Stimulus Package Talks Resume

Our President ordered stimulus talks to resume almost as abruptly as he ended them. Yesterday, he ordered his Treasury Secretary to again negotiate with the other side. emphasizing that he should, “Go big, or go home.”
If they do agree on a new stimulus package, it may be dead on arrival in the Senate. For now, the Senate Majority Leader is saying no, given their concerns about the deficit ballooning out of control.
Now that the talks have resumed, the leadership in the House has placed an arbitrary 48 hour deadline to reach an overall consensus. We’ll see if they can get anything done.
Let me leave you with this.
My column Friday on the Fair Tax generated a spirited debate on both sides. I wasn’t quite ready for some of the comments that I received, but I truly respect all opinions. One issue it brought up on more than one occasion was the concept of a flat tax vs. a progressive tax.
I will present both sides of the argument so that you can make a better informed decision. This is a debate that is almost as old as the concept of taxation itself.
A Flat Tax, which for all intents and purposes we have in Illinois, charges the same tax, regardless of income, to all income brackets. Flat tax success stories are easy to find. Since the fall of the Soviet Union, most of the countries under their control, have imposed a flat tax system, and have seen unprecedented growth. It’s pros include
1 – Higher income individuals who own businesses and create jobs, have an incentive to stay.
2 – It encourages investment and expansion of businesses, given the fact that additional profits are not taxed at higher rates.
3 – Businesses can make decisions to better serve their customers rather than trying to beat the tax code.
The cons include
1 – Taxes are shifted from the wealthy to the middle and lower classes.
2 – Its more difficult for governments to add revenues without increasing the tax burdens of all their citizens.
Progressive taxes, as proposed on the November ballot, charge a different tax rate to different income brackets. This system is more common in the US at both the Federal and State levels. Pros include
1 – It shifts the tax burden to those more able to pay.
2 – This protects taxpayers in difficult times. As your income goes down, so does your tax burden.
3 – Many economists agree that governments can get the most from progressive tax systems.
The cons include
1 – Individuals with higher earning potential will normally leave.
2 – Its a disincentive to investment in businesses to create additional revenue flows given the increased taxes.
3 – It can be used in a corrupt manner by politicians.
Where you land on this debate will probably have everything to do with how much money you make. I have had many of my clients for several decades and have watched their belief systems change with their fortunes.
As clients make more money, they favor a flat tax. As they make less, they favor a progressive system.
I’m not writing this to aggravate my readers. There are pros and cons to each side. The choice is yours, but however you decide, please vote.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whatever you need, whether you are a current client or not, you have but to ask,. I’m here and I remain,
Sincerely yours,
Chris Amundson
Accounting Solutions Ltd.
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