by Don Jones
News ReporterOne of the hottest issues facing voters in the presidential primaries is the flat tax proposal initiated by Republican contender Steve Forbes.
"Scrap the tax code. Replace it with a pro-growth, pro-family tax cut that lowers tax rates to 17 percent across the board and expands exemptions for individuals and children, so that a family of four would pay no taxes on the first $36,000 of income," Forbes said, according to the World Wide Web page maintained by his campaign.
Derrick Thomas, junior finance major, said he likes the idea of a flat tax. "You should not be penalized for your success," he said.
Under the flat tax, Thomas' mother, who makes $16,000 per year, would pay $480 in taxes if she were to file as single head of household. That's because she would receive a $12,800 exemption under the Forbes plan.
Under the current tax code, Thomas' mother pays 15 percent in taxes, after a standard deduction and exemption of $8,250. That would leave her with a bill of $1,162 to the federal government -- $682 more than the Forbes proposal.
In addition to the flat tax on personal income, Forbes said, "There would be no tax on Social Security benefits, no tax on pensions and no tax on personal savings. (The flat tax) would set off a boom by letting people keep more of what they earn."
While not taking either side of the flat tax debate, Deborah Lance, junior psychology major, said that there should be a tax cut of some sort for the middle class. Lance added that under the Forbes proposal, her father -- who is retired -- would no longer have to pay any income tax.
Under the existing tax code, the IRS uses five sliding scales to determine taxes on individuals.
Single people with taxable incomes less than $22,100 pay 15 percent of their income in taxes, according to the U.S. tax codes.
Single people earning between $22,100 and $53,500 pay a $3,315 fee. They also pay 28 percent of their income over $22,100.
Those earning between $53,500 and $115,000 pay a $12,107 fee as well as 31 percent of any income more than $53,500.
Single individuals who make between $115,000 and $250,000 pay $31,172 plus 36 percent of income exceeding $115,000.
Those fortunate -- or unfortunate -- enough to be in the highest income bracket pay $79,772 on the initial $250,000 of their income and 39.6 percent of any amount exceeding that.
Steven Craig, UH professor of economics, said the flat tax would encourage individuals to save money.
"If we don't start saving any money, we won't have any to spend," he said.
The main sticking point to the flat tax proposal, said Craig, is that the flat tax only applies to income tax -- the issue of Social Security taxes has been ignored.
Currently, employees pay 7.65 percent of their income to the Social Security Administration, while their employers pay another 7.65 percent. Despite these contributions, Craig said current Social Security income will not be enough to cover future Social Security benefit payments.