In CosmoDan’s scenario they would owe about $2,900 under the Federal income tax, and less if they had mortgage interest or other deductions that exceeded the standard deduction. Like most of the working and middle class, they would pay substantially more in FICA than in income tax. Of course if the money was from interest, capital gains, or dividends then they would not be subject to FICA and would have an effective 4% tax rate which is lower than **CosmoDan’s ** non-revenue neutral, pulled out of his ass tax rate. I’d love to see the chants at the next Tea Party rally: “Let’s pay higher taxes and make the deficit worse, pensioners don’t need the money except to pay the hearse”. Followed of course by “Wall Street pays too much, let’s use the middle class as a crutch”.
ETA: wrong quote
That can’t be right. If it were, then a bunch of rich people would be setting up phony grass root organizations to advocate for a flat tax. 
I don’t want Republicans to lose, I want Republicans to stop coming up with stupid ideas because there is always a chance that some of those ideas become law.
In exactly what way is it an absurd number? There are countries right now using flat tax that hover around 20% the interesting part is as prosperity grew the tax rate was able to be lowered for everybody.
Now you’re putting words in my mouth. Don’t bother. I’m proposing a different tax structure not opposing any form of progressive tax. Have you forgotten the title of the OP?
I’ve provided links and you haven’t mentioned them. I just provided another. If you have anything to offer in the way of actual discussion please present it. Your blanket dismissal and assertions without discussion aren’t very interesting or informative.
[QUOTE]
You mean it’s not absurd?
I’d want to see a more independent source. I can’t imagine that a $6,000 tax bill for a family of four earning 70,000 a year is that huge a burden. Of course there are lots of other factors to consider but the single issue under discussion here is the tax system.
I guess my point was that it is ridiculous to compare a tax system used in a country with a population that is about half the size of Brooklyn to a tax system for the largest economy in the world.
The flat tax is largely used in former Soviet states, their ability to reduce taxes has more to do with their economic growth (which most people attribute more to their conversion to capitalism) than their tax structure.
In post 202 you say: "Our current tax system is complicated to the point of being ludicrous. A flat tax makes it very simple for anyone with basic math skills to figure it out. "
Maybe I read too much into your statement.
10 seconds of Googling showed up that Estonia has a flat tax of 22% and a VAT of 20% and a social tax of 33% paid by the employer and a 2.8% unemployment tax shared equally by the employee and employer.
ETA: just a word of advice, if a well known conservative says something just assume it’s a lie until you can confirm it otherwise.
ETA 2: and Hong Kong has graduated tax rates.
[quote=“cosmosdan, post:266, topic:537416”]
It’s not absurd so long as you also do not eliminate payroll taxes or corporate taxes. As long as we’re only talking income taxes, I’d say 20% is in the ballpark.
As far as a more independent source, I’m going to link for like the fifth time in this thread to the CBO study. Here. A $70,000 income will put you right between the middle and fourth quintile. If you go to the second table on “Effective Individual Income Tax Rate,” you’ll see that the average rate paid would be between 4.7% and 8%. For a family, the number would be on the lower end, and for a single person, toward the higher. Let’s call it 5% of $70,000 pretax income, and that would come out to be about $3,500 in income taxes as an average tax paid for that income level.
I’ve seen that written several times. Would someone please demonstrate how that is true? What are we considering the middle class?
And Latvia:
That progressive taxation is good is essentially a value statement, not a fact that can be demonstrated. Rich people should pay higher rates than poor. Why? Because it is fair. If you don’t agree, fine.
I find it very strange that you respond to that statement with a Cato screed against “double taxation.” Can you demonstrate why double taxation is wrong?
I get double taxed all the time. My income is taxed, then my purchases are taxed, then my property is taxed… There’s nothing whatsoever wrong with the latest conservative boogeyman, double taxation.
How would a race to the bottom be good? Do you still think that starve the beast tactics can work?
Weren’t you arguing that people will take their million dollar jobs and move to low tax rate jurisdictions and therefore we should reduce our taxes?
You mean like America during the 50’s and 60’s? Aside from the one extreme poster who thinks 99% tax rates can work, I think most posters are talking about returning to Clinton or early Reagan tax progressivity.
Where would you make the threshhold because most social security recipients? We currently exempt social security from income if there is less than $25K in “other income” The overwhelming majority of social security recipients fall into this category and do not pay taxes on their social security income. In fact the average social security check of $1000/month accounts for about 40% of the average retiree’s total income. Where would you draw the line?
Medicare is even more of a problem because the retirees who can afford health care without medicare are vanishingly small. Where would you draw the line in medicare?
I’d also like to point out that none of your suggestions are particularly politically viable but lets ignore that and see what sort of society you want to live in.
Social security is a form of Ponzi scheme. Todays contributors are paying last generations contributors. Once you privatize social security for young folks, we are left with an almost immediately insolvent social security trust fund and the governemnt must either wither cut benefits almsot overnight or go deeper into debt.
I would point out that social security is largely paying for itself so unless you intend social security to be a revenue generator for other budget items you wouldn’t raise the retirement age by very much.
A family of 4 must make less than 27K/year to be leigible for food stamps. We have been cutting these social safety net payments for decades, the growing income inequality has put more people on the foodstamp rolls but I’m not sure I would call the benefits particularly generous. What benefits were you talking about?.
Yeah this never made much sense except to the extent that it promoted home ownership, which has some societal ebenfits but not nearly the level of benefit that the National Association of Realtors would have us believe.
I generally agree that we should get rid of about 10,000 pages of special deductions. But what if that means our entire agricultural industry moves to Brazil, thats OK with you? What about the R&D tax credit? What about the oil and gas depletion regime? What about special tax treatment for insurance companies (life insurance death benefits are not taxable and insurance companies get to take a current deduction for the present value of their insurance liabilities)? What about accelerated depreciation for small businesses? Should we elminate tax exemption for municipal bonds?
Aside from the fact that school vouchers are generally a stupid idea, the Department of Education spends about 60 billion/year. Two thirds of that goes to subsidize colege educations in the form of Pell grants, work study and guaranteed student loans but lets just assume that people would prefer the vouchers. There are about 75 million school age children in America. That means a voucher for $800 for every student in America if we get rid of the Dept of Education and access to college educations by a pretty large segment of the population.
I agree. We need a single payer system to reduce societal health care costs, especially medicare costs.
Maybe, because we are still at 10% unemployment?
OK we do all that stuff, how much does that save us? I don’t see anywhere near enough to balance the budget never mind cut taxes.
You can’t do that without telling me exactly where you cut. That’s just another way of saying “pay for it with spending cuts” without identifying the spending cuts.
Its not an assumption. Its what has happened through our history. rasise taxes and you get more taxes, lower taxes and get less taxes. This may not hold true at the extremes but in the meaty middle its true (e.g. Tax increases during Clinton’s administration (along with significant spending cuts) resulted in the only budget surplus we have had since Reagan took office).
Double taxes would be if you got taxed on a purchase and then taxed again on the same item every year as part of a luxury tax (like in Virginia). You might not have a problem with that (as you say, it’s all a value statement), but that’s why I never lived in Virginia…I thought it was ridiculous and unfair. Different strokes.
Well, as you say, that’s a value statement that depends on how one looks at such things.
-XT
I can cite you a list 100 pages long that should not be handled on a global basis but I can also identify a few things that seem to amke more sense to handle on a global basis. I mentioned three: financial regulations, environmental regulations, tax coordination,
I’m pretty familiar with Asian economic history and I’m not saying these were command economies but these coutnries had HUGE amounts of government interference in economic decisions. Japan was famous for their various ministries that basically told companies what to do. China still has huge amounts of central planning. Korean real estate development is all done centrally, Taiwan didn’t naturally become and almost unnatrually export oriented as it had become, Singapore is one step from being a fascist state, I don’t think these economies were more free market than we are here and yet they seem to have done just fine.
But like I said I think that the free market is (on average) better for consistently creating wealth and innovation over the long run than any other system out there. If that’s not enough for you and you want to say that free amrket economies ALWAYS do better than less free market economies then fine but you would be wrong.
fair enough.
nope.
Isn’t it often a matter of who is taxing you and where that money is going?
I think the point may be that simplifying, limiting deductions and special cases, not using tax code to court votes and reward allies, might create a more free and more prosperous economic picture. I’d agree that simplifications can be put in place while maintaining a progressive tax system.
The question is how tax systems stimulate or slow the economy, encourage business and growth. I wouldn’t claim to know that answer.
How are you defining consistent? The welath held by the top 5% has gone from 50% to 60% from 1989 to 2001 and my understandign is that wealth concentration has accelerated since then.
http://solutions.powersimsolutions.com/Ranking/HistoricalPerspective.aspx
I don’t particularly mind increasing income disparity if everyone is doing better. IOW, I would rather have people unequally rich than equally poor. But, thats not what we have been seing recently. The rich have been getting richer and the poor have been getting poorer. Its not like we’re vassals or anything but we are experiencing concentration of wealth and incomes.
Modern liberalism’s stances on Medicare and Social security were legislated between 70 and 40 years ago. There is nothing modern about modern liberalism but your notion that it is something new.
Universal health care and public schools strike me as things we can’t afford NOT to provide.
The US had marginal tax rates between 70% to 94% during the 50’s and 60’s our economy did fine. We did not suffer from a lack of good CEOs, good lawyers or good bankers. With that said, there was a LOT of tax planning.
Yeah cuz tax rates are what all decisions are based on. pfft.
Other than universally mandated health care, what social programs do we have today that we did not have 40 years ago?
I will refer you back to our experience during the 50’s and 60’s when marginal tax rates were obnoxiously high, we seemed to do just fine and we seemed to have decent CEOs. Perhaps if the rewards were not so great that one year’s compensation could make your family wealthy for generations, there would not be the temptation to engage in the type of behaviour we have seen in the last couple fo decades.
Well if the republicans would stop cutting taxes for the rich,w e wouldn’t have this whipsaw effect.
He’s talking about marginal utility
Tell me what the billionauire hedge fund managers produce? Tell me what the Credit default swap traders at AIG produced? What did the Synthetic securities bankers at Goldman produce? Did Frank Mozzillo really produce billions of dollars of value when he ran Coutnrywide?
If you have afull time job making less than $20K/year you are probably producing more than take home, if you make $100,000/year, you probably produce that much, if you make $1,000,000 you MAY be producing that much value but if you are making much more than that, your income is the result of leveraging capital or labor, that capital or labor is doing much of the production and you are getting much of the value of production.
Professional athletes and movie stars fall into this category and there you have an argument but there are a thousand people that can do what Fabrice Tourre did, he doesn’t have some peculiar talent.
And all rich people get their money like this?
I’m going to guess that I personally know more investment bankers than you do. They are as a whole, very smart and very hard working but they do nothing that a lot of other people couldn’t do but the dollars are so large that they make astronomical amounts of money by breaking off a little crumb from the deals they work on.
Not for much longer. The American standard of living cannot be supported by capital much longer when the cost of labor in places like China are so cheap. But that doesn’t really address your contention that everybody basically deserves what they earn.
Okay, but the tax rate changes hardly cause churn, and it seems that you are willing to change them every year anyway.
Not necessarily. If you are opposed to the tax code being used to encourage or discourage behavior, then maybe. But if you favor the government encouraging saving, or encouraging sending children to college, or encouraging home ownership or charity, then no. The way we do it today, there is one form and one time that you apply, as it were, for your home owning or college incentive, and it is all done on one form. One government agency processes everything. Isn’t this simpler than requesting your mortgage incentive from one agency and your college incentive from another.
And the incentives are going to happen. Call it a high minded attempt to do good, or a low minded bribe to constituents, but it will happen.
Look, assume that the government needs a certain amount of money and that the flat tax is revenue neutral. You make sure that the poor get a break, fine. Who else gets a break? Unless you tax the middle class at the same average tax rate as the rich, which would raise their taxes a ton and not be revenue neutral, you clearly cut the taxes on the rich and to be revenue neutral increase taxes on the middle class. That sounds like a terrible idea to me.
Nothing to do with year to year changes. The incremental value of making a dollar diminishes with each dollar you make, this is called the marginal utility of money. You recognize this yourself - you don’t want to tax the poor because the value of each dollar they have is very high. If you make $30K, getting an extra $1k is very significant. If you are Bill Gates it isn’t worth noticing. I got an unexpected $1,000 bonus, it was cool, and I think I bought a book to celebrate (for $10) but it went into my investments and was hardly noticed. If you or I won the lottery it would change our lives - if Gates won the lottery he’d just give it away.
Similarly, a tax of $1,000 extra would be a killer for the poor, a pain but not a disaster for me, and hardly noticeable for the rich. If we want to be fair we need to adjust the tax rate to more or less match the marginal utility of the money to each income level. We can’t do this perfectly, but it is the only way to be fair.
Of course I understand that marginal utility must be less than linear for this argument to work. It is.
Certainly the tax rate can be adjusted based on spending and national income; what we are discussing is how to distribute taxes for a given tax requirement. I’m paying a higher percentage in tax now than when I started to work, but I feel it less, so the higher percentage is fair to me. During the bubble I shot into the highest bracket and I wish I was there still.