(my bolding in your quote)
Minor quibble - Hall and Rabushka are at the Hoover Institution on War, Revolution and Peace at Stanford - not the Heritage Foundation in DC (though I am sure many of them have privileges at both locations).
A flat tax on unimproved land value, supplemented with taxes on extraction of natural resources (oil, minerals, etc.) and pollution (cap and trade, or whatever). This would replace most taxes, but maybe not the gas tax or the estate tax.
Yes add an inflation adjustment to basis. We don’t have to use an abacus anymore so the math is fairly simple. If you wan to limit this to “hard” math to returns over some threshold amount, fine by me.
I agree
There is enough progressivism in the way benefits are paid that we don’t need progressivism on the tax.
Yes, that became clear to me with the TARP bailouts, as well as farm and oil subsidies
I think he was just talking about Social Security and Medicare.
I have, I think, a pretty simple but also fairly comprehensive tax plan. In my view, the biggest problem is that our revenue and spending don’t match. If we want to have a balanced budget, I think that we need to tie the cost of various government plans directly into the tax system. I’ll explain how I’d approach that in a second.
The other problem, I think is that our tax code is just way too complicated and it is trying to do too much for the wrong reasons. I think there is only one purpose for taxation, and that is to raise money for the government. Trying to use taxes to do social engineering (encouraging or discouraging behaviors) or as economic stimulus or as punishments is ultimately self-defeating. If we want to engage in social engineering, without addressing whether or not we should, rather than complicating the tax code, I’d rather just have a plan to tax additional cost for it then send some sort of rebate rather than give all kinds of tax exemptions so that we can see the actual cost and actual benefit independently of the tax system.
Personally, I would prefer a consumption tax over an income tax, but that adds a whole lot of additional complexity in determining adjustments, so I’ll just sort of run with the income tax idea. However, the same basic principle can be applied to almost any sort of taxable revenue, so regardless of the system, it works.
So here’s the basics of how the system works. Simply put, absolutely every bill and every program the government runs must provide an estimated budget for a given year. Those estimates are compiled by the IRS to create a single cost of government value. That cost of government value is then compared to the taxable revenue (either estimated income by individuals or estimated consumption) and you get an effective tax rate.
Before I mention how to apply the effective tax rate to your adjusted income, I do want to mention the importance of this rate. This rate will be what should be socialized as far as cost of government and how we should compare how various different services and programs will adjust taxation. The key point is that this value ties directly to the cost of all services and programs, so if the cost of government goes up, this rate goes up, and if it goes down, this rate goes down. Thus, you can never increase spending without increasing taxes or cut taxes without also cutting spending.
Now, how we apply the effective rate is using what I’d like to refer to as a utility adjustment. By this, I mean that individuals should be taxed as fairly and as simply as possible, but a flat tax is regressive. Utility is a measurement of the value of a commodity, in this case money, based upon how much it’s worth to an individual. For instance, someone making $20k will see $1 as more valuable than someone making $200k, hence why a flat tax is regressive. Thus, individuals should be taxed based upon the utility of their money rather than on the straight up value. Generally, the utility of money grows logarithmically. Further, the utility of money isn’t just based upon how much of it you have but also cost of living, which is most greatly affected by where you live. For instance, taxing someone who makes $100k living in New York City at the same rate as someone making $100k living in Omaha, Nebraska isn’t as fair because the cost of living is drastically different.
Hence, we generate a formula that will adjust one’s income. First we adjust based upon where you live using actual cost of living data normalized to the national average. Then that gets fed into a value utility that adjusts the income logarithmically. Then, once we have the adjusted income, we simply multiply by the effective tax rate and that’s how much tax we owe.
While that sounds a little complicated mathematically, and it is a little bit more complicated than a graduated scale, it means the tax rate system is completely fluid. Your tax return will only have 2 inputs other than personally identifying information, how much you make and cola adjustment based on where you live. The cola comes from a chart, and all you do is plug those two values into the formula and you get your tax rate. Your entire tax return will be half a page, can be done in 5-10 minutes max, regardless of how much or how little you make, and is about as fair as it can reasonably be.
There’s some other really cool stuff we can do with this sort of system. Let’s say, for instance, that our estimates are off one year and we have a deficit or a surplus. The solution is simply that we roll it into our estimate for the next year by adjusting the effective cost of government up or down when calculating the rate the next year. This means, if we start running a deficit, it will automatically raise tax rates accordingly and if we start running a surplus, it will automatically lower rates.
The other really cool thing about this is that every program and service is tied directly to a portion of the effective tax rate. This means if people say that taxes are too high, we can identify how high they are (say it’s 28% and people want to lower it to 25%), then we HAVE to identify programs and services that total that 3% and they have to be cut, we can’t just arbitrarily lower taxes or raise spending. Thus, when we want to lower taxes, we start talking about what really matters which is that we don’t feel like we’re getting our money’s worth and we can debate what things can go to make that happen. Similarly, if a new program gets instituted, everyone knows if it will raise their taxes and by how much and we can discuss whether or not that raise in taxes is worth it.
The other cool thing about this is that it takes out the whole discussion about whether or not we’ll increase tax revenue or not by raising or lowering taxes and whether taxing or spending need to go up or down, because they’ll be directly tied together. We shouldn’t even care about whether we’re getting the maximium amount of tax revenue, our concern should only be in getting as much tax revenue as we need to fund the government as fairly distributed as possible.
Flat tax rate of 25% with a $25,000 exemption. No deductions and all income treated the same.
You know what tax I hate more than anything? The personal property tax on my car. It’s my car. I own it. I bought it and I paid taxes doing so. I registered it and licensed it and all those were taxes. And you, the government, are going to force me to pay you money for that same piece of property every single year?
So your suggestion is that the government now go into my bank account to tax me year after year after year on the exact same funds? Funds that you think I’m sitting on but that I’m actually trying to earn interest on (or would if your suggestion didn’t make me go in the hole each year)?
Yeah. Fuck that shit.
I would institute a progressive tax structure with increasing percentages for higher incomes. Those below the poverty line will pay nothing, and income tax brackets will be done marginally, meaning that you pay taxes for only the income exceeding a certain amount like what we have right now
All types of income would be taxed, no loopholes for corporations, no different tax rates for investments, and if you even have an offshore account, you will pay an extra 100% on top of your owed amount (doubling in taxes what you owe) unless you report it and how much you are squirreling away
I would keep the estate tax and gift taxes, because we can’t have people giving away money and assets to avoid taxes. Besides, if its inherited or a gift, you didn’t earn that anyways, so having that amount taxed is still extra money for you. So don’t complain, pennypincher 
I don’t really think the government should be encouraging people one way or the other to get married or have kids, so no tax benefits for marriage. I will, however, allow lower taxes for kids because they can’t work and is a net drag on the family. So too shall age and infirmity count for differing tax rates on the other end of the age spectrum
Finally, no exemptions for religion. They shouldn’t have been exempted in the first place and shouldn’t be now
This is very close to my plan, except I would convert the exemption into a benefit of, say, $10000 and radically simplify the expenditure side of the budget at the same time.
All income (earnings, investments, dividends, capital gains, inheritance, winnings) are taxed at the same rate R. Get rid of all exemptions, deductions and payroll taxes.
Everyone gets the same benefit, B. Get rid of all other forms of benefit (food stamps, unemployment benefits, welfare, government pensions, housing subsidies, child benefits). B is adjusted by age for children.
Your tax bill is:
T = RxI - B
If it’s positive you send $T to the government, if it’s negative the government deposits $T in your bank account.
Congress has two dials to turn: increase B to make the code more progressive, increase R to raise more income.
While you are at it, get rid of corporation taxes and replace with a carbon tax.
Social Security payroll tax would be exactly as progressive as the income tax, which would be a whole lot more progressive.
Your plan isn’t very simple. Its simple in the sense that it is simply some sort of progressive floating rate balanced budget amendment but it allows for almost tax predictability. The problems with our tax code isn’t the tax brackets, right now its mostly all the tax expenditures.
Do you understand what happens to a weak economy with high wealth disparity on a consumption tax?
Most wealth taxes envision some sort of minimum threshhold before it is applied. Its not like a real property tax where you pay from the first dollar of value. The threshhold is usually some amount that people think is enough for a dignified retirement. I don’t particularly like it but its not like the car tax in Virginia.
What you describe (except for the stuff I excerpted above is pretty much what we have now.
We already have pretty stiff penalties for non-discolure of foreign accounts, Its called FBAR. A few years ago, the swiss banks agreed to divulge the names of US account holders and IRS immediately instituted an amnesty program for folks who wanted to come clean before they were caught. It is this amnesty program that folks think Romney might have participated in. That is why everyone wants to see his 2009 tax returns.
No marriage and kids means we eventually lose our middle class because middle class folks don’t immigrate here nearly as much as the folks at the top or the bottom of the spectrum. We have to grow our population organically.
How about to the extent they engage in charitable activity? Can we make them tax exempt for that purpose or should we discriminate against religious charities the Salvation Army, Catholic Charities, etc.
So you like Milton Friedman’s tax plan.
So we only tax industry in this country and you leave the folks on wall street alone? Yeah THATS a plan for economic growth
We may have it on paper but its not working. Corporations still pay little taxes, and Romney can get away with paying 13% while I pay much higher on paper and simply because more percentages of my income goes to things like food and necessities like that.
We wouldn’t have to lose our middle class if the tax structure was more fair. Right now it feels like we give breaks to things like marriage just to keep our middle class afloat. Ideally, marriage shouldn’t matter in terms of tax structure, anyone should be able to get a job that pays a decent wage. I’d raise the minimum wage too, but this isn’t the right topic for it
Don’t say discriminate. Its not discrimination. Rather, it is removing an unfair advantage that they’ve had. Its leveling the playing field. Just because they’ve had this advantage doesn’t mean its right, or that it should continue. Charities can be in a different tax plan than everyone else but there should no longer be an assumption of tax free status if its a religious organization. Unless the Mormon Church does actual charities, non-religious ones, then they get taxed like everyone else.
Get rid of the mortgage interest deduction. Why should the government be in the social engineering business of promoting one type of housing over another? It’s the type of intrusion / overreach conservatives rail against…the tea party types should be leading the charge to eliminate it.
I like your ideas and want to subscribe to your newsletter.:D:cool:
Really, I’d say about the same. Income tax- up the highest marginal rates. All taxable income is taxed the same, no benefits from those that gamble on the stock market.
Get rid of Misc Itemized deduction, Medical, and Casualty losses. Just taxes and Home Mtgt, which is capped at one home and say $30000.
No Moving expenses, pretty much most other weird little deductions gone. Increase std deduction by a buttload. No More EITC.
This would mean those making Min wage would pay nothing but Payroll taxes, and could file a 1040EZ.
Estate tax- I’d exclude a Primary residence up to $1MM. Other than that, all else is taxed after $1MM.
Soc Sec? About the same, but raise the age by .5 year for those under 50, 1 year those under 40, 1.5 years those under 30, 2 years those under 20. The cap would increase by $10K a year for 5 years then no cap. But a cap would continue on benefits.
Anyone with a Taxable income over $1MM would have a negative Credit for Soc Sec paid to them, in other words, they’d have to give it all back. This would phase in, of course. This would be more acceptable than a means test, and $1MM in Taxable income is a LOT.
It can be phased out, but not eliminated for those who bought their homes based upon that deduction.
I’d make the whole thing just as complicated as all hell, with large differences in outcomes if people follow the rules correctly or don’t.
You drive it every year, right? You cause wear & tear to the roads every year, right? I’d accept that such taxes would have to go toward road maintence, sure.
That 13% rate is almost based ENTIRELY on the capital gains rate differential and the current treatment of carried interest, which is a different rate for investments, one of the exceptions I highlighted from your post.
Like I said encouraging marriage and kids is crucial for a vibrant middle class. Whether you like the politics of it or not, the family unit provides about the best platform we have for building middle class incomes and raising kids that will become middle class citizens. So encouraging families (or at least not punishing them), is not a bad policy to follow if you are going to inject that sort of policy into the tax system.
So can the “foundation for teaching kids how to use condoms” be tax exempt? How about universities? Seminaries?
Get rid of the mortgage deduction and watch home prices drop by 20% across the board. You think our current recession is bad, knock home prices down another 20% and see how people feel about spending. We can probably lower the limit from $1,000,000 to something closer to the conforming limits of ~$400K in mostm places and up to ~$700K in high cost areas without too much damage.
That includes deductions and credits for alternative energy rights? We just convert those into annual appropriations, rights?
The EITC was a trade-off made by Clinton and Gingrich during Welfare reform. Would you increase annual appropriations to welfare to patch the gaping hole that eliminating the EITC would leave in the social safety net?
WHY specify the TYPE of asset that gets excluded. What if the dearly departed lived in a rental apartment and had a million dollar baseball card collection they wanted to leave to their grandson? Why does it have to be a primary residence?
You probably don’t need to cap the benefits. The benefits are so progressive that you would have to live to 100 just to get your money back without interest. So someone who made an average of $10 million might get a $40,000 check from social security every month but they would have put so much money into the social secuirty system that they would have to live to 100 just to get their contribution back.
I am against means testing social security, it changes social security from a social insurance system to something closer to welfare.
LOL. Gotta love your consistency.
I’m pretty sure that there is no movement towards earmarking the car tax. Right now you only pay about a 1.5% tax on the first 20K of value on your car and then 4.5% after that. Business use cars get no relief on the first 20K. Its main purpose is to raise revenue, not to defray cost of wear and tear on the roads, that is what the gas tax is for.
I am willing to consider Alt Energy Credits. Actually, maybe a Gov’t rebate might be better instead.
The EITC was enacted in 1975. And yes, there’d be some increase in other payments. But it’s rife with tax fraud and the recipients get a large block of cash which they usually dont spend wisely.
Like I said, you get $1MM PLUS a $1MM primary residence. And we exclude that as often the familiy is still living there.
That is why there’s no means testing in what I suggested. Already Soc Sec become taxable if your income is high.
I think in CA and several other states it already is.