Definition of Regressive Tax and why Megan does not like it

With the 2012 presidential election season upon us, I thought I'd just chime in a bit on the ridiculousness that seems to be catching on, namely Herman Cain's regressive tax plan. Let's review the difference between a regressive and a progressive tax. A regressive tax, also known as flat tax, or "fair" tax, taxes all income earners at the same rate. A progressive tax taxes income earners at different rates based on their level of income. A lot of people say that progressive taxation is not fair because you are punishing success. May I explain how I see regressive taxation as being unfair, or at least harmful to those who we really need to try to help?

So, if we all pay the same percentage in income tax, let's just say...oh...9.1%, that means that a family who earns $200,000 a year will pay around $18,200 in taxes, leaving them around $181,800 disposable income to spend on health care, housing, food, utilities, fun, etc. Now look at a family who earns $40,000. They will pay $3,640 in taxes, leaving them $36,340 disposable income to spend on health care, housing, food, utilities, etc. As someone in the latter category, I can tell you that $3,640 would be a significant tax increase compared to the present tax code. We spend our disposable income on our health coverage, rent on an 800 square foot apartment, food, utilities, gas for our one used car, and student loans. Our luxury spending would probably be preschool for our almost 2 year old and fancy cell phones. I'm not including internet as a luxury, because I work from home, so internet is a work expense. All that said, I think that when it comes to the impact on daily life, a "fair" tax impacts the lower income negatively compared to the higher income, since raising taxes on low-middle and low-income families affects their ability to buy adequate food, health coverage, and housing. I may go out on a limb and say that raising taxes on millionaires affects their ability to buy vacation homes, pass wealth on to their heirs, and...I honestly don't know what the rich do with their money. A gallon of milk costs the same for someone making $7.50 an hour and someone making a million dollars a year, however, it is a greater percentage of the former worker's disposable income.

Cain's plan would also get rid of all tax deductions except charitable giving. The charitable deduction benefits basically the wealthy, since many low income and low-middle income families who give an equal percentage of their income away to charitable organizations do not give the minimum amount to qualify for the tax deduction.

Herman Cain admits that some would see their taxes increase with his plan, although he seems to think this is only based on what they spend. This tax policy would increase the income tax rate that low-middle and low income earners pay as well as most likely double their sales tax. Cain's answer to this is to tell people to buy more used goods instead of new goods. My husband asked if restaurant food is considered used goods... Our family could not buy more used goods than we already do. We cannot buy used food, used diapers, used soap, used health care, used internet service, or used gas. We already live in a used condo and drive a used car.

Jonathan tells me not to get so worried, because he doesn't think Cain will move forward, and even if he did happen to win the election, there is no way this tax plan would pass. What worries me is that so many people seem to think that a slick campaign message is more important than the substance of that message. I have mentioned to many friends that I am more than willing to pay more in taxes if it means that public programs and safety nets are kept in place. I will say that I am willing to pay more in taxes, but not if it means that the wealthy get a tax break while I get a tax increase. That is what seems unfair to me.