Tax debt service which, while large in relation to the tax paid, is still tiny compared to the revenue that could be gained by charging more. So, the revenue would increase if rates were raised.
The point is that rates are very low in some years, high in other years. They go through the business cycle. A tax system that tries to keep within a given range of rates, no matter how you slice it, is bound to overshoot either way: either rates are too low or too high.
In fact, a flat-rate tax is the definition of a revenue-maximizing tax: if the revenue collected is lower than some maximum, then the tax rate cannot be lower. So the flat tax has to be somewhere in between.
We can think about this as follows: When the tax rate is low, the only thing keeping demand high is confidence. When tax rates are high, the only thing keeping demand low is fear. So, to make the system work, there has to be something between fear and confidence.
Confidence must be higher in years when tax rates are lower, and fear must be higher in years when tax rates are higher. The way in which this is achieved, in a flat tax, is to allow people to ‘choose’ between tax rates and levels of security.
People prefer to have low rates in times of low security, and high rates in times of high security. When the government increases the security, it reduces the tax rate, and vice versa. It doesn’t have to be that way. The government could put up all tax rates at a given level.
People could decide for themselves what is ‘fair’. So it would be a case of “If the government raises taxes, I’ll lower my security and cut back my spending, because I want to be confident. If the government cuts taxes, I’ll increase my security and spend more, because I want to be afraid.”
Of course, this means that the burden of taxes falls more heavily on those who are better off. If you spend money on security and safety measures, you get a lower tax rate. If you spend your money on frivolous items and luxuries, you get a higher tax rate. In a flat tax, taxes and security are related in such a way as to make the system work.
So if a person is better off than their neighbours, and if their income falls between the tax bands, they will pay less tax than they would if they had higher income. If they are poorer than their neighbours, they will pay more tax than they would if they had higher income.
If they are less than their neighbours in terms of income, they are taxed at the level that keeps the system working, and this is always determined by the tax on the higher income group. If you want to pay for the welfare state, it needs to be financed, so you can’t keep increasing your income. That way lies stagnation, and increasing misery.
The bankruptcy court, however, considered the Debtors’ credibility, based on the facts it found to be undisputed. Although it determined that the Debtors’ total income exceeded the national poverty guidelines, the bankruptcy court made express findings that the Debtors lacked the ability to pay their unsecured claims. The court did not make an express finding that the Debtors were not credible, or that their unsecured claims were based upon a “phony” source of income that they did not have the ability to pay.
For more details about what kind of services might help with your tax debts, call (888)489-4889 to get a free consultation today.