Can we get rid of personal income tax?

… and replace it with a combination of capital gains taxes, corporate tax, “fees” for meeting requirements (e.g., USDA inspections) and voluntary certifications, unfunded mandates, and direct levies on the states?

(This is on the Federal level, of course, and in the U.S.)

I’m opposed to sales taxes but I might be willing to fill in gaps with a small tax on items over, say $5000.

  • Is this constitutional? I believe the unfunded mandates are, but the direct levies? That seems to be allowed by the XVI Amendment.
  • Is it practical? Can the mandates and levies be enforced?
  • Is it politically viable? There’d be astroturf opposition, but would real people complain, particularly real people who seldom if ever pay capital gains taxes?

(NB: I was about to post this in GQ, when I had a premonition of the character of the replies; if I am informed that I was right the first time it will only serve to enhance my SDMB experience)

Factually yes. I don’t know about direct levies on the States, though, those may be unconstitutional and I haven’t even considered them before so I have no idea.

The lion’s share would come through capital gains, corporate tax, and fees under your above suggestions. The reason unfunded mandates won’t work is States only comply with unfunded mandates when it is to their benefit.

For example a State has $10m of Federal dollars on the table it could get, but it has to do $800k in work to get it, States will find the money for that because it is to their ultimate benefit. If you just pass a ton of unfunded mandates that would just crush State’s fiscally they just would opt out of whatever Federal program you were pushing that required them. That doesn’t happen now because no programs are so onerous, but if you’re talking about replacing the personal income tax they would be onerous.

Now on to your fees, capital gains, and corporate taxes – yes, some people would oppose them vehemently. Every thing in America would, over night, cost dramatically more money. Corporate taxes are actually typically regressive at the individual level, because they increase the cost of consumer goods and consumer discretionary goods, and rich people have a much larger share of their income that goes to things other than consumer goods than do lower income people.

In the grand scheme of things I don’t think it matters how you tax if you keep it as the same percentage of GDP. If you have a tax rate that basically means it’s say, 20% of GDP, it doesn’t matter how you get it, because its going to effect everyone no matter how you structure it.

Now, it’s not immediately a problem that everything would cost more, because people would have more money. But the problem with a lot of your tax revenue being tied to consumption of goods and services is people will dramatically restrict their spending on anything discretionary in times of economic duress, which will vastly magnify government deficits.

The “good” thing about taxes like property taxes and income taxes is people still pay them even if they are tightening their belts. Income taxes are generally going to be less variable than excise taxes or corporate taxes that ultimately end up being consumption taxes. But income taxes are also highly variable too because in times of recession or times of boom incomes vary wildly.

That’s why ideally your tax base is in the form of different taxes on different types of things.

On the record I support income taxes, but to answer the point about people not spending money is there were sales taxes, etc instead , there are ways around that, say zero percent or even negative interest rates, randomly invalidating random serial number ranges to keep people from stuffing money into their mattress, maybe eliminating paper currency. The problem of large private party sales say at antique or gun shows or even Craiglist might be close to being solved with iPhone credit card readers and such.

There is one gigantic problem. First, corporate taxes would be hard to levy at these levels because if they get too high, corporations can leave.

But look at capital gains taxes. To counteract the impact of a recession, governments need to stimulate the economy, which takes money. But during a recession capital gains tax revenue will plummet, because people lose money in the market. So, the situation just gets worse. The income gap closed a bit in 2009 only because the rich lost so much money in the market for that year. They made it back, but if the government mostly depended on capital gains taxes …

Depending solely on sales taxes we just had a thread about.

Almost all taxes go down in a recession. Sales taxes are probably the most elastic, and then income taxes and capital gains taxes would be next. Corporate taxes will also go down.

Probably the least elastic in terms of varying with overall economic prosperity are property taxes, as they are just assessed at a mill rate that is only adjusted periodically and often times stays the same even in recessions (unless you’re “lucky” and the assessor comes by while your home’s value is depressed.) Property taxes will fall in recessions, as people are foreclosed on and as housing prices fall, but foreclosures take awhile to start up and until someone actually assesses the house you keep getting taxed at the mill rate already established.