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.
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.
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%.
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.)
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.
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.
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?
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 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.
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.
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).
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%?
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.
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.
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?
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?
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.
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?
Well which is it, should the government be selecting specific industries to succeed or not?
Your taxes would be the same unless you make additional investments. Where your income comes from is irrelevant.
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.
