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Nov election — Fair Tax?

By Terry Savage on October 19, 2020 | Wild Card & Pandemic Related

What is your opinion on the fair tax question?

Terry Says

I have responded to this question several times on my blog and my opinion hasn’t changed!
Here it is — again!

I’m not political –I’m economic. And on that basis I cannot think of one “pro” for a graduated tax — unless you’re the Governor trying to get re-elected for just one more term, and then move to Florida!! (where your wife already lives!)

A graduated income tax starts with only “the very rich” and quickly gets expanded to the middle class. That’s the history of EVERY tax in history– starting with the Federal income tax in history.

According to the Tax Foundation, The top marginal income tax rate in 1913, the first year the modern income tax was levied: 7%. And that was levied on only the top 1%.

The thing about Federal income taxes is that you can’t do much about them — except vote the taxing party out. Sure, the Beatles left England, and Roger Federer lives in Dubai to escape high taxes.

BUT STATE TAXES ARE A DIFFERENT THING! The “rich” top earners who would be taxed are pretty smart. They can MOVE out of state! And they have the money to do it! So states like Florida, Texas, Nevada, Tennessee are gaining population, while NY, CT, NJ, and Illinois have been net losers of population.

Between the loss of deductions for state and local taxes, and the rising real estate taxes, and the prospect of a higher income tax — many smart middle-class people have already left the state. The ongoing violence in Chicago hasn’t helped the situation, and now people don’t have to go to an office to work — and might not be required to return. So the “attractions” of the “big city” aren’t a sticking point.

A graduated income tax would cause a trickle of leavers to become a swollen river of departing residents, reminding me of the old bumper sticker: “Will the last person out of Illinois please turn off the lights!”



a personal
finance question