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.
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.
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.
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.
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.
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.
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.
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.
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…
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.
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.
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.
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.
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.
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.
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.
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).