If you had the power, how would you structure the tax system?

[CoastalMaineiac]

I see a lot of debates in a lot of places about who should be taxed and how much they should pay. Let's just say, for the sake of discussion, that the current tax code has been totally scrapped, and Congress (or whatever you call your country's legislative authority--I often call them things that probably aren't mentionable in Great Debates) has given you cart blanch to design and implement a new system of taxation.

What would you tax (income, sales, use of services, the air we breathe)?
At what rates?
Would the rates vary based on the payer (or in the case of sales taxes, the items being purchased) or would it be universal in the name of simplicity?

What do you define as fair? Everyone pays the same? Those who have more, pay more? Those who use the services pay for them (such as now with the roads and vehicle and fuel taxes)? Let's not get into how best to spend the money, just how to raise the money.

[bot3]

Straight sales tax on everything for everybody including all business at a rate of 10% to 30%. AND ABSOLUTELY no other taxes of any sort. And no loop holes of any sort. No exceptions. No state income tax or city or county, or property or road tax, nothing, nada. All tax shared by state, local and federal as needed by the local community. This would mean a very lean form of fiscal responsibility and accountability.

Basically, if you earn it but don't spend it you don't get taxed. If you spend it then you get taxed on whatever you buy. Absolutely fair for everybody. If you can't afford it then don't buy it. Just because you're rich or poor you still pay for what you use.

Would I allow certain items not to be taxed. Perhaps, things like essential foods, maybe. Medicines at the consumer level? Maybe.

Is it harsh? Yes, but we would soon learn to be very fiscally sound and responsible.

Just say'n.

[Mdcastle]

Straight income tax on everything, no loopholes, deductions for charitable contributions only, about a dozen or so rates from zero to 95%, no sales taxes or property taxes or any other kind of taxes on anything, except maybe liquor and tobacco. No user fees either, like State Park admissions, highway tolls, and the like.

[Wesley Clark]

Whatever led to the most economic growth and US economic competitiveness while also being as progressive as possible. How that would work in reality, I don't know. Glad I could help.

[RTFirefly]

Originally Posted by bot3

Straight sales tax on everything for everybody including all business at a rate of 10% to 30%. AND ABSOLUTELY no other taxes of any sort. And no loop holes of any sort. No exceptions. No state income tax or city or county, or property or road tax, nothing, nada.

That would be a pretty hefty financial transactions tax! There'd hardly even BE a stock market, with a straight 10% or higher sales tax on every sale of a stock, bond, or other financial asset.

[Jonathan Chance]

Even speaking as a registered financial rep, RT, that's what it would take to make a sales tax work. ALL sales, clothes, toys, cars, homes, stocks and bonds. If money changes hands the Uncle Sugar gets his cut.

I know plenty of folks in my line of work who push the idea of a national sales tax until I bring THAT up. Then they say their sales should be exempt. Weenies.

[drew870mitchell]

If you're seriously interested in this there is useful data here.

[figure9]

My tax rate would be the positive side of a parabolic curve, with an offset of $25000. Basically at $25000 or less you pay no federal tax. Up until $200,000 your taxes would rise gradually. After $200,000 the taxes would start to rise very quickly. This would the advantage of a progressive tax rate and would also give me a chance to do something useful with the analytic geometry that I was forced to study.

[Little Nemo]

I'd have a mixed system of taxes.

An income tax. I'd eliminate most deductions. I'd also classify all forms of money earned as income and tax it all as income. I'd have a progressive tax rate system.

Corporate taxes. If corporations have constitutional rights they can pay a share of the cost of running the government. I'd close off loopholes here as well.

A national sales tax.

I would not have fixed percentages because my tax plan would be that you collect the amount of taxes needed to pay for whatever you're spending. If government spending goes up, taxes should go up to pay for it.

But just to start things out, I'd probably set the maximum income tax rate around 50% - not as high as the 91% we had back in the fifties but higher than the 33% rate we have now. Plus people would actually be paying close to this with all the loopholes I'd close off.

I'd probably reduce the official corporate tax rate below the maximum 35% it's at now. But as I said, I'd close off loopholes to raise it up from the 18% that is the average that's actually paid. I'd aim for an effective tax rate around 25%.

I'd set the sales tax at five percent.

As I said, these would all be just starting points. I'd adjust them up and down depending on what effective rates resulting from these official rates and depending on how much the government is spending. I'd also aim at keeping taxes high initially to pay off the deficit with the plan on reducing them once that was gone. Deficit spending is a hidden tax on everything and I'd want to eliminate it.

[L. G. Butts, Ph.D.]

A sales tax would be too regressive for my taste.

I would go with a two tiered approach. First, I would impose a carbon dioxide tax, something along the lines of $0.02 per pound of CO2 released. This is about 40 cents per gallon of gas, or about 1.2 cents per kWh. This compares to natural gas as ~0.9 cents per kWh and coal at ~2.4 cents / kWh. This tax, assuming we use only coal for energy, would generate around $ 800 Billion/year at current consumption.

I would then impose a progressive income tax / welfare program that is neutral at $30,000 / year. Those over 18 years old that have no income would get assistance of $6,000 / year or so. Those making exactly $30k/year would pay nothing. Those making more would pay an increasing marginal rate maxing out at 30% for income over $10,000,000. For the purposes of the tax income would be defined as pay, health benefits, capital gains, dividends, interest, company cars, etc... Basically any transfer of wealth to an individual would be considered income with the single exception of inheritance. There would be no deductions of any kind and no other taxes, at least on a federal level. No corporate taxes, sales taxes, property taxes, estate taxes, etc...

[TriPolar]

Very high tax rates for income that is not used for necessities or re-invested into the economy.

[Little Nemo]

Originally Posted by TriPolar

Very high tax rates for income that is not used for necessities or re-invested into the economy.

I have problems with this principle. If the government has the power to determine which products are non-taxable necessities and which are taxable luxuries and which investments are non-taxable good investments and which are taxable bad investments, you're pretty much creating state planning of the economy. Government decisions will be deciding what products are bought and where money is invested. Taxation is necessary but I like to see it structured to have the minimum possible impact on economic decisions.

[TriPolar]

Originally Posted by Little Nemo

I have problems with this principle. If the government has the power to determine which products are non-taxable necessities and which are taxable luxuries and which investments are non-taxable good investments and which are taxable bad investments, you're pretty much creating state planning of the economy. Government decisions will be deciding what products are bought and where money is invested. Taxation is necessary but I like to see it structured to have the minimum possible impact on economic decisions.

I wouldn't do it that way. I'd have a standard deduction for every person for the minimum costs of living. A family of four would have four standard deductions. It should cover the average cost of food, shelter and clothing. There could be possible regional variations. It's like the current income tax deductions, but should be much higher. I don't know the figures are, but let's say it was $5000 a year, that family of four wouldn't pay any taxes on their first $20,000 of combined income. Additional deductions could be made for medical care. As for investment, it would be capital investments in the US. The investment would have to be for salaries and easily valued capital such as buildings and machinery. Other deductions could be available, but always by defining general criteria. Retiring savings for a capped amount per person could be in this category.

[Hershele Ostropoler]

Nigh-confiscatory tax (75% or so) on income, massive deductions that amply cover necessities and actually allows a fairly lavish lifestyle if you can otherwise afford it.

ETA: Not wholly unlike TriPolar's plan, it looks like.

[CoastalMaineiac]

Some interesting proposals here. I suppose I'll chime in with my own ideas now. I think we could fund most of the government on fuel taxes, import tariffs, and moderate income taxes.

The idea of taxation is not to be punitive, but simply for the government to pay its bills and not leave society with a debt (owing money is never a good thing, imho, neither on a personal level nor on a societal level). So I don't subscribe to the idea of taxing everyone the most they can afford for the simple hell of it. I believe that if the government's budget includes expenditures of a trillion dollars, than the taxes should be adjusted to provide that trillion dollars.

Fuel taxes would fund infrastructure (roads, bridges, etc). Tariffs would fund the law enforcement and military arms of the government (include customs and border patrol). Income taxes would fund various social programs (education, social safety nets)

I would also institute various social insurance taxes to be paid by business owners who hire employees. These would be the main source of funding for organizations such as OSHA, the Department of Labor, etc.

I think the idea of supporting the military and law enforcement might not be practical at current levels... but then again, I don't think the US military or Law Enforcement is practical to maintain at current levels. We've dropped too many bombs on people who never did anything to us. We've incarcerated too many people for "crimes" against no-one. Some cutbacks in these areas wouldn't be all that bad, imho.

[Little Nemo]

Based on your OP, I deliberately avoided the subject of spending. Talking about significant changes in government spending is a separate issue from taxation. Any honest comparison of tax systems has to assume spending neutrality.

[bot3]

Originally Posted by RTFirefly

That would be a pretty hefty financial transactions tax! There'd hardly even BE a stock market, with a straight 10% or higher sales tax on every sale of a stock, bond, or other financial asset.

Ok! I realize that my idea is not realistic in this day and age. But (and I'm not trying to be argumentative) what is wrong about not having a stock market? To me the stock market is just a false sense of spending and money exchange. There is no real goods or services being exchanged. Stocks, bonds and things like that are only promises of things to be. And many times these promises never come to fruitation.

[CoastalMaineiac]

Originally Posted by Little Nemo

Based on your OP, I deliberately avoided the subject of spending. Talking about significant changes in government spending is a separate issue from taxation. Any honest comparison of tax systems has to assume spending neutrality.

Right you are on that. My own thoughts were more along the lines of "tax A funds department X, tax B funds department Y, etc.", not on the lines of actual budget amounts. I realize that's an old idea these days, but I think knowing that certain taxes pay for certain items makes people a bit less disgruntled as taxpayers.

[DrCube]

Get rid of sales tax. Simplify the income tax, by getting rid of loopholes, etc. Deductions are either standard, or stay the same every year. Let's keep it fairly progressive.

The main feature I want in a tax system is consistency. I want to know, if I get a job or start a business, that my taxes will be the same (or at least predictable, if I move into another bracket, or take different deductions, for example), in 20 years. The system shouldn't be tweaked every time a new party comes to office or every time the government wants to promote or discourage something. Make it simple, keep it consistent year after year. And then make it to where a 2/3 majority is needed to change the tax code.

[CoastalMaineiac]

Originally Posted by bot3

Ok! I realize that my idea is not realistic in this day and age. But (and I'm not trying to be argumentative) what is wrong about not having a stock market? To me the stock market is just a false sense of spending and money exchange. There is no real goods or services being exchanged. Stocks, bonds and things like that are only promises of things to be. And many times these promises never come to fruitation.

A business needs money to get off the ground, or to expand. Two ways they have of doing this are by issuing stocks and bonds.

When you buy stock, you aren't just buying a piece of paper, you are buying a portion of the company that share of stock represents. In other words, you are a part owner of the company, entitled to a share of the profits; the stock certificate is proof of that ownership. If the company is liquidated, it's debts are paid, and what remains is divided amongst the shareholders.

When you buy bonds, what you are buying is basically a promissory note. In effect, you are lending money to the business, with a promise of repayment plus interest. Taking on the role of a banker, if you will--as well as the risk that comes with it.

So it's not as though the stock market is just a bunch of nothing changing hands all the time. A stock has a real value behind it. Charging someone a tax on buying a bond makes no more sense than charging banks a tax on every mortgage they issue.

As for taxing stocks... ask yourself this: Would you feel that two buddies who decide to form a business partnership, each contributing $5000, should have to pay a tax to the government for doing so? They both have "stock" in the business, even though it isn't publicly traded (quite probably not even incorporated).

http://en.wikipedia.org/wiki/Stock
http://en.wikipedia.org/wiki/Bond_%28finance%29

[L. G. Butts, Ph.D.]

The problem with corporate taxes and energy/carbon taxes is that they end up being regressive. Corporations, which only exist when they profit, simply pass the tax on to customers. Agriculture and transportation together account for a majority (IIRC) of energy usage in this country. I like carbon taxes in the sense that they encourage cleaner fuels and conservation, but I think they need to be coupled with a progressive income tax system.

I think tariffs are horrible. They are a tax on all the consumers of a country that also directly subsidizes the workers in this country that could not otherwise directly compete. Way too distortive and inefficient. YMMV.

[CoastalMaineiac]

Originally Posted by L. G. Butts, Ph.D.

The problem with corporate taxes and energy/carbon taxes is that they end up being regressive. Corporations, which only exist when they profit, simply pass the tax on to customers. Agriculture and transportation together account for a majority (IIRC) of energy usage in this country. I like carbon taxes in the sense that they encourage cleaner fuels and conservation, but I think they need to be coupled with a progressive income tax system.

I think tariffs are horrible. They are a tax on all the consumers of a country that also directly subsidizes the workers in this country that could not otherwise directly compete. Way too distortive and inefficient. YMMV.

Well, there are reasons workers in our country cannot directly compete with some foreign workers. First and foremost, government effectively prohibits it with a mandated minimum wage. Now I'm not going to suggest that we all start working for slave wages to compete with foreign workers. One of the goals of any government is to promote the general welfare of its constituents. Taking measures to raise the overall standard of living fall under that category. And one of the ways we can do that is to tax imports in ways that level the playing field--in other words, we take away the advantages of off-shoring.

[TriPolar]

Originally Posted by CoastalMaineiac

And one of the ways we can do that is to tax imports in ways that level the playing field--in other words, we take away the advantages of off-shoring.

While the principle may be good, this tends to creates duty wars between countries and makes it difficult to find good trade balances which are also needed for economic growth.

[Human Action]

Originally Posted by CoastalMaineiac

Well, there are reasons workers in our country cannot directly compete with some foreign workers. First and foremost, government effectively prohibits it with a mandated minimum wage. Now I'm not going to suggest that we all start working for slave wages to compete with foreign workers. One of the goals of any government is to promote the general welfare of its constituents. Taking measures to raise the overall standard of living fall under that category. And one of the ways we can do that is to tax imports in ways that level the playing field--in other words, we take away the advantages of off-shoring.

Inexpensive labor is the comparative advantage that poorer nations have. Taking that away via tariff is monstrous, and condemns such nations to stagnation and misery, while simultaneously deprived our consumers of inexpensive goods that raise our standard of living.

As to the tax code, I would implement Milton Friedman's version of the negative income tax . This model is designed to replace all welfare and assistance programs, as well as serving as a tax code.

Specifically, I would set the allowance rate for a family of four at $15,000, with a subsidy rate of 50%. So, if you earn less than $15,000, 50% of the gap is paid by the government as assistance. If you earn exactly $15,000, you pay no tax at all, amounts above that are taxed progressively. I would cap the top rate at 50%.

[Martin Hyde]

Tax policy doesn't exist in a void. My main concern would be that we collect enough revenue to pay for whatever we decide the government needs to be doing. Suggestions like TriPolar's run afoul of that, because at least without being fleshed out, it just says government should confiscate money that isn't being used in ways it likes to spend on whatever it wants.

Structurally I would have tax brackets and a progressive tax scheme like we have now. I'd probably prefer a bit more granularity, so I'd have two more tax brackets. Right now I'd put one at $1m and one at $10m. But the brackets and the specific rates should change over time to reflect spending choices society makes. We shouldn't just collect as much money as possible, but instead it should reflect spending. Deficits should be minimized and/or eliminated as possible, and debt trimmed. (A balanced budget amendment is not a good idea though, as deficit spending is sometimes the best option.)

I also think we should just have the rates set up to get what we need in terms of revenue and have no deductions at all aside from a flat deduction everyone can take. I also think the lowest tax bracket should start at the poverty level, I think the last thing people under the Federal poverty limit need is to be paying taxes, and I'd even be in favor of an expanded EITC (which is similar to Friedman's negative tax.)

[TriPolar]

Originally Posted by Martin Hyde

Tax policy doesn't exist in a void. My main concern would be that we collect enough revenue to pay for whatever we decide the government needs to be doing. Suggestions like TriPolar's run afoul of that, because at least without being fleshed out, it just says government should confiscate money that isn't being used in ways it likes to spend on whatever it wants.

Indeed I do say that government should confiscate some of the money that isn't being used to support the economy as a whole. The easiest way to collect enough revenue to pay for whatever is to encourage economic growth. Those with more money than they need to live owe that to the system created by everyone, and it is the means to ensure that system survives.

Now if the system is properly set up, I have no objection to those who invest enough money into the economy paying no taxes on their income or wealth. The rewards from investment multiply over time and if freedom for taxes is an incentive to provide that investment then it's fine with me. The benefits to the investor multiply over time as well. Petty concerns over who or who does not pay what get in the way of rational thought on this subject. We are all better off with a strong, growing economy, and our debt and deficit worries will fade away as economic growth improves.

[Human Action]

Originally Posted by Martin Hyde

Tax policy doesn't exist in a void. My main concern would be that we collect enough revenue to pay for whatever we decide the government needs to be doing. Suggestions like TriPolar's run afoul of that, because at least without being fleshed out, it just says government should confiscate money that isn't being used in ways it likes to spend on whatever it wants.

I think any moral tax system should look at taxation as a necessary evil, which is tasked with taking the bare minimum from taxpayers so as to provide for government to carry out its legitimate role. There is no income level at which the government is entitled to confiscate your earnings.

Originally Posted by Martin Hyde

I also think we should just have the rates set up to get what we need in terms of revenue and have no deductions at all aside from a flat deduction everyone can take. I also think the lowest tax bracket should start at the poverty level, I think the last thing people under the Federal poverty limit need is to be paying taxes, and I'd even be in favor of an expanded EITC (which is similar to Friedman's negative tax.)

I would support that, though stability in tax rates does have a benefit, as it makes risk easier to project, and thus makes businesses more open to expansion and growth. Care to put a dollar figure on your EITC?

[Human Action]

Originally Posted by TriPolar

As for investment, it would be capital investments in the US. The investment would have to be for salaries and easily valued capital such as buildings and machinery.

Originally Posted by TriPolar

Indeed I do say that government should confiscate some of the money that isn't being used to support the economy as a whole.

May I ask why wealth intended for investment overseas would be better confiscated by the government?

Originally Posted by Tripolar

Now if the system is properly set up, I have no objection to those who invest enough money into the economy paying no taxes on their income or wealth.

Is this subject to the same definition of "investment in the economy" as the above? Only salaries and easily valued capital? Do stocks and bonds count?

[WillFarnaby]

I don't think I can talk about taxation without talking about what is to be funded by the taxation. All taxes, when possible, should be levied on the beneficiaries of a particular service so that the cost of that particular service is known.

All federal highways can be funded by the gas tax, or even better, tolls. The FDA can be funded by taxing the goods it inspects. National Parks can be paid for by donations and visitor fees. All foreign military installations should be paid for by a tax on the host country or shut down. The navy shouldn't be subsidizing the protection of cargo on the seas. They should tax the importers and exporters for their services. Patent offices can be paid for by those who use the service.

Do away with the individual and corporate income taxes. Reduce government spending to about 1/3 of current levels and pay for the rest of it with a sales tax.

[TriPolar]

Originally Posted by Human Action

May I ask why wealth intended for investment overseas would be better confiscated by the government?

Is this subject to the same definition of "investment in the economy" as the above? Only salaries and easily valued capital? Do stocks and bonds count?

I'm not ruling out investment overseas. It just more difficult to ascertain what part of that is helpful to our economy and why.

Newly issued stocks and bonds count.

[chargerrich]

Combination of a Consumer + Luxury Tax - we can argue the amounts, but there is no question IMO that this system would be far more beneficial/fair to the American people.

That said it will never happen because the IRS employs well over 100,000 people and lawyers and accountants that rely on the mess that is the US Tax Code count into the millions.

Now add lobbyists and the ultra rich that use the loopholes to pay less than a blue collar worker and you will never see this far better system implemented.

But since you said I have the power.... POOF... done!

[Jas09]

I'm conservative when it comes to massive changes in an existing system.

So I would take what we have now, add some revenue by raising rates at the top-end and some base-broadening by capping itemized deductions. I'd leave investment income in a separate category but remove special treatment for carried interest and raise the rate back up to 20% or so.

I'd reduce business taxes because in a global economy I think it's better to raise revenue from individuals than from businesses. Make up for some of the lost revenue by beefing up the estate tax - multi-generational wealth accumulation is a bad thing, so let's tax it more. The rest could come from a small VAT at some point if we want to move towards an income + consumption system.

And I would add a carbon tax on the same principal of "if you want less of something tax it". We need to incentivize conservation and the best way to do that, IMO, is to put a price on consumption and let the market decide what path to take.

ETA: And now I read the thread and see that I also agree with a lot of what Martin Hyde wrote - more brackets is good, a BBA is bad. I'm not sure about "no deductions beyond a flat one", although I could definitely see moving towards that by capping them and letting inflation get us to where itemizers are even more of a minority than they are now. I agree with the more general point that using deductions as social policy is non-optimal (I prefer more direct approaches like the above-mentioned carbon tax).

[Buck Godot]

Originally Posted by bot3

Straight sales tax on everything for everybody including all business at a rate of 10% to 30%..

Originally Posted by Mdcastleman

Straight income tax on everything, no loopholes, deductions for charitable contributions only ....

So your opinion is that there isn't enough of a wealth gap in the US such that we need to tax the poor by 10-30% and tax the very rich by 2-6%?

Originally Posted by figure9

My tax rate would be the positive side of a parabolic curve ...

How are you going to keep the curve from going over 100% tax?

I would favor a strongly progressive system including many more brackets with the top tax rate at something like 50%. I would alter the method that deductions are calculated such that rather than reducing the taxable income, they give you credits at a fixed rate relative to the size of the payment. So for example regardless of your income you receive say a $180 tax rebate for every $1000 mortgage interest you paid, and a $200 rebate for every $1000 in charitable contributions. The rich shouldn't get more back than the poor for donations to charity. The Mortgage interest deduction should only cover one home per person or couple filing jointly. I would also institute a 0.1% speculation tax on stock sales to discourage flash traders.

[Human Action]

Originally Posted by TriPolar

I'm not ruling out investment overseas. It just more difficult to ascertain what part of that is helpful to our economy and why.

Are there investments that are harmful to our economy? Should the government be in the business of deciding which is which?

Originally Posted by Buck Godot

The Mortgage interest deduction should only cover one home per person or couple filing jointly.

Better yet, eliminate it. The government subsidizing home ownership needs to stop, it's gotten us into trouble before, and it will again.

Charitable deductions can stay, but the others should be eliminated; they distort the market too much.

[TriPolar]

Originally Posted by Human Action

Are there investments that are harmful to our economy? Should the government be in the business of deciding which is which?

I'm not saying foreign investments are harmful per se. But if you pay employees in the US they will pay more in taxes and add to our economy. It's just not as easy to determine which overseas investments provide that benefit. And yes, the government should be making those decisions on a general basis. That's what government's do. They shouldn't be selecting specific companies or industries, but establishing the criteria for economically beneficial investment and encouraging that.

[Zeriel]

Originally Posted by Martin Hyde

Tax policy doesn't exist in a void. My main concern would be that we collect enough revenue to pay for whatever we decide the government needs to be doing. Suggestions like TriPolar's run afoul of that, because at least without being fleshed out, it just says government should confiscate money that isn't being used in ways it likes to spend on whatever it wants.

Structurally I would have tax brackets and a progressive tax scheme like we have now. I'd probably prefer a bit more granularity, so I'd have two more tax brackets. Right now I'd put one at $1m and one at $10m. But the brackets and the specific rates should change over time to reflect spending choices society makes. We shouldn't just collect as much money as possible, but instead it should reflect spending. Deficits should be minimized and/or eliminated as possible, and debt trimmed. (A balanced budget amendment is not a good idea though, as deficit spending is sometimes the best option.)

I also think we should just have the rates set up to get what we need in terms of revenue and have no deductions at all aside from a flat deduction everyone can take. I also think the lowest tax bracket should start at the poverty level, I think the last thing people under the Federal poverty limit need is to be paying taxes, and I'd even be in favor of an expanded EITC (which is similar to Friedman's negative tax.)

I don't agree with you much in terms of policy, but this seems entirely spot on to me. Can we eliminate capital gains as a separate tax and just characterize realized gains as income under this structure?

[Human Action]

Originally Posted by TriPolar

I'm not saying foreign investments are harmful per se. But if you pay employees in the US they will pay more in taxes and add to our economy. It's just not as easy to determine which overseas investments provide that benefit. And yes, the government should be making those decisions on a general basis. That's what government's do.

Perhaps my tax bill shouldn't depend on the effect I have on my secretary's tax bill. How is that equal protection under the law?

Originally Posted by TriPolar

They shouldn't be selecting specific companies or industries, but establishing the criteria for economically beneficial investment and encouraging that.

Selecting specific industries is exactly what would happen. Industries that use low-wage overseas labor would be harmed, industries that are purely domestic, with easily-appraised, fixed capital assets, would be aided.

[TriPolar]

Originally Posted by Human Action

Perhaps my tax bill shouldn't depend on the effect I have on my secretary's tax bill. How is that equal protection under the law?

Yes, let's have everyone pay exactly the same amount in taxes. Can you afford that?

Selecting specific industries is exactly what would happen. Industries that use low-wage overseas labor would be harmed, industries that are purely domestic, with easily-appraised, fixed capital assets, would be aided.

Yes, exactly.

[Human Action]

Originally Posted by TriPolar

Yes, let's have everyone pay exactly the same amount in taxes. Can you afford that?

No, but I can afford to have my taxes assessed on my income, not other peoples' income, if they happen to be economically linked to me. If I own a fabrication plant that employs 200 people and pays me $10 million, and you own a sports agency that employs 20 people and pays you $10 million, why should our taxes different?

Originally Posted by TriPolar

They shouldn't be selecting specific companies or industries, but establishing the criteria for economically beneficial investment and encouraging that.

Originally Posted by Human Action

Selecting specific industries is exactly what would happen. Industries that use low-wage overseas labor would be harmed, industries that are purely domestic, with easily-appraised, fixed capital assets, would be aided.

Originally Posted by TriPolar

Yes, exactly.

Well which is it, should the government be selecting specific industries to succeed or not?

[TriPolar]

Originally Posted by Human Action

No, but I can afford to have my taxes assessed on my income, not other peoples' income, if they happen to be economically linked to me. If I own a fabrication plant that employs 200 people and pays me $10 million, and you own a sports agency that employs 20 people and pays you $10 million, why should our taxes different?

Your taxes would be the same unless you make additional investments. Where your income comes from is irrelevant.

Well which is it, should the government be selecting specific industries to succeed or not?

The government isn't selecting specific industries at all. You can avoid paying taxes by making investments that contribute to the US economy. Don't invest in other countries if you want a tax break.

[Human Action]

Originally Posted by TriPolar

Your taxes would be the same unless you make additional investments. Where your income comes from is irrelevant.

I must be misunderstanding your tax plan then. If you'd like to continue the discussion, could you state it again with some more detail?

Originally Posted by TriPolar

I'm not saying foreign investments are harmful per se. But if you pay employees in the US they will pay more in taxes and add to our economy. It's just not as easy to determine which overseas investments provide that benefit. And yes, the government should be making those decisions on a general basis.

Originally Posted by TriPolar

The government isn't selecting specific industries at all. You can avoid paying taxes by making investments that contribute to the US economy. Don't invest in other countries if you want a tax break.

But if tax deductions are based on investment in and contributions to the U.S. economy, and the deductable value of foreign investments cannot be assessed on this basis, then deductions will not be offered to American companies that make more foreign than domestic investments. This means that, in particular, companies engaged in import from lower-wage countries would operate at a disadvantage to other American firms, even though both of their industries benefit the U.S.

You can say "Don't invest in other countries if you want a tax break," but foreign investment and trade is a vital part of the U.S. economy, and should not be discouraged. After all, dollars spent to build a factory in China will eventually be used to buy goods priced in American dollars.

[TriPolar]

Originally Posted by Human Action

I must be misunderstanding your tax plan then. If you'd like to continue the discussion, could you state it again with some more detail?


But if tax deductions are based on investment in and contributions to the U.S. economy, and the deductable value of foreign investments cannot be assessed on this basis, then deductions will not be offered to American companies that make more foreign than domestic investments. This means that, in particular, companies engaged in import from lower-wage countries would operate at a disadvantage to other American firms, even though both of their industries benefit the U.S.

You can say "Don't invest in other countries if you want a tax break," but foreign investment and trade is a vital part of the U.S. economy, and should not be discouraged. After all, dollars spent to build a factory in China will eventually be used to buy goods priced in American dollars.

What I'm talking about in this discussion is high income tax rates on all income. In conjunction there would be tax deductions for reinvestment back into the US economy. The kind of things that used to be called tax shelters. As far as I'm concerned, if an individual re-invests enough money into the economy, theire effective tax rate could be zero. I think this should be applied to corporate taxes in a similar way. Profits to be distributed as dividends shouldn't be taxed at all, they'll be taxed as income after being disbursed. Profits re-invested into the US economy wouldn't be taxed either.

I don't rule out investment in other countries, but investment in other countries isn't guaranteed to be benificial to the US. If those investments can be proven to be beneficial to the US then I'd allow them. But capital investment in the US is always beneficial to our economy. Investment in China because it may one day benefit the US economy is a crap shoot.

I'd also have standard deductions to make taxes very low at the bottom of the economic scale to prevent regressive effects. This is how we get our own cheap labor and minimize the amount of welfare needed to maintain social order.

[BobLibDem]

10% tax on sales of all motor vehicles, new or used, not made in North America in closed union shops.

Legalize marijuana and tax it say $5 per pack of 20 joints.

Estate tax: 10% on first $100,000, 20% on amounts from $100,000-$250,000,
50% on amounts from $250,000-$500,000, and 90% on amounts over $500,000.

Tax the churches like any other business. Televengelists pay 90% tax.

10% tax on sales of new rifles and shotguns. Register handguns like cars and tax all sales, new or used, at 25%. Tax all ammo.

Return tax rates to the Clinton era rates.

Eliminate deductions for mortages on second homes. We need the deduction on the first home to encourage home ownership.

Tax 20% on sales of yachts and private jet aircraft.

10% tax on golf club membership.

3rd and later marriages ineligible for joint filing.

I'd give some credits, too

$5000 per year per students in public universities

$10,000 for moving out of a flood zone

$1000 per person per year who can test free of tobacco use

$100 per person per year who promises not to wear plaid pants.

[Human Action]

Originally Posted by TriPolar

What I'm talking about in this discussion is high income tax rates on all income. In conjunction there would be tax deductions for reinvestment back into the US economy. The kind of things that used to be called tax shelters. As far as I'm concerned, if an individual re-invests enough money into the economy, theire effective tax rate could be zero. I think this should be applied to corporate taxes in a similar way. Profits to be distributed as dividends shouldn't be taxed at all, they'll be taxed as income after being disbursed. Profits re-invested into the US economy wouldn't be taxed either.

I think I understand your plan now. Your motive is to keep money in circulation through investment, rather than using the tax code solely to collect revenue, correct?

Originally Posted by TriPolar

I don't rule out investment in other countries, but investment in other countries isn't guaranteed to be benificial to the US. If those investments can be proven to be beneficial to the US then I'd allow them. But capital investment in the US is always beneficial to our economy. Investment in China because it may one day benefit the US economy is a crap shoot.

I disagree with your plan on the grounds that it's too distortive. There are times when investment simply isn't prudent, and providing a perverse incentive to stash your money in some kind of investment would lead to problems, I think. Also, I would argue that investment anywhere is beneficial to the US, since it contributes to a free worldwide market.

Originally Posted by TriPolar

I'd also have standard deductions to make taxes very low at the bottom of the economic scale to prevent regressive effects. This is how we get our own cheap labor and minimize the amount of welfare needed to maintain social order.

This I can get on board with, as it's closer to the negative income tax.

[TriPolar]

Originally Posted by Human Action

I think I understand your plan now. Your motive is to keep money in circulation through investment, rather than using the tax code solely to collect revenue, correct?

Correct. I would rather have revenue result from many people working and paying reasonable tax rates rather than having to soak the rich to pay the bills. It would lower our costs, and increase revenue over a broader range.

I disagree with your plan on the grounds that it's too distortive. There are times when investment simply isn't prudent, and providing a perverse incentive to stash your money in some kind of investment would lead to problems, I think. Also, I would argue that investment anywhere is beneficial to the US, since it contributes to a free worldwide market.

If investment is going to pay salaries, build buildings, and buy equipment made in the US I don't see how it could go wrong. Investments that don't do things like that would have to be ruled out. I do see that it's difficult to figure out whether buying machinery from Korea to make things in the US is beneficial or not, or how beneficial. But I think those things could be worked out. Buying machinery in China to be used in China to make things to sell to the US is a very different issue. The path to the benefit for us is too indirect, and may never be realized. I'm not ruling it out, but I don't have a simple way to define when a foriegn investment is directly beneficial, so I'm not really addressing it here.

This I can get on board with, as it's closer to the negative income tax.

Yes. I don't like the NIT when it begins to look like money for nothing. That would be a disincentive to people working. Not always a bad thing either. Parents being able to spend more time with their children is a benefit. But something that recipients will see as no different than our current welfare system will not be good. However I'm not proposing something in contrast to NIT, just what I see as addressing the proper issues. For instance, if a consumption tax was used it could be implemented as a tax prebate to cover the average amount taxes that would be paid on basic necessities for people. Each family might receive a check for $500 a month per person in the household to cover the cost of the sales taxes on their necessities. However there are many other problems with a nationals sales tax. But I'm not looking at the details of the collection system in this thread so much as the principles involved.

[Buck Godot]

[quote=Human Action;15781961
Better yet, eliminate it. The government subsidizing home ownership needs to stop, it's gotten us into trouble before, and it will again.[/QUOTE]

I could support a gradual phase out, but many home owners based their financial decision to buy a home based on this deduction. To end it overnight would quadruple the already high number of foreclosures as the rules change and people who could afford their homes suddenly can't. Perhaps a grandfather clause that would eliminate it for all future purchases but keep it for current mortgages. The bottom would still drop out of the already weak housing market, but at least you wouldn't be throwing people out on the street.

[Human Action]

Originally Posted by TriPolar

Correct. I would rather have revenue result from many people working and paying reasonable tax rates rather than having to soak the rich to pay the bills. It would lower our costs, and increase revenue over a broader range.

So, in the event that the majority of taxpayers went whole-hog for investing and caused a revenue shortfall, you'd just adjust the deduction amounts on a year-to-year basis?

Originally Posted by TriPolar

If investment is going to pay salaries, build buildings, and buy equipment made in the US I don't see how it could go wrong. Investments that don't do things like that would have to be ruled out. I do see that it's difficult to figure out whether buying machinery from Korea to make things in the US is beneficial or not, or how beneficial. But I think those things could be worked out. Buying machinery in China to be used in China to make things to sell to the US is a very different issue. The path to the benefit for us is too indirect, and may never be realized. I'm not ruling it out, but I don't have a simple way to define when a foriegn investment is directly beneficial, so I'm not really addressing it here.

This remains an issue, overseas investing is a major business activity and should not be discouraged.

Originally Posted by TriPolar

Yes. I don't like the NIT when it begins to look like money for nothing. That would be a disincentive to people working. Not always a bad thing either.

The key to the NIT is the subsidy rate. If you set it at 50%, then every dollar a person earns, under the allowance rate, replaces a 50 cent welfare payment. This provides the incentive to work.

Originally Posted by Buck Godot

I could support a gradual phase out, but many home owners based their financial decision to buy a home based on this deduction. To end it overnight would quadruple the already high number of foreclosures as the rules change and people who could afford their homes suddenly can't. Perhaps a grandfather clause that would eliminate it for all future purchases but keep it for current mortgages. The bottom would still drop out of the already weak housing market, but at least you wouldn't be throwing people out on the street.

Oh, absolutely. You'd have to have something like a grandfather clause, an overnight shutdown would be unjust. Much like Social Security, such programs are insidiously difficult to shut down once begun.

[TriPolar]

Originally Posted by Human Action

So, in the event that the majority of taxpayers went whole-hog for investing and caused a revenue shortfall, you'd just adjust the deduction amounts on a year-to-year basis?

In the unlikely event that happens, yes. I don't see it as possible in anything but a skyrocketing ecomomy of unknown proportions. But I do think investment opportunites should be available to anyone with a few bucks to spare.

Remember by investment I mean things like newly issued stock, not just trading existing shares. Money provided for salaries is best since a portion of that immediately becomes tax revenue. Other capital investments such as buildings and machinery will add to economic growth also. There might be schedules to deal with cases like buying an old building or old equipment. The costs of refurbishing those things should be considered deductable investments. But possibly there could be a partial deduction for buying an existing building if it's part of a larger investment in new productivity. Economic growth brings in new revenue through taxes (and other duties, fees, etc. that I don't object to if they are reasonable). And a growing economy can pay off old debts.

Again, I don't object to deductions for overseas investment, if we know it has a beneficial effect. That's a whole other subject, and how other countries tax and handle their economies is a factor in making those decisions. We can't control what they do with money through our own regulations. I just want to make sure there isn't an incentive to send money overseas to avoid taxes, in a way that benefits individuals, but not the economy overall.

I'm trying to set down the principle that income above the level needed for necessities should be taxed at the rate needed to pay the bills. But investment in economic growth will pay off in the future and is a better way to pay those bills, and keep them from getting that high. So I'd incentivize that investment through tax breaks, and it gives a way for those who hate taxes to avoid them that is beneficial to the economy as a whole.

[Blaster Master]

My plan would be pretty simple and would work best on income, but would be doable on a consumption base as well with a few minor adjustments. In so designing taxes, I consider that essentially, in a society, the purpose of taxation is to raise money for services that virtually everyone paying that tax receives virtually the same benefits from the use of thsoe taxes. The purpose of taxation is ONLY to raise funds, not for social engineering or benefits or penalteis, which if deemed necessary can be performed by plans funded by taxes rather than directly implemented through taxes, and the pain of taxation should be spread as evenly through the population as possible.

To this end, I've devised what I call a utility based tax system. Essentially, the idea is that the value of money isn't the same for each person. If we use a flat tax percentage, while everyone is technically paying the same amount and so one might argue the pain of the tax is the same, in reality it's not. For someone making $30k, losing 15% of that in taxation is going to affect their standard of living more than someone making $300k. So the idea is to adjust tax rates based on that. I don't have a specific formula off the top of my head, but I do know that studies have generally shown that the value of money grows logarithmically. Thus, the most fair way to tax everyone with equal pain is to have a flat tax rate on that value, by establishing the rate and adjusting it based on utility.

Basically, this gives us a progressive tax system, but it would be based on actual economic data on the value of money to the people being taxed. But to give an example of how this would work, I threw together a quick formula that eyeballs some numbers that are good enough to this point [utility = ln(inc * 0.00015) and utility(base)/utility(inc) to normalize]. Let's run with 30k as median income and give them base utility tax rate of 12%. Based on my quick formula, to someone making 20k, a dollar is work about 1.37 to what it's worth someone making 30k, so they pay 8.8%, but to someone making 50k it's worth 0.75 so they pay 16.1% and if you make 200k you pay 27.1%. Obviously, it needs more than 10 minutes of me playing with the numbers, but I think the basic idea comes across. I'm sure that an economist who specializes on this sort of thing could figure out a much more solid way of modelling this value.

Now, when congress institutes a tax hike or a tax cut, it automatically hits everyone. Yes, richer people get more from a tax cut, but they also take more from a tax hike. But the key point is, since it's adjusted based on utility, everyone should feel roughly the same impact and can know roughly what their conversion rate is so they know how to respond to a certain amount of a tax change.

That all said, the base tax rate isn't just an arbitrary number, it is specifically chosen to exactly, or as nearly as reasonably possible, balance the budget. To this end, every bill and every expenditure must provide a budget and that is added to the budget, and the rate is more or less a ratio of government budget to income. If they over tax a bit one year, the extra money is applied to the following year's budget and thus the next year gets a slightly lower rate. If there's a shortfall, it's added to the next year's budget and there's a coresponding increase. As a result, we'd never never sustain a long term budget shortfall or surplus.

The other benefit is that every single government program could be directly correlated to how it affects each individual's taxes. If the government wants to spend more money, they HAVE to raise taxes. If they want to cut taxes they HAVE to cut spending. And each person can see how much of their taxes goes toward defense or social security or education or whatever and take that into account when politicians talk about policy. And if politicians are talking about creating a new program or cutting an existing one, each person can see exactly how much it will cost them or what they'll gain and better decide if it's worth it.

And as I mentioned, if we decide we want to give bonuses to home owners or whatever, it needs to be done after taxes. Charge them the same rate, then have a government program that calcuates what it would cost and sends a check to those people. Then everyone can see how much it costs us to engage in that social engineering and if we still want it.

So we all get to have a single number we can relate to, it's easy to calculate exactly how much we owe, so it's simple to deduct from payroll and do our taxes, and it's easy to understand how the government's spending affects our taxes to better understand policy.

TLDR: It would be a progressive tax system based on the utility of money. The base rate is roughly a ratio of government cost to taxable income and automatically rolls in surplusses and shortfalls from year to year. Every government program must account directly for it's cost and is easily reportable to the public for discussion on policy as how much it affects the base rate. And doing your taxes would be as simple as plugging your income into the formula and getting your rate; you'd spend more time filling in your personal identifying information than you would actually doing your taxes.

[Hershele Ostropoler]

I want to revise mine:

A flat tax, but taxable income is after deducting, basically (and I have a system for itemizing this to an extent) the cost of a comfortable middle-class lifestyle. That means that someone not earning enough to afford a comfortable middle-class lifestyle pays no taxes, but these are also the people who would miss the money the most. I assume the rate would have to be fairly high, then, but I don't think it should be for the sake of being high; if a relatively low tax rate on taxable income would cover everything, I'm fine with that.