This is what has always struck me as unfair and somewhat crude about a flat tax as well. A flat tax is only "fair" if you assume that everyone allocates their funds in relatively congruent proportions, e.g. that everyone spends about 10% of their income on groceries.
But past a certain point, groceries are more or less a fixed-dollar expense, and so the more you make, the less you pay for groceries as a proportion of your income. You can extrapolate this same idea to other critical expenses.
Thus, from the perspective of personal income alone, a flat tax--or a mildly "progressive" tax--is actually regressive, because although it affects all in equal proportion, the effect on the poorest is to forgo life's necessities, whereas the effect on the richest is to forgo some measure of luxury.
Of course, the use of personal income to fund investments and businesses muddies the issue, but the argument still remains, especially since the poorer masses far exceed the richer few in number.
That does not address his problem. He is suggesting that a fair tax would have everyone taxed to the same marginal value, that is, where the last dollar the government taxes is worth the same amount to each person.
There is nothing inherently fair about a flat tax any more than there is something magical about round numbers. It just appeals to our irrational love for symmetry.
But past a certain point, groceries are more or less a fixed-dollar expense, and so the more you make, the less you pay for groceries as a proportion of your income. You can extrapolate this same idea to other critical expenses.
Thus, from the perspective of personal income alone, a flat tax--or a mildly "progressive" tax--is actually regressive, because although it affects all in equal proportion, the effect on the poorest is to forgo life's necessities, whereas the effect on the richest is to forgo some measure of luxury.
Of course, the use of personal income to fund investments and businesses muddies the issue, but the argument still remains, especially since the poorer masses far exceed the richer few in number.