This is in response to the Jan. 24 letter by Joseph Carroll about a flat tax and a "fair" tax system. Mr. Carroll stated he believes the current graduated tax system punishes successful people. I have heard many people talk about a flat tax. But what does it mean?
If I make a $100,000 and the flat tax is 20 percent, then I pay $20,000 in taxes. If I make $10,000 then I pay $2,000 in taxes, right? What about my student loan interest adjustment, home interest mortgage deduction, my real estate tax deduction, my medical expense deduction, my charitable contribution deduction, my child and elderly dependent exemptions, my widower filing status or my child tax credit? Would these all be eliminated under this flat tax?
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What about my investment returns? Currently these qualify for preferential tax treatment. Do I lump my gains with my regular income?
Or does flat tax mean take your income, pick your filing status, subtract your deductions and exemptions, then multiply that amount by 20 percent? If that were the case if I had $100,000 of income and had $20,000 in adjustments, deductions, exemptions, etc., I would pay $16,000 in taxes. My effective tax rate would be 16 percent. My neighbor's rate could be 13 percent because he has more deductions. Is that what you mean by flat tax, Mr. Carroll?
One of the richest men in the world agrees with you, but for a different reason. Warren Buffett wrote that wealthy people should pay more in taxes. In his words, "My friends and I have been coddled long enough by a billionaire friendly Congress." Please look up The New York Times article. Mr. Buffett certainly does not feel punished by the graduated tax system. He is more than willing to pay his fair share.