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0 of 3 Premium Clicks used this month SUBSCRIBE Print + Online Subscriber Activation | Register x Forgot Password | Need an Account? subscribe | newsletter | deals Classifieds Jobs Autos Real Estate FEATURED » NEWS NOW Suspending ego identification helps in living enlightenment ... Grange remembers Leif Brecke ... Bonfire by Shop'n Kart parking lot leads to fence, cutting off short-cut ... Suspending ego identification helps in living enlightenment ... Grange remembers Leif Brecke ... Bonfire by Shop'n Kart parking lot leads to fence, cutting off short-cut ... RELOCATIONS Herb Rothschild Jr.: A fairer flat tax Comment DailyTidings.com Writer Posted Apr. 30, 2016 at 12:01 AM Posted Apr. 30, 2016 at 12:01 AM » Social News Some policies that appear fair aren’t. That’s true of the “flat” personal income tax, which many Republicans, including Ted Cruz, espouse. I’ll explain why, then propose a different flat tax they wouldn’t touch with a 10-foot pole. Two arguments have been put forward for the flat income tax. One is that it would simplify a complicated tax code. About this the proponents are correct, but the main reason the code is byzantine is that it’s been so often amended to create loopholes for the wealthy. The other argument is that the flat tax treats everyone fairly. About this they are dreadfully wrong and surely know it. Here’s the fairness argument — all of us would pay the same rate on our income, which means that higher earners would pay a lot more in actual dollars than low earners. For example, if everyone paid 16 percent, a household earning $20,000 would pay only $3,200 in taxes whereas a household earning $200,000 would pay $32,000. So the tax burden would continue to be borne most by those who could most afford it. The numbers appear fair. The impact on people’s lives is anything but. Even a small family trying to live on $20,000 per year can’t make ends meet without public assistance like Medicaid. Subtract $3,200 in taxes from their income and their situation becomes desperate. Subtract $32,000 from a family income of $200,000 and their situation remains secure and comfortable. Let me suggest a different flat tax that’s fair both in appearance and reality — a flat tax on personal wealth, not income. It need be no higher than 2 percent to generate the needed revenue. Let’s play this out. Forty percent of Americans have no assets whatsoever, so they would pay nothing. The richest 1 percent own 35 percent of personal wealth. Along with the next 4 percent, they own 63 percent. All these would pay a great deal of money. For example, Forbes estimates the wealth of Ken Griffin, who made his money in hedge funds, at $5.5 billion. He would pay $110 million per year. Is such a tax confiscatory and punitive? No. The wealth of the very rich is almost entirely in investments, such as real estate, stocks and bonds. Thus it produces income. People don’t become billionaires by averaging a 2 percent return on their investments. Thus, year after year the wealth of such people would increase despite the size of their tax payments. Only a high estate tax could end this steady accumulation at the top. No wonder every Republican politician wants to abolish the estate tax. What about the impact on the real middle class — those with some assets? I would allow an exemption for the family home, because it’s often their biggest asset but isn’t income producing and is already taxed locally. If, in addition, a family has assets, say, of $500,000, its annual tax would be only $10,000, probably less than it’s currently paying. This proposal is fair in another sense. It would mean that unearned income — e.g., capital gains and dividends — would in effect be taxed more heavily than earned income, which is not the case now. I see no reason why someone whose income derives from the labor of others should be treated more favorably than those who produce the goods and services of our nation. Herb Rothschild's column appears in the Tidings every Saturday. DailyTidings.com Writer Posted Apr. 30, 2016 at 12:01 AM » Comment or view comments Reader Reaction » STAY INFORMED Email NewsLetter Sign Up Today Sign up for our newsletter and have the top headlines from your community delivered right to your inbox. Southern Oregon Directory Featured Businesses Loading... 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