Flat Tax Retort

It is basically a huge scam. Strangely, it's only virtue (simplicity) makes it even easier to identify as a scam.

Situation 1: You make $25,000 per year. Your effective income tax is about 10%. You lose another 10% to other withholding (state taxes, medicare, Social Security etc). So, you save ~$2,500 per year. Because you are a poor scum bag, effectively all this money is spent buying things.

• Old way: $25k - $2.5k in taxes - $2.5k in other witholding - $5k in rent/mortgage = $15k buying power for the year.
• New way: $25k - $0 in taxes - $2.5k in other witholding - $5k in rent/mortgage = $17.5k buying power. However, everything you buy now costs your 30% more. So your $17.5k only buys $13.4k of pre-flat tax goods.
  

Situation 2: You make $75,000 per year. Your effective income tax is about 20%. You lose another 10% to other witholding. You're a not-so-poor working stiff so maybe you save 10% of your income.

• Old way: $75k - $15k in taxes - $7.5k in other witholding - $15k in rent/mortgage - 7.5k in savings = $30k buying power.
• New way: $75k - $0 in taxes - $7.5k in other witholding - $15k in rent/mortgage - 7.5k in savings = $45k buying power ($34.6k adjusted)
  

Situation 3: You make $225,000 per year. Your effective income tax is about 27%. You lose another 10% to other witholding. You're doing rather well and can put away 20% of your income.

• Old way: $225k - $60k in taxes - $25k in other witholding - $25k in rent/mortgage - $45k in savings = $75k buying power.
• New way: $225k - $0 in taxes - $25k in other witholding - $25k in rent/mortgage - $45k in savings = $130k buying power ($100k adjusted).
  

These are clearly estimated numbers and they may have some fundamental problems. However, the things I've ignored make the flat tax an even dumber idea for low- and middle-class humps. For example, deductions for children, mortage interest, or higher education can greatly reduce income tax on the middle class and virtually eliminate it for the lower class.

I've also ignored the fact that if I'm making $225,000 per year, I'm going to buy my Porsche/racing sloop/walk-in humidor in another country or online. So there are plenty of ways of avoiding the new tax burden.

So, at a glance we see that the poor guy gets rogered (10% less buying power), the middle class guy does OK if he's smart enough to save some money (15% more power), and the rich guy makes out like a bandit (33% more buying power). 'Twas ever thus.

Fortunately for the proponents of this plan, poor people can't do teh maths, so they'll probably jump in with both feet.

What else did I miss?

*Updated to correct typos/errors.