The Flat Tax that makes sense.

The "fake" flat tax that many preach about is posed as follows:
Lets select a "fair amount", lets say 17%, and have all pay this same amount without regard to other expenses --- If you are poor and make $100 per year, you pay a simple $17, if you make $100,000, you pay $17,000. Simple, right! And in particular, if you happen to be a lazy lout who inherited 1 billion from uncle Joe and have never earned a cent, not even in interest, you pay absolutely zip, nada, nothing because, you see, the tax is on "Income".

Lets now consider the argument from a different point of view. Lets say you have to raise an awfully expensive army because you are about to be invaded. For the sake of argument, let us suppose our economy is composed of only two individuals, Mike who earns a salary of $100,000 from the other participant in this economy, Joe who does not have to work because of his billion dollar inheritance. As luck would have it, the 100k salary is the only thing that Mike has because of his hand to mouth existence (he lives in the only town, called New York, which is very expensive, and also it happens to be owned by Joe the billionaire who has no salary).

Based on the above, the flat tax on salary seems like a strange way to finance our defense, especially since most of what we are defending really belongs to Joe!

But the flat tax dictates that since Joe has no income, and Mike literally has all the income (but zero real wealth) he ends up paying not only the full expense of defense, but even the principal and interest on all the loans secured to pay for defense since the president Joe (naturally) figured it was unwise to fully tax Mike immediately for the full expense of the conflict. Worse comes to worse, he may allow Mike to adopt a child so the debt could be passed on to the next generation.

I think it may possible be clear even to the blind at this point that a flat tax on incomes in a land that does not have a 100% inheritance tax makes absolutely no rational sense.

A flat tax must be apportioned based on total assets controlled by the individual being taxed relative to other participants in the economy.

Lets return to the two person example discussed above. Salary is not item that the tax should be apportioned against, it is total assets.

If at the end of year 1 of the this model economy, Joe has 1 billion dollars of total wealth and Mike has a total 100,000 (after food, healthcare, etc.) then the fraction of the tax bill that is owed by Mike is not 17%, it is 100000/(1 billion + 100k) = 0.009999 % and the balance that is owed by Joe is 99.99% of the tax bill !

I have a feeling that Joe will make sure that any conflict is short lived and will have definite payoff since he will be on the hook for most all of the cost!

Note I have only gotten to what part of the tax bill we are responsible for, not what the tax rate really is -- Tax should first be based on what is really owed by the individual, then we can then focus on what the rate is.