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October 25, 2011

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My proposal: one standard deduction, that's it. Tax dividends, capital gains and income all the same. No corporate taxes.

This would eliminate all the corporate accountants who figure out tax shelters. No deductions for installing new attic fans, mortgage interest, charitable contributions, etc.

[HS: Without corporate taxes, you create a whole new loophole.

When you create a category of income with a 0% rate (corporate income not paid out as dividends), everyone will be tryng to figure out how to get as much of their income as possible to fall into that category.

Bad idea to open that can of worms.]

I don't get the flat tax mania either. It always struck me as an appeal to the chumps who don't understand how it works and are bothered by all the complexity. So instead of tackling each exception and exemption and special treatment one by one on the merits, they want to repeal the whole thing.

Until it comes to their own particular exceptions, like MID.

"This includes home mortgage interest, local taxes, medical expenses and most importantly charitable deductions..."

Are you insane?

Our church provides "social services" to our community. To say that we are more efficient than the government at providing that help and support is an understatement! The professionals in our congregation (teachers, accountants, doctors, contractors, etc.) serve this community directly, via our church, paid for by us.

Our local, regional and state bureaucrats are (literally) fat and lazy.

Any thought about where Buffet's income comes from? We know he made $62M last year but B-H stock pays no dividend.

Well, where people like Buffett get lower taxes is on "capital gains." If you make a million dollars because your stocks went up by that much, this is taxed lower than if you make a million dollars of income at your job.

Low capital gains taxes benefit the value transference class. This is the first thing that needs to be changed, as this is why Buffett (whose income comes almost entirely from capital gains) pays taxes at a lower rate than most people in the middle class.

[HS: Income always tries to find the lowest-taxed category. If capital gains tax were increased to 35% and corporate tax to 0%, you can be sure that Buffett's tax advisors would be busy at work trying to figure out how to get his income altered from personal capital gains to corporate income.]

"[HS: Income always tries to find the lowest-taxed category. If capital gains tax were increased to 35% and corporate tax to 0%, you can be sure that Buffett's tax advisors would be busy at work trying to figure out how to get his income altered from personal capital gains to corporate income.]"

The 1986 tax reform made the top personal income tax and the capital gains tax the same (at 28%). You could make the top rates on all three (corporate income, personal income, and capital gains) the same, which would probably be a good idea, but for that to be practical, you can't have the top rate be the 39.6% rate the Dems like.

A good starting point for a new tax system would be something like this:

Since the majority likes progressivity, and doesn't realize that a flat tax with a standard deduction is progressive, give them three rates.

For income: a standard deduction up to the poverty level (i.e., no one pays income taxes if they're earning less than the poverty level). Then a 10% tax rate on income up to the median ($50k?), a 15% tax on income between that and, say, the 80th percentile, and a 20% rate on income above that. The same tax rates would apply to dividends. Eliminate all deductions except the mortgage income deduction, which will be phased out over 10 years, to avoid further crashing the real estate market.

For capital gains: the same brackets as above, at the same levels. So there will be no advantages to one or the other. The top cap gains rate will be higher than now, but the same rate as under Clinton, and lower than under Reagan.

For corporate income: a 20% rate, with tax credits given for dividends paid, so there will be no double taxation of dividends, and an incentive to pay them. Also, phase out the tax deduction for interest paid, to reduce the incentive to lever up with debt.

"Any thought about where Buffet's income comes from? We know he made $62M last year but B-H stock pays no dividend."

I haven't seen his tax return, but I do know he owns shares of other companies in his personal account, some of which pay dividends. So that could be part of it, and part of it could be capital gains from selling a few of his BRK shares.

I agree with chris that the charitable deduction should remain. I do believe the tax code for charitable deductions needs modified though.

The United Way is nothing more that a employment agency for contribution collectors and distributors, as are many family name (Gates, Clinton, etc) foundations. My cousin did some stuff for United Way a while back, but has since severed ties. He told me that as a rule the UW president/director/ceo's salary was similar to the population in the area (not sure if this is the case for large metros) .... that's a lot of grift.

Every charity should be audited every other year. Reasoning: Chicago has a population of 2,695,598; there are 9890 charities of all types listed with a Chicago, IL address. That is 1 charity for every 273 residents. I will gurantee that not all are legitimate.
http://www.irs.gov/app/pub-78/
Do a search for where you live and see what you find.

I would suggest raising capital gains taxes at some threshold, but that would just encourage tax avoidance through accounting. So it's either all or none. I would prefer honestly none to any as the investor was the one that took the risk not the government. Dividend income should be tax free if capital gains are taxed.

Mortgage interest should remain a deduction, else there is no advantage to buying which results in less stable communities. Sweetheart credits to put on solar panels an the like should never be offered, it a govenment subsidy to a business that can not otherwise compete -- too much of that going on.

Yes, I would be agreeable with a flat tax with a few deductions.

There should be no individuals with a negative tax rate. If you don't pay taxes to the IRS, you can't get anything back -- period.

The problem with corporate taxes is that it undermines the competitiveness of US companies at home and abroad. The corporate tax rate is 15-35% which companies have to pass along to consumers as part of the price. People buying US goods are being asked to subsidize social security, medicare, welfare, etc. Foreign companies don't have that burden. The gov shouldn't impose any tax that makes US companies less competitive.

My recommendation for solving the issue HS raised about unequal corporate, income & capital gains taxes is to just replace them all with a national sales tax. That way foreign companies have no advantage over US companies and everyone pays the same rate.

From an economic standpoint, it's better to tax spending rather than income. Corporate, income & cap gains taxes discourage growth. But sales taxes discourage spending which encourage saving and investment.

I certainly wouldn't want a national sales tax added to the current tax system. If we had a national sales tax I'd want a constitutional amendment prohibiting income, corporate & capital gains taxes.

The government takes, through various taxes from local to federal level, about 50% of the money I earn, and you want to take away my mortgage deduction? Indentured servants had a less onerous burden.

Siggy, how is that graduate degree in tax law coming? About as good as your dating site?

Do you finish anything that you start?

I kid! I kid!

I don't see how not having a corporate income tax and having income, dividend, and capital gains all taxed at say, 15%, is a bad thing. Okay, business owners could abuse that by having the business pay for cars and whatnot, but that is a very small slice of the taxpaying public.

What really needs to be done is eliminate the mortgage interest deduction for second homes and mortgages over $500,000. Stick it to the Blue States. Get rid of the state and local tax deduction, too.

I don't see how reducing the corporate tax rate would make the possible government revenue just disappear. Maybe my understanding is elementary/naive, but wouldn't the higher profits just end up in the salaries of employees/executives that would be taxable? Or dividends, invested back into the company, etc..?

It's not like corporate profits exist in a vacuum that suck the lifeblood out of the economy.

You're right that flat tax proposals aren't about simplifying the code but you failed to mention what they are about: giving tax breaks to the wealthiest.

Wrong again, HS.

"Part of the reason the tax code is so big is that many tax laws are passed for purposes other than raising money." A social goal using a tax law, for example, is Congress's attempt to alleviate the housing problem by giving tax breaks to those who invest in low income housing. Similarly, an economic goal is found in allowing rapid tax writeoffs to buyers of new business equipment to stimulate manufacturing. And there are purely political reasons for tax laws. Many special interest groups, such as oil companies, horse breeders, broadcasters, insurance companies, and even major league baseball clubs, have gotten tax laws passed that are designed to give them special treatment. These special provisions of the tax code OUTNUMBER THE LAWS OF GENERAL APPLICATION."

And the higher that taxes are, the more energy people and corporations have to put into producing loopholes and carve-outs enacted for their benefit. Simple, low, broad-based taxes allow people to put their energies into making shit instead of devising ways to bribe the people with the guns.

Income taxes are bad because they discourage working, which creates wealth. We should instead adopt an idea that has support ranging from Warren Buffet to Milton Friedman to David Bradford to Robert Frank. I'm talking about a progressive consumption tax.

People should be taxed for using resources. For the left it has progressivity. For the right it taxes consumption.

An excerpt: http://www.democracyjournal.org/8/6591.php

Families would report their incomes and their annual savings to the IRS, just as many now do with 401(k) and other similar retirement savings accounts. Their taxable consumption would then be calculated as income minus savings minus a large standard deduction–say, $30,000 for a family of four. For example, a family that earned $50,000 and saved $5,000 during a given tax year would have taxable consumption of $50,000–$5,000–$30,000, or $15,000 total. Tax rates on taxable consumption would start off low–say, 10 percent for the first $30,000 of taxable consumption. Under the consumption tax, this family would owe $1,500, about half of what it would pay under the current income tax.

Because the progressive consumption tax exempts savings from tax, it cannot generate even the same revenue as the current income tax unless marginal rates on the highest consumption levels are significantly higher than the highest current rates on income. But higher marginal rates would be problematic under the current income tax, because they would undermine people’s incentives to save and invest. In contrast, higher marginal rates on consumption, as opposed to income, would actually encourage savings and investment.

Moreover, a steeply progressive consumption tax would raise additional revenue without causing significant reductions in consumer welfare. For families that already consume at a high absolute level, evidence suggests that psychological well-being depends much more on relative consumption than on absolute consumption. By encouraging an across-the-board reduction in high-end consumption, a progressive consumption tax would thus have little effect on the relative consumption levels that shape well-being.

Do you know the favorite sport of the economic elites since the XIXth century? It's creating foundations and associations, and obtaining the guarantee of State tax refunds for donations to these.

Then they donate money to each other, and as nobody checks what the funds are used for (or the officials are bought) it generally comes back to them after a few months or years.

That's the less risky way to defraud the fiscal administration, and the cherry on the top: it improves your philantropic image.

Now I think you understand why so many billionnaires have a foundation. It's not because they are genuine, empathetic do-gooders: they aren't.

Forgot the estate tax. Here's my idea for that: A $50k standard deduction, then a 10% tax on everything above that. Broad base, low rate, would raise a lot of revenue

I notice that everyone is up in arms about taxes, saying that we should be like Germany. Have you seen their tax rates?
45 percent for those over 250k euros (not including a surcharge)
25 percent for capital gains
Corp tax is 15 percent, but has a 5.5 percent surcharge and a trade tax.
And that's not including the 16 percent VAT tax.

So, for those people who say taxes hurt job production and cause unemployment, the rate is 6.6 percent.

Billioniares and Millioniares have hijacked a certain party, and convinced the sheep that the rich pay too much in taxes, and that's the problem with our government...and of course, the sheep have bought it.

Forget flat tax. Forget 999. Forget fair tax. We should implement a regressive income tax by reversing the current federal income tax rates. Those earning $5000 should have to pay 35% income tax. While those earning 1 million and above should pay 10%. This would encourage lower income people to earn more money, which would lower our unemployment rate. Although tax rates would be lower on the higher income people, more people would be earning more, which would more than make up for their lower tax rates.

In my mind, simplifying the tax code means eliminating all the various loopholes and coming up with a concise definition of income, rather than a flat tax. Republicans like the idea of a flat tax because it shifts the burden to the poor and away from the plutocrats.

High personal income taxes will encourage business owners to reinvest their profits back into the business rather than converting them to personal income. This is good for the economy.

I don't buy the arguments about higher taxes discouraging work. If I work a certain amount of overtime, I move into a higher tax bracket. Does this discourage me from working overtime? No, because even with higher taxes I'm still making more money than I would without overtime pay.

A flat tax with zero deductions has some appeal because a lot broader base of people would have to start paying taxes again.

We have reached point that the majority of income earners today pay no income tax. This is leading to constant class warfare rhetoric to tax the rich (anyone making over $250k), and this is only going to get worse as inequality increases.

When the majority pays no income taxes, and the country needs more money to pay for income transfers and so on, why of course the majority is going to like the idea of raising taxes since it has no impact on them.

"Anyone who took eighth grade math"

HS, I think you mean anyone who understood eighth grade math. That's a lot fewer people than any of us want to believe.

The problem with changing the tax code is its not going to help.

Even if we hit a Hauser Maximum (Hauser's Law states that the maximum revenue collectible in the US is about 20% of GDP) we can't or won't cut spending enough to make it work.

Doing that would actually gut the economy. Also there is no way the USG would be permitted to cut the military down to size. Beyond the lobbyists, there are the unemployed soldiers and a military that while thus far is loyal is dangerously different than the average person.

Cut social security and all that and the seniors remove you from office.

That most of the budget.

Changing corporate taxes won't help except to increase executive compensation which won't help in a broader
sense as they reach a consumption cap.

We also don't need more savings anyway. Sure it would shift money to the private sector but if we put a heavy clamp on all the gambling, it would just sit in bank accounts doing nothing. Its highly deflationary and unless we can find a nation as big as the US and as full of suckers to push exports on, the economy would implode faster than Japan's

The problem is that there is nothing really to loan money for, plenty of capital and excessively low interest rates (thanks to Japan and later us) but nothing to use money in that produces real yield or wealth.

Decently affluent nations with strong rule of law (rules out China and South America) who are open to trade and investment and who have a growing population of affluent consumers are currently zero. Yes zero.

The US has weak rule of law (fixable) and more importantly our population of middle class is shrinking fast. A great many people here live little better than they do in poorer nations and the American Dream is dead.

Basically without those traits there is nothing to actually put money into.

Grotesque as it is we will actually get more utility out if government waste than much of the private sector as that money is spent quickly.

Now this is reversible if you can get wages up by about 40% or so. This would allow debts to paid down and spending to increase.

This is complicated by several things,

#1 the global labor surplus, billions willing to work just for a mat and a bowl of rice does not bode well for workers.

#2 Automation. There really is a lot less need for many trades. Turbo Tax replaced your accountant and a robot replaced a a factory worker. We cannot be a rich nation of shop clerks and apple pickers with a few speculators on top and the government being the entire middle

#3 The bad education system. It was designed for a factory era and is obsolete.

and last #4 the ugly truth of HBD. The biggest population growth has been in the lower IQ brackets. The new immigrants simply are not as smart as the previous generations on a biological level and cannot be made smarter any more than Vern Troyer can be in the current NBA. This limits how much they can earn in a market system. On top of that, the Mexican (and its almost entirely Mexicans) parenting style is low parental investment, little effort, little discipline. In that circumstance even the smart ones (and there are some) ill find it difficult to thrive.

To fix the big four we'd have to have

#1 protectionism,
#2 work sharing/wage support,
#3 educational reform
#4 closed border/mass deportation scheme.

Given this is a nation utterly incapable of knowing how to end a war, balance a budget, allocate resources, fix infrastructure, or do anything hard and can't agree on most of the basics, something like that is off limits.

lastly to Droll Proles idea. I hope thats satire as such a scheme would raise too little money to keep the state functional and risk civil war and replacement in a haze of violence.

Right now the rich are hated but most Americans respect rule of law enough to keep it generally peaceful. Do that and well a Junta is your best outcome.

HS,

This country will never see a flat tax!
HS, I sent you a email with pictures of me. Can you please rate my looks and tell me if I am attractive enough to attract a white male.

But what about all those tax lawyers!! The accountants!!
People who's high IQ are used to learn obscure laws, which are obscure on purpose to avoid normal people from understanding it.

Its pretty fucked up if you think about it. People used to complain that the Bible was in Latin. This is way worse.

Chicago has a population of 2,695,598; there are 9890 charities ...

And that doesn't count the police and fire departments calling you up and asking for donations.

Even with a flat tax, in a few years some politician would say, "but we need a green energy credit", "and business lunch deduction".

Scrap the income tax entirely, preferably with a constitutional amendment. Substitute it with a sales tax. The only people with a legitimate gripe would be current retirees who would be effectively double-taxed, but we could find a way to deal with that.

Posted by: Turambar
"Any thought about where Buffet's income comes from? We know he made $62M last year but B-H stock pays no dividend."

According to google, Warren Buffett's salary is $100,000
*smirk*
If Mr. Buffett was truly sincere about his guilt for paying low taxes perhaps he should claim a higher salary?

Could you please turn down your silence about the Koch-brothers-financed study proving global warming is real. You’re giving me a headache!

[HS: Define "global warming".]

And eliminate the deduction for a state income tax.

"According to google, Warren Buffett's salary is $100,000"

Right- he gets $100K in salary. His positions on other boards nets him maybe another $100K. He could sort of live in Manhattan on that but he'd be watching expenses. Wouldnt be able to afford his two wives.

So how does he get to $62M a year in income?
Supposedly almost all of his net worth is tied up in B-H stock. Borrowing against it just to pay tax doesnt make much sense.

Define global warming? How about "the average temperature of the earth's surface increasing."

I mean, really, Half. Any third grader should know this.

[HS: The average temperature of the earth has increased a little since the "Little Ice Age" ended. Not news, has nothing to do with humans or carbon emissions. I guess this means I too "believe" in "global warming."]

"#2 Automation. There really is a lot less need for many trades. Turbo Tax replaced your accountant and a robot replaced a a factory worker. We cannot be a rich nation of shop clerks and apple pickers with a few speculators on top and the government being the entire middle

#3 The bad education system. It was designed for a factory era and is obsolete."

#2 Investment in capital only happens when labor is scarce and expensive. Businesses can't get something for nothing. That isn't what is killing labor.

#3 Our education system is among the best in the world when you separate students out by demographics. Point #4 touches on this, and there is simply no way to improve the performance of blacks and hispanics. While they can benefit from white taxpayer dollars and uncorrupt institutions, they will eventually overwhelm both.

@president barbicane

ROLF

Are you serious?

We're supposed to take a recently noticed trend (semi-reliable recording of temps within the last 100 yrs) and say that this is an anomaly for a planet billions of years old? How the hell do we know whether if it's a natural cycle or man made?

Regardless, this whole nonsense of global warming could be avoided if people had advertised better reasons for green tech.

1) Air quality
This shit is REAL, compare the air in Industrial China to rural America, hell of a difference..

2) Energy independence
blah blah muslims you get it

3) Long term solutions to scarce resources
Oil isn't going to last forever yadayda..

Why the hell do liberals/politicians latch to global warming when there are better more concrete reasons for green tech?

#3 Our education system is among the best in the world when you separate students out by demographics.

We are far and away the best when disaggregated. Our NAM's are higher performing than any other country's NAM's. Our prole whites who endure schooling with NAM's outperform prole whites elsewhere.

Point #4 touches on this, and there is simply no way to improve the performance of blacks and hispanics.

Actually we already have, as I stated above. However there is no way to close the gap between NAM's and whites/Asians.

Why a flat tax though? Somebody who makes a million would pay more than a $30,000 wage earner. How is that fair? We don't charge Bill Gates a % of his income at Burger King.It is a 2 dollar burger for him and 2 dollar burger for me. Why should he have to pay more tax than me?

"#4 closed border/mass deportation scheme."

We also need to pay low IQ LEGAL (not illegal) immigrants $100,000 per family member to leave the US for their ancestral homeland because 40% of adult LEGAL immigrants don't have high school educations.

and...

#5 Whites only immigration.

"Why a flat tax though? Somebody who makes a million would pay more than a $30,000 wage earner. How is that fair? We don't charge Bill Gates a % of his income at Burger King.It is a 2 dollar burger for him and 2 dollar burger for me."

I think this is a good argument against the flat tax.

As an alternative, how about replacing both the employee and employer sides of the payroll tax with a national sales tax (not a VAT, because a Euro style VAT is much more of a pain in the rump to account for than a simple sales tax).

Swapping the payroll tax for a national sales tax would be beneficial to lower middle to upper middle class whites because it replaces one regressive middle class tax with another regressive tax on the middle class.

However, the nice thing about swapping the payroll tax with a national sales tax is that it would make American labor cheaper for employers of Americans. Lower the cost of employing white Americans would help keep jobs in the US and attract business from other 1st world countries to America.

It would also let lower middle to higher middle class whites be better able to handle an income shock because if, say, a husband loses his job, the family can compensate for the loss of income with a lower wage job and by not spending as much to make their lower wage job's money go farther.

I wonder how cheaper labor in America would be if it wasn't completely obfuscated by the legal system here.

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