and progressive federal income tax structure for an all-three-in-one flat tax on discretionary income, defined as:
The amount of [a household's] income available for spending after the essentials (such as food, clothing, and shelter) have been taken care of.

(Image links to source)
Despite the flat rate, the tax paid under a flat tax on discretionary income would be effectively similar to taxes paid under the current system for all current tax brackets— with the notable exception that the roughly third to half of American households without any discretionary income (i.e., impoverished and low-income households) would not be burdened with any federal taxes.
Also, if anyone has or can access better data on discretionary income in the U.S., I'm interested.