I think we can all agree that it’s a bad idea for the government to take a bunch of junk that it doesn’t really want in order to sell it and give us back some money. The current system is much better-- the government takes our money and then give us back some junk that we don’t want. 
The asset tax is unworkable if only because it’s so easy to hide assets. The government can’t possibly afford to send an assessor to everyone’s house, looking for their secret stash of cash or jewelry. You can’t track every single purchase I make, I’ll say I spent all my money on lobster dinners and champagne baths, while squirreling away all that cash under the floorboards. It would also wreak havoc with the securities markets since people would try to avoid having trackable assets.
For me, I like the income tax, and would go with a flat tax, setting the percentage at something around our current top marginal rate, say 33%. Cut back on the number of wild and wacky deductions that make it so difficult to do your own taxes. Then, you just set the lower bound of when you start paying taxes such that the government brings in the number of dollars it needs for the year. The really poor pay nothing, the poor pay 33% on a small portion of their income, maybe 3% overall, and the rich pay 33% on almost all of their income, with few opportunities to deduct it away.
It’s a lot easier to track income than it is to track assets.
Cheesesteak - Geting rid of payroll taxes as well, right?
Philisophically, to me at least, taxing income is much worse than taxing wealth.
They tax my assets but not my liabilities? Yeowch! A mass trend toward renting would start. And if you allow net worth to be used instead of assets, then it just encourages people to accumulate anough debt to have a negative net worth and get money back from the government. (Ooooh, can I get 1% of my negative net worth in Area 51?)
A workable tax that has been implemented a couple of times in Venezuela is a tax on bank transactions. Every time money moves, the government keeps some of it. Very poor people avoid the tax by living of cash, but for bigger fish, it is impossible to escape it in any significant way.
Do you mean FICA (Social Security)? If so, the rate would probably have to be higher than 33%.
I dunno, it really isn’t that hard to determine my assets. I have homeowner’s insurance at the replacement value of my house, garage, shop and storage sheds; the value of the property with and without improvements is on file with the local county assessor’s office, and I pay license plate fees every year for my vehicles based on their estimated value. It would be easy enough to subtract my mortgage from the value of the property to determine my actual property wealth (I do resent the hell out of having to pay tax on a debt, frankly) and dun me a percentage of that. Assets can include retirement funds, savings and checking accounts, investments and so on. At least it would be a true tax on wealth.
I’d be in favor of a national sales tax (5%) of all transactions. When you file your federal income tax return), you get rebated your excess payemets (20% of all income). This way, you catch the following groups who pay no taxes:
-illegal aliens 9who work under the table). if they don’t file a return, they get NO rebate).
-business owners 9who take minimal salries but huge expense accounts)-again, they wind up paying
-the Mob (cash business)
-drug peddlers (who will forfeit rather than filing self-indicting returns)
-the very rich (who escape taxation vis the ownership of tax-free bonds-like the Kennedy family)
-corporate thieves 9like the Ken Lays of the world)-they cannot escape the sales tax.
Plus, the government could reduce welfare payments, as they learn about the welfare recipients who seel drugs
Yes, and Medicaid as well.
True, the Mob will pay a 5% tax on most of the stuff they buy with cash, but they still won’t be taxed on the stuff they sell, which mostly are under the table. Plus, you’re increasing the incentive to broaden their trade in untaxed goods.
You are right-but at least you would get they 5%. currently, the Mob/mafia pays nothing-no state or Federal taxes on the money iut extorts, on the profits from loan sharking, on the profits from prostitution, drugs, etc. And, if they were so foolish as to file for a rebate, you’d be able to nail them!
The first thing you have to do if you are going to establish a tax system is to determine the purpose of the tax. In the U.S. The income tax is historically progressive. We have seen that this obvioulsy doesn’t work but why? The answer in my opinion is the interference with the system by those who pay the most and their dissatisfaction with that privilege. Witness the estate (death) tax. Here is a tax paid by less than 2% of the population, the wealthiest 2% in the entire country and yet Congress is constantly considering and reconsidering the abolition or extension of it. Now reconsidering past positions is not a bad thing, but if we don’t know what our purpose is in establishing a tax it is hard to get a good handle on the merits and fairness or unfairness of it.
I always figured the purpose of taxes was so the government could obtain enough money to give us all the things we collectively insist they buy for us. The idea of making taxes progressive is independant of that purpose and is based on the general principle that people who have more money tend to be people who have more money. And estate taxes are based on the idea that dead people generally don’t get a lot of use out of their money anyway - personally, if the government was willing to put off my taxes until after I was dead, I’d be in favor of it.
A national sales tax is a very very bad idea for several reasons.
The transition issue is imsurmountable.
You would see people start using cash instead of credit cards to avoid the tax.
The sales tax rate would have to be north of 20% and as high as 34% to cover our budget.
People would make all their large purchases in another country.
Acouple of other points:
The AMT eliminates the value of municipal bonds pretty quickly.
Really wealthy people earn more in investment income (the stuff you wouldn’t tax) than they spend (the stuff you would tax) and you would effectively reduce their tax rate.
The national sales tax is generally another contrivance of the same people who brought you the elimination of the estate tax.
Well, progressivity in taxation is 2 parts “tax the people who can afford it” and 1 part “tax the people who benefit the most”
The estate tax is just as concerned with dynastic accumulations of wealth as it is with the idea that you can’t take it with you.
Individual tax reform tends to focus on one of these questions:
- Which groups should pay less?
- How can we make it so we all pay less?
The OP is attempting to address #2 by changing from an income-based system to a wealth-based system. But the only way to reduce taxes for everyone is to either:
a) Reduce spending in general
b) Reduce inefficiencies in the tax system (effectively a specific type spending reduction)
I think it is agreed that seizing assests does not address (b). And I agree with others that the best way to address (b) is to simplify tax codes for individuals to the point that filing a tax return is unnecessary for the majority of people – perhaps 85%.
But is there a lot of bang-for-the-buck in increasing the efficiency of taxation? The IRS’s budget in 2006 was $10,679,261,000. The entire US budget for that year was $2.6 trillion. Thus the IRS represented 0.41% of the 2006 budget. Even if you able to eliminate the entire cost of IRS (which supports more than individual tax), you would save about $82 per return (using 130,728,360 returns from 2003.
Obviously I have greatly simplified and probably missed a bunch of important factors. But unless my math is off by an order of magnitude, it doesn’t seem like changing taxes is the first place to optimize. I suspect optimizing spending is a lot like optimizing computer code: you start with the biggest spender and work your way down.
I guess I left out other downstream inefficiencies that occur as a result of the tax system. There is the cost of filing your taxes (in both time and money), the overhead of the supporting industries, and of course, all of these factors over again for the state income tax.
But I would think there would be equivalent factors when optimizing the Department of Education or Department of Defense by the same amount.
Correct, the flat tax concept only changes the way we pay federal income tax.