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What do you think is the fairest method of income tax?

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Based on annual earnings,a cut off figure say 2 million yen,those earning below become tax exempt.Money saved from paperwork and man hours will recouped by a rising tax scale on earnings of 1 million yen hikes to say 10 million yen ,then earnings above taxed at the top rate.

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minello7 - Gees! That sounds familiar. You have described the current tax system.

The question should be, "What is the fairest way that governments can use your taxes?" I like the Australian tax system. Yes, most Aussies pay around 25% tax on the standard bracket, which is quite high, but at least you can go to any hospital for treatment, drive on FREEways and have sufficient welfare back up.
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There are more concerns to tax than being fair. Feudalism was a pretty fair tax system.

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Flat tax, for both federal and local. A total tax burden shouldn't be no more that 20-25%.

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Flat tax, for both federal and local

Flat tax = Dumb.

First $30K of income, tax free for singles. ($50K for families.) Progressively escalating rates above that. Top marginal rate of 80% only to be lowered when the budget is balanced.

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I would start with lowering govt spending, figure out the taxes after cutting the bloated budget busting programs

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yabits: "Top marginal rate of 80%"

Why should anyone have to fork over 80% of their income to the government to waste?

I agree with donpablo. Cutting wasteful spending is the first thing to do.

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Flat tax = Dumb.

Offering no reason for a one word opinion=dumb. Flat taxes are the best and fairest way to take peoples' money in a democracy. Corporate taxes, rebates on employment, research and development costs and a flat tax rate on all other profits. Double the tax rate for people receiving welfare after retirement. Retired people getting a pension should be doing volunteer work and leaving paid employment to younger now unemployed folks.

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Take out a small percentage from the first yen someone earns. That way all the "freeters" won't get out of paying taxes.

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There should be no taxes on food, rent paid by residential tenants and medical treatment (including prescription drugs). This has always been my biggest objection with the Japanese consumption tax. People below the poverty line and retirees on fixed income pensions deserve a break. In any case the wealthy can hire accountants to devise all kinds of tax strategies and milk the system for all that it's worth.

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I'll second the flat tax

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For something like 90% of people in japan the tax rate is flat at 20% (roughly)..,,

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Flat tax = Dumb.

First $30K of income, tax free for singles. ($50K for families.) Progressively escalating rates above that. Top marginal rate of 80% only to be lowered when the budget is balanced.

So yabits, I take it that you are envious of others who go out and sacrifice and work and make a very good living. Giving 80%, does that include the local taxes too or just the federal taxes. So if they have to get taxed at 80%, where will money come for investing? I think you will find that those who will be at the lower end of the tax bracket (meaning that they are not making as much) will take the money that they save from taxes, and not invest in the stock market, but probably invest in bettering their own lives. So there will be less money for capital investment.

At least with a flat tax, it will be pretty even in terms of tax burden.

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Not sure I agree. Wouldn't a fair system mean you get in as much benefit as you pay out. Suppose we have a 35% flat rate, but large welfare benefits for everyone under say 250,000. Would that satisfy the flat tax advocates?

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Taxes in Jpn like many places is insane, here are some of the taxes I pay:

income tax, consumption tax on purchases, consumption tax if my gross exceeds a certain amount, resident tax(a form of income tax), business tax, property tax, another property tax that only applies every couple yrs, health ins(yes its a damned tax as it varies with the amount you make), car tax, and there is I am sure a couple more I forgot.

When I add it all up its depressing as hell, clearly if Jpn just simplified a bunch of these damned taxes the savings in admin costs wud be massive, yeah like that will every happen

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Not sure I agree. Wouldn't a fair system mean you get in as much benefit as you pay out. Suppose we have a 35% flat rate, but large welfare benefits for everyone under say 250,000. Would that satisfy the flat tax advocates?

Junnama, I don't think the purpose of taxes is to provide welfare benefits for others. If a couple makes $50,000 and pay a 10% flat tax, they pay $5K. The $250,000 pay $25K. Under the current system (in the US and probably Japan too), the couple that makes $50K pay far more than $5K in taxes, and the ones making $250K will probably be able to shelter their tax burden so that they may be paying less. So paying a flat fee based on income is fair.

Welfare benefits should have nothing to do with paying taxes.

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Yes, but of course that doesn't address the point that tax money has to be spent is as important to fairness as how it is collected. My example is just extreme to make a point. Its fundamental to understand tax collection creates pool of capital that have to be distributed. Let's try it this way: everyone pays in 20% and it is all spent on military expenditures. Everyone above 250,000 the prior serves and gets paid 1 million per year, 2 year limit on service.

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Yes, but of course that doesn't address the point that tax money has to be spent is as important to fairness as how it is collected. My example is just extreme to make a point. Its fundamental to understand tax collection creates pool of capital that have to be distributed. Let's try it this way: everyone pays in 20% and it is all spent on military expenditures. Everyone above 250,000 the prior serves and gets paid 1 million per year, 2 year limit on service.

Junnama, you start to loose me at the end of your post. You are correct in that in addition to a flat tax, spending must be under control, and the government needs to know just becuase they can collect money, doesn't mean that they can waste it.

As far as your end comments go, not going to work. Most of the time, people who are making $250,000 are people who have started off low in their company and worked their way up. It takes years to get to that kind of salary, no matter how much they try to show in the movies that a young college graduate just happens to land a high paying job at a prestigious law firm or trading house on Wall Street. It does happen, but not as often as you think. So the person who has started at the bottom (so to speak) and has worked their way up has probably spent a good 10 to 15 years. So now by your plan since they make that much they owe obligaed military service, they are probably too old (should be in their mid 40's). So that is not how you win wars with old men (they just tell young ones how to do it).

No one is entitled to a "fair distribution" from the government of your tax money. I believe governments can help if you become unable to care for yourself, but not to just redistribute money to others so that we are all even.

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Flat tax. Reduce corporate welfare.Pro-big business is not the same thing as pro-free markets. No more special favors. On the other end, it means no way for Lefty demagogues to penalize one group of society with higher taxes in order to win voters ignorant or hate-filled enough to buy into anachronistic, discredited class war rhetoric. Simplifying tax codes also ensures greater compliance. Best of all governments would be held much more accountable, since a tax on one becomes a tax on all. It would force greater transparency and increase familiarity with how big government has screwed you up to now.

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No Income Tax is fair.

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So yabits, I take it that you are envious of others who go out and sacrifice and work and make a very good living. Giving 80%, does that include the local taxes too or just the federal taxes. So if they have to get taxed at 80%, where will money come for investing?

Apparently, you don't know what is meant by "marginal" rate. I'm all for creating tax exemptions for qualified investments. But "we the people" through our elected representatives will decide what investments qualify for tax exemptions.

The 80% top rate can come down when the federal budget is balanced, but not before. (Why not return to the rates when the US had its highest rate of economic growth?)

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I say with modern technology it is time to eliminate all income tax because the rich always find some sort of loophole.

With today's technology we could have very high sales taxes with special cards issued to people based on their income and limits one the type of purchases they can be used for and no taxes on basic necessities like food.

Luxury goods like high end cars and over certain priced housing would have an even higher sales tax with no exemption possible.

This way your middle income family who would normally purchase a ¥2,000,000 car would pay for example 20% tax a lower income person purchasing a ¥1,500,000 a lower tax base on what his card allows.

But the rich guy buying a expensive car like ¥6,000,000 would pay let say 40% tax same would apply for housing.

This may sound crazy but the rich just can't seem to help showing off and in this manor they cannot avoid paying taxes.

Just think a normal person buys a condominium for ¥36,000,000 they pay 20% (¥7,200,000) the rich guy buys a luxury home at ¥200,000,000 they pay 40% (¥80,000,000) that's probably more tax then you would have ever gotten out of the rich guy in 10 years with the way they use loopholes.

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I say with modern technology it is time to eliminate all income tax because the rich always find some sort of loophole

The loopholes are there because the rich have ways of getting them written into the laws. "Modern technology" can help eliminate the loopholes just as well as it can do anything else.

The system you propose is still based on income. What happens when one company buys from another company? Do they still pay a sales tax at high rates? (Which they would have to pass along to consumers, who would pay even more.)

If not, it would be relatively easy for a wealthy person to incorporate themselves and make their luxury purchases as a "company." As soon as you exempt certain entities from the sales tax, a whole host of problems will sweep in.

Henry George developed the most fair tax of all, called the "single tax." It's not a tax on income but a tax on property.

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I wouldn't worry about making sense of my examples. They are nonsense. The key point is even if you could fairly collect taxes, how could you decide the taxes collected are fairly spent. That's more to the point of creating a fair system to me.

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Depends on what tax is used for...

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The "fairest" method? A flat tax.

Why not ask what is the "best" method?

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The "fairest" method? A flat tax. Why not ask what is the "best" method?

I think it is implied that "fair" would be the "best" method. Anyway, I like a flat tax, too, as long as the rate is zero.

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I have lost one friendship over such a discussion.

I was discussing various tax shelters with a friend over lunch and he indignantly stated, "I enjoy paying my taxes." I asked him if he enjoyed paying for $5,000 toilet seats and $2,900 hammers? How about research on the effects of nose picking on work productivity or money to support First Tee, a program that uses golf to teach kids life skills. It only takes a 3-second internet search to find out that $200,000 is being giving to teach Cleveland kids about rock and roll. You don't want to know how much is given for the painting of murals on dams.

I just made up those numbers on the hammers and toilet seats, but I think it's clear that cutting wasteful spending should come before any tax hikes - even on the rich. Obama is an economic ignoramus.

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I prefer the marginal tax method, 18%,22%,25%,28%,33%,36%. Before you say people shouldn't have income taxed at 36%, know how tax brackets work. Income earned over $200,000 should be taxed at 36%, which doesn't the person pays 36%, most likely the person marginal tax or real tax rate would be around 29-30%. If a lower tax rate keeps a family above the poverty line, then an extra 12 or more percent would be more then worth it. Those living below the poverty line are statistically more likely to commit crimes, drop out school, and well in general be less productive members or society. Which translate into higher crime(increased policing cost), a smaller GDP(the total pie shrinks) and so forth and so on.

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I think it is implied that "fair" would be the "best" method.

Then it seems to be a poorly worded question, making the assumption that "fair" is always "best".

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marginal tax method, 18%,22%,25%,28%,33%,36%.

a lot of people call this "progressive"

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Flat Tax!!!

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The so-called 'flat tax' is no such; it places a heavier burden proportionally on those with lower incomes. The progressive tax method is fair; everyone has the same allowances and base income on which they pay no tax, and the 'surplus' income is taxed proportionally; the more you have, the more you pay. What actual numbers would be fair would depend on the total tax requirement and income structure of the population as a whole.

Whether the tax revenues are used for painting murals on dams or on building drones to bomb remote villages in faraway countries is a totally different problem. (Personally, I'd go with the murals, if it was a choice between one or the other.)

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limbo, just because your not rich and you choose to be average, it doesnt mean you take your hate on people that want to work hard, have big dreams and want to be rich.

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Fair income tax is an oxymoron. Progressive income tax is the symbol of the politics of envy. Income tax punishes people for the crimes of hard work and success, and rewards greedy, power-hungry politicians. It is theft and slavery in disguise, and it perverts the principles of justice by forcing individuals to prove their innocence under laws so complex that no-one can understand them. Why not force politicians and bureaucrats to prove that they need our money?

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it perverts the principles of justice by forcing individuals to prove their innocence under laws so complex that no-one can understand them

Pardon?

Why not force politicians and bureaucrats to prove that they need our money?

You mean you think it should possible to run a country on hot air and promises?

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Sorry to say, but if you are rich you can afford the people who will find the loopholes. The envy of the rich conversation is just plain silly.

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How about no income tax at all? Income tax is invasion of privacy and direct confiscation of property. What I earn is mine and government shouldn't be allowed to monitor it, let alone take it!

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The envy of the rich conversation is just plain silly

No. The "envy of the rich" phenomenon is real and fundamental. Politicians seek to win votes by appealing to envy. They then put up tax rates to punish the rich. Unfortunately, the real rich can easily avoid taxes, and so it is the hard-working middle-classes and small business owners who take it on the chin. Bad for them. Bad for the economy. But really good for politicians.

You mean you think it should possible to run a country on hot air and promises?

What do you mean "run a country." Who does that?

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Alan, I do tax for a living. Tax data in no way supports your conclusion. I would say actually the "rich envy" conversation is in itself a class warfare tactic. Further tax breaks without spending cuts are borderline political bribery.

Anyway, A good CPA isn't that expensive.

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Junnama: A good CPA won't protect you from paying taxes. They just help you to keep on the right side of some insanely complex laws. I agree that "rich envy" is a class warfare tactic. But it's one used by left-wing politicians to build their own power bases.

tax breaks without spending cuts are borderline political bribery. That argument excludes the economic stimulus effect of tax cuts.

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If you want to stop paying taxes you can check out very easy and go into the mountains. However, if you want to enjoy public goods like oh say "roads" and "defense of your nation" your have to pay taxes because the money for that isn't coming from anywhere else.

Tax cuts only stimulate because govt isn't cut concurrently. If they did both they would roughly cancel each other out. That's why it's bribery. In the old days you'd just give out plum govt benefits. Why bother when you can reach so many more people with a broad tax cut paid for by future generations?

Oh you're right about the left using rich envy, but the right uses it equally well. If you don't see that you're just another "true believer". No shortage of those on either side of the aisle.

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Flat tax is the way to go. No matter what level, people should pay no more than 20% on income. That would attract investment and stimulate the economy.

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Junnama: I'm a "true believer" in emperical evidence. I lived in New Zealand in the 1990s. The government of the day (which ironically was nominally left-wing) cut income taxes radically but still achieved higher income tax revenues in subsequent years.

Your comment on "public goods" is interesting. Like "human rights," it is a vaguely defined concept that has provided the excuse for endless government expansion.

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Just think a normal person buys a condominium for ¥36,000,000 they pay 20% (¥7,200,000) the rich guy buys a luxury home at ¥200,000,000 they pay 40% (¥80,000,000) that's probably more tax then you would have ever gotten out of the rich guy in 10 years with the way they use loopholes.

@limboinjapan, dude, that is insane. It would kill prices for one. In addition, your definition of rich is not right. You understand people take out massive mortgages and become slaves to their work for life to pay off such debt.

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Public goods are very clearly defined: items purchased through pooled public money. We can go back to no public goods any time we want: stop pooling the money and see what the free market produces. People aren't going to go for it so we might as well be talking about unicorns and stuff.

If nz cut taxes from a high level and didn't cut govt spending they should have got better tax revenue, being as that's backend expansionary fiscal policy. Try it with cutting govt spending and see what happens. Or is it the case that you extrapolated one specific case and assumed it would work in all cases?

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I believe a 10 - 15 percent "Flat Tax" is the best and fairest way to go. No more Revenue Service, no more forms, less government bureaucracy.

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Public goods are very clearly defined: items purchased through pooled public money. In New Zealand, public goods by your definition included airlines, banks, railways, the telephone network, power stations, TV stations and an "adult shop" seized from a tax defaulter in Wellington. That is what I meant by ill-defined. Governments try to turn all sorts of things into public goods. Really the definition should also include "and that can only be provided by collective means." By that definition, the only public goods are law and order and defense of the borders, or in other words, protection of life, liberty and the pursuit of happiness.

The tax cut-tax revenue equation is hard to argue either way because economic conditions are never identical before and after tax cuts. However, I believe (if memory serves) that the Kennedy tax cuts in the 1960s and the Reagan tax cuts in the 1980s also resulted in (or were followed by) higher revenues (either in absolute terms or as percentages of GDP).

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Hike up taxes for those least educated and productive. If they can't contribute make them pay.

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However, I believe (if memory serves) that the Kennedy tax cuts in the 1960s and the Reagan tax cuts in the 1980s also resulted in (or were followed by) higher revenues

One only needs to look at debt levels to see what really happened. Kennedy had a minor increase in debt, Reagan had a huge increase in debt. Sublimating tax revenue, with debt, is just putting off the inevitable tax increases for another generation. Businesses use police to protect their property, government made infrastructure for their logistical needs, etc., they could put tolls on everything but the tolls are technically taxes if the government imposes them.

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Reagan went on military spending spree, thats where the debt is from. That said, if government only needed to spend on protection and some basic infrastructure, they wouldn't need massive income tax. They could have got their revenue from trade tariffs like they did before. The problem is that government is trying to get involved in everything else. Health-care, education, transport, wealthfare, insurance, pension, etc, none of this should be government's concern, yet those are government's biggest expenditures.

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What!!! Fact check!! The governments biggest expenditures are on defense!!!

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Flat tax... maybe 10%

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"Top marginal rate of 80%"

No one with such earning potential will stay in Japan. Taxes here are already too high.

Renho could be doing a better job in cutting public expenditure. There are so many men employed in jobs that don't need doing - I counted 12 men near Shinjuku South Exit with batons telling people where it was safe to walk.

I went to the library - there were three people to hand out one book.

The argument is that public expenditure could be severely cut back to get rid of these worthless jobs. Once taxation is lower and people are motivated to work and create businesses then that will take up these newly found unemployed.

Short sharp shock. It worked in Russia, it can work here.

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Not really up to date on this or a tax "guy", but i think taxes should be paid according to income and that's that. We are all able to use services provided by government. Make more, pay more. Companies need to pay in proportion to what they make also, I do think religious organizations should pay taxes also based on what their believers donate, and for people in the lowest income bracket..perhaps tax exemption every other year some relief time to make some savings.. how about direct public voting on government funded projects via internet..do quarterly balloting on defense, infrastructure projects etc...locally. just some ideas.

No one said taxes had to be fair.

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I say tax at 100%. Then we could be like CUba

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What!!! Fact check!! The governments biggest expenditures are on defense!!!

Wrong http://www.usgovernmentspending.com/

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I say no income tax is the fairest of all. Why should I pay part of my salary to the government while they are taxing on every single item I buy already. Tax on my car, my house, land, even my bonus. They should tax rich people and companies, not poor individuals.

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Cute, merging Medicare and social security so they are bigger than the military. I like the term "general expenditure. You are aware this doesn't include the special budgets for the two wars...

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It not possible to answer the question without knowing the society, social inequality, opportunity of eduction, business structure, etc.

Flat tax would be the fairest in a utopian society, i.e., nowhere.

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Henry George developed the most fair tax of all, called the "single tax." It's not a tax on income but a tax on property.

Henry didn't own any property, either.

Nobel Prize in Economics winner Milton Friedman called for a 10% flat tax on income so everyone knew how much they were going to have to pay. I believe he was against the sales tax, too, but I'm not sure.

But generally the fairest method of income tax is one where people richer than I pay through the nose and people in my tax bracket get money back.

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Fairest would be no income tax at all. Move all taxation to ressources and consumption, period. The tax code would be simplified radically, cheating would be eliminated, and taxation would give the proper incentives (rewarding work instead of punishing it).

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yokohamarider at 02:16 PM JST - 21st September Flat tax... maybe 10%

Yes please.

Oh, and get rid of all the other taxes. No more "inhabitants tax" or "property tax" or "car tax" or "<insert new tax here>". It's like being nibbled to death by guppies! It's also a privacy concern. The government uses car tax to track my car, property tax as a reason to trespass on my land, inhabitants tax to spread my financial information across every level of government... it's ridiculous how many government departments are carrying information on me at every level all under the excuse of "taxation". I'd happily pay a flat 20% if they'd just get rid of all of the useless little taxes that mean I have to spend days every year filling in paperwork, filing the paperwork with various offices and generally wasting time all as a thinly veiled excuse for Big Brother to spy on my every move.

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