Let's brainstorm about taxes

Great Debates
1

I want to come up with a workable and innovative taxation system, with your help. I suggest, therefore some brainstorming. To get the ball rolling, I propose the following controversial system to replace taxes:

Every year, the government is permitted to seize 2% of your assets. Half of that 2% are assets chosen by you. The other half will be chosen by the government.

This encourages you to keep on making money - after all, you won’t be taxed on your earnings, but on what you have lying around. It encourages you to diversify your assets, otherwise you’re screwed if all your equity is in your home. It also allows the government to take valuable resources off people for the nation that it would otherwise never get a chance to get ahold of.

2

ISTM that the only significant difference between this and the current system is that under this proposed system, you wouldn’t be taxed on your consumption of non-durable goods.

Earnings become either consumption or assets (or charitable donations). Anything you earn that you don’t either give away or spend on non-durable consumables becomes part of your assets, and thus subject to tax.

And the “choice of assets” business sounds like a real bureaucratic nightmare. Surely it is far more efficient in terms of revenue collection just to withhold a certain percentage of income than to go around every year selecting particular assets out of everybody’s property.

3

This is terrible idea. If no one knows what assets might be “seized”, that would put a tremendous damper on business activity. Fortunately, there is this new invention called “money” that can be used instead of assets. I predict it will revolutionize the barter economy, and make the collection of taxes quite simple. You heard it here first, folks!

4

Why would it affect business activity? Things are only being seized from individuals.

5

What would the government want with “assets” and what would they do when they got them? How would they go about collecting them? Where would they store them? Who would determine their value? How do you differentiate between an appreciating asset and a depreciating asset?
(Picturing guys with dark glasses and IRS ballcaps storming grandmas house and taking all her precious moments figurines).
I like John Mace’s idea better.

6

Please note this is brainstorming, so although you can pick my idea apart as much as possible (and please feel free to!), proposing other ideas or refining my idea (or other, previously proposed ideas) is welcome.

7

Depends on the asset. Land would be very useful for the government to own. Similarly unusual objects, or works of art. Other assets they could just sell. Don’t forget that the individual has the right to choose half the assets as well - a great way of getting rid of unwanted stuff.

Depends upon the asset.

Fair market value at the time. Probably. It’s easier than using NPV or something…

8

I’ve tried to brainstorming in GD before, and it doesn’t work. But good luck with your effort.

Anyway, I think that the best tax structure is one that treats all income equal*, and doesn’t allow any deductions. The purpose of taxes should be to raise the needed revenue in the most neutral way possible. It’s an ideal to shoot for that can probably never be achieved, but out current system doesn’t even try.
*although income from capital gains should be basis-adjusted to account for inflation.

9

Except, if we’re going to have a tax on assets, why not simply assess the asset-owner’s net worth (we’d have to do this anyway to determine the ‘2%’ figure you mentioned earlier, and then allow the asset owner to pay that assessment in any way they like? That is, you know, with money. If the owner of a used car lot has 100 cars with total average value of $5,000 each, why wouldn’t the government prefer that he hand over $10,000 cash rather than two cars? As you said, the government would probably have to sell those cars anyway, why not let a guy who’s an expert at selling cars–the used car salesman–do it for them?

And of course, there are plenty of assets that can’t be divided. If you own the Mona Lisa, you can’t cut it into 100 pieces and give the government 2 of those pieces. Instead we could use tokens to represent the value of the Mona Lisa, and you could give the government 2 of those tokens, and they could use those tokens to provide the essential services we demand.

Yes, it sometimes happens that the government does come into possession of assets, through seizures, forfietures, and emminent domain. But these fall into two cases. In the first case, they’d rather have the money, but since you don’t have the money, they’ll take your stuff instead, and then sell your stuff. Or it’s stuff you’re not supposed to have (like, you stole it, or it’s illegal to have, or whatever), and then they’ll either give it back to the person who really owns it, or they’ll destroy it. Or, they really really want one particular thing you own, no other thing in the world will do, so, with due process, they figure out the “fair market value” of the property, hand you a check, and the sheriff kicks you out.

Anyway, here in the US the only significant asset taxes are property taxes. And yes, people can be forced to sell their land if they’re unable to pay the taxes on it. But most other taxes are transaction taxes (income tax, sales tax, tarriffs) rather than asset taxes.

10

You picked a bad example, Lemur. I think there are quite a few government officials who would make excellent used car salesmen. :slight_smile:

11

This may work for the ultra rich. Seizing land, cars, boats, jewelry, works of art, etc.
But for Joe sixpack and Sally housecoat they really don’t have any assets that can be taken and certainly not anything anybody would be interested in. They probably have a mortgage on their smallish house and it’s lot. Can’t really take any property from them. Their nicest piece of art is a Thomas Kinkade in their living room and an IKEA framed poster in the den. They both need their 5-6 year old GM cars to get to work so you can’t really seize them. I guess you could take their television set but you’ll never be able to sell it for what it’s worth.
And when you say the government can turn around and sell the stuff how do they do that? A ginormous government flea market? IRS e-bay?

A government needs taxes as income so they can spend that income on lots and lots of programs. Making them earn that income by trying to resell everyone’s crap back to everyone just seems like a needless step.

12

Suppose the 1% the gov’t is allowed to choose each year is always real estate?

13

So in a 400 sq. ft. condo, the government now owns 4 sq.ft?
How, exactly, is the government going to make use of that closet? (Or will it choose the floor under the oven?)

Wouldn’t that idea discourage homebuying?

14

They can seize 2% of your assets or 2% o fyour assets measured by value? I’m sorry but this is a nutty idea.

15

How about taxing income on a truly sliding scale instead of a tiered one with the mess of exemptions?

Putting basically random numbers for the sake of the example: Taxes start at 15% for an income of $12K and go up to 30% for an income of $200K and up.

The scale doesn’t have to be linear. S-shape is probably better. And you might want different scales for individuals and businesses.

It takes only one datum to calculate, income. Plug it in the appropriate formula and there you go. The contributor doesn’t need to understand the formula. Follow the printed instructions, go online, go to an IRS office.

Heck, you might even be able to work in exemptions, if you really feel like it.

16

You are talking about a wealth tax. There are a few basic forms of taxation, wealth tax, consumption tax, transfer tax, and income tax. There is no reason to stick to just one.

Wealth taxes are like property taxes.
Consumption taxes are like sales taxes.
Transfer taxes are like the estate taxes.
Income taxes are like your federal taxes.

John Mace is pretty close, except the inflation adjusted basis for capital gains, you might as well reduce taxable interest income by the inflation rate. When it comes to the income tax, there should not be a preferential tax rate for investment income. There are plenty of ways to improve the tax system but there is no political will to do so. If I had to improve the tax system I would:

Get rid of all those stupid phase out rules
Get rid of the AMT
Get rid of the social security cap
Tax earned income at the same rate as investment income
Revise the taxation in the insurance industry
Get rid of the preferential tax treatment for natural resources (oil)
Add a few more income tax brackets (max out at 50%) until we get our national debt under control
Take another look at the tax exempt status of overpriced colleges and universities

The thing is that there is someone on capitol hill with a list a lot like this one but they are trying to figure out how to get a special tax break for their friends without making it look like they are getting a special tax break for their friends.

17

The most difficult question in taxation is “what is income” A really big part of what tax lawyers think about all day is defining the term income. It might be a little easier if you are just gettig a paycheck but what about if you own a small business. What if the majority of your pay is in stock options. What if you own stock that has risen but you haven’t sold yet. These are the necessary complexities in the tax laws. We should get rid of the unnecessary complexities like AMT and phaseout of deductions.

18

A really bad idea in several ways.

First off, the nice thing about money is that it’s fungible. Any two amounts of money of the same size are functionally equal. So nobody has any particular attachment to any specific amount. Your proposal, on the other hand, is the opposite of fungibility - it’s based on the idea that we can take billions of items and assign them an objective value.

And there’s no way that’s going to work. What happens the first time some government tax agent says that somebody owes $500 and they’re taking that gold ring. The person will protest that it’s their grandmother’s wedding ring and priceless to them. The agent will say he has no sentimental feelings for it and to him it’s just a piece of gold jewelry worth $500.

Second, this system would create an obvious incentive to hoard and hide assets. It wouldn’t just be objects of sentimental value like my wedding ring example. People would want to hide as many of their valuables as possible to minimize what they owe and to keep what they own away from the tax agents. That’s why they tax things like incomes and sales - it’s relatively easy to keep track of money that’s be passed from one person to another at the point of transaction and relatively easy to conceal wealth once one person has it under their control.

Third, what the heck is the government going to do with all that loot? If they tried to convert it to cash, they’d be flooding the market every year with millions of used goods and driving down their value. And the value of these items would be diminished anyway by the knowledge that anything bought at the Great American Garage Sale was something that the government had already decided once was valuable and worth confiscating - potential buyers would worry about the government just taking it back again come next tax day.

19

And not to mention the other half of the garage sale which consists of cast-off junk.

20

This solution seems framed around the idea that the problem with our tax system is that it is focused on money. If the focus on money is even a problem, it must be the least controversial aspect of taxation there is.

UncleBeer, what would the government do with property it seized? Could it still tax its use? It can’t turn around and sell it - who is going to buy from the government a 1% chunk of someone else’s property?

Perhaps the homeowner would buy it back, but then why don’t we just let the homeowner use money to pay the taxes in the first place.