Flat Tax

 Widow's Mite

"Amen, I say to you, this poor widow put in more than all the other contributors to the treasury. For they have all contributed from their surplus wealth, but she, from her poverty, has contributed all she had, her whole livelihood." Mark 12:41-44

Is a flat tax a tax on surplus, or a tax on livelihood?

Any flat income tax, a fixed percentage of income, is regressive.  Income can be divided into need, or livelihood, and desire, or surplus.  Desires are met only after need is satisfied.  However there is a maximum amount that will be devoted to needs.  A flat tax is the same on both surplus and livelihood.  A progressive tax is not merely a ramp up to the percentage of that flat tax.  If a lower, or no tax, is imposed on livelihood then the percentage of taxes has to be greater than the flat tax on income that is surplus.

This is basic math. If the revenue from taxes is

Tax Revenue=% Flat Tax * Total Income

and income is divided into income for Livelihood and income for Surplus,

Total Income= Income for Livelihood  + Income for surplus

then to raise the same revenue and also have a smaller tax rate on livelihood,  the percentage tax on the surplus must be greater than the flat tax.  If we call the income for livelihood the standard deduction, on which no taxes are paid, then if the standard deduction is raised, and the tax on surplus is lowered, then mathematically the total tax revenue has to decrease. 

% Effective Tax * Total Income =

                        % Tax on Livelihood * Income for Livelihood + % Tax on Surplus*Income  for Surplus.

Increasing the standard deduction might appeal to those whose share of income for livelihood is larger, and reducing the tax rate for all income, might appeal to those whose share of income for surplus is larger, but it results in a lower total tax revenue from all and a lower effective tax rate.  “Let them eat cake” could be a display of ignorance of how things work.  If there is a shortage of flour then there is a shortage of both bread and cake.  You can correct ignorance with learning, you can’t correct stupid.  Let’s not be stupid.