Just out of curiosity, I’d like to know where you all stand on taxes. Personally, I would like something like the FairTax. The reason for that is because it would take care of almost all of the fiscal issues faced by gay people. But there are plenty of other options out there. Flat tax, FairTax, leave it as it is, tax the rich more, tax the rich less, no taxes!
I know what the people at my other blog think, and it was a pretty good conversation (both in this thread and in many others.) I’d like to know what you think.
**Update: Also, uhmmm, VOTE!
dslak
I’d like to see a VAT on consumption and the end of the income tax. The problem is that it’s a big mess to avoid taxing those in poverty with a VAT, and I’m not quite sure what to do about it.
dslak
Actually, I just looked at the FairTax site, and it seems similar to what I have in mind. Rather than exempting businesses from paying taxes on purchases however, I would opt for refunds for businesses after-the-fact.
In either case, given that this is the US, I worry that a large increase in sales taxes might lead more Americans to turn to the black market for many of their goods.
Decided FenceSitter
Ideally, I like the idea of a simpler tax code, and the idea of a sales tax appeals to me. However, I *know* I’m not enough of an accountant/tax guru to track the unintended consequences.
Consumption is the easiest thing to tax; however, it will punish the poor more than the rich. There are ways I’ve seen to get around that; such as not taxing essentials such as food/clothing until it goes over some amount such as 100 dollars.
However, you’ll get into a case where the internet will do an end run around this unless you want to tax interstate commerce. Or if not that, at least for the wealthy you’ll bump into the same thing that happens in states next to sales-tax free states, those with the means do their purchasing in the neighboring state.
Taxing income has the similar income of just moving your finances offshore. But I *like* the idea of an income tax, because quite honestly, and I say this as someone who is making more than his parents made (though they did so in a place with a far lower cost of living, so relatively I’m making less) that I benefit more from the services; I need the police more, as I have more to guard; I need the fire protection services more, as I have more to protect; I need the well educated more, my job depends on other well-educated people.
And honestly it is like that, all the way up. The more you earn, the more the infrastructure benefits you, so the more you should give back to the society that has provided the infrastructure to get you where you are. Even if it hasn’t helped you directly; unless you are doing all your work by yourself and don’t need educated employees, perhaps then you don’t need the public education infrastructure. Then again, you also need a market to sell your goods to.
Infrastructure is the one place where a rising tide does raise all boats.
But what do I know?
Jay
The so-called FairTax is just a stealth tax cut. The sign of the intellectual dishonesty of the FairTaxers is that it is represented as a 23% gross receipts tax rather than a 30% tax, which is what it is if you compute it the way normal people would. (That is, 30 cents on a dollar of goods.) When you get to a 30% sales tax, you are getting into serious evasion territory, so it would probably have to be somewhere in the forties to actually be revenue neutral.
And that’s 30 cents on *everything*, so if you buy a new house (and maybe a used one, I can’t immediately tell) you have a 30% markup, so a $250K house just cost $325K. Of course, people won’t suddenly pay a 30% markup on a house, so that means that if you own a $325K house, you just lost $75K in equity like *that*.
And suppose I have some serious medical bills, which my insurance covers. Like say, $500K or so. Is my insurance suddenly going to cover this 30% surtax as well, or am I on the hook for $150K in taxes that my insurance won’t cover?
I’m not such an obsessive about inheritance taxes that I am willing to take on these things. Not interested, thanks.
louisms
Fencesitter has it right.
I make that point in every discussion about taxes in which I engage. Thanks, Fence, for saving me the trouble.
As for a mega-sales tax, aren’t you afraid of killing the goose that laid the Golden Egg? Anything that might tend to discourage consumption of consumer goods could mean trouble for our whole economic house of cards.
Michael D.
Maybe you just don’t know how the FairTax works.
All the hidden taxes on the wood, the doors, the lights, the cement, the shingles, the appliances, the electrical – everything – would be gone. In fact, those hidden taxes account for about what the FairTax would add.
That 275,000 house you’re talking about? It would still cost about $275k. As for your medical bills:
Which would lower the cost of healthcare proportionately.
John S.
I like the concept of the Fair Tax. Our present tax code as loopholes so big you can drive a tractor trailer through them.
Seeing as how the juggernaut behind our economy is consumer spending, it would make sense to attach a tax rate to that – a tax that cannot be avoided by an accountant’s trick. You buy somthing – you pay tax.
I also think marijuana should be decriminalized and regulated (taxed) by the governement. A friend of mine did his thesis at the University of Toronto on that very subject. The revenue assumption alone would be worth it.
jon
I say put in a 20% income tax with the first $30,000 deductable. Keep the Social Security and Medicare taxes. And the rate should apply for all taxpaying entities, whether they are individuals, corporations, or trusts. And all forms of income are counted the same: work, investments, winning at the track, lottery winnings, capital gains, and even inheritance. And no, it’s not double taxation to tax something when it was your dad, grandma, or geat uncle who paid for it and you just get it because of death. That’s income to you, so deal with it. But I think windfall income can be paid off over a few years (anything that goes over 20% of your normal income, since not all inheritances are liquid assets or easy to make so.)
Put corporations and individuals on the same page, and the tax code becomes transparent as hell. Just make sure the same rate applies to both and it will stay simple, too. And that’s fair, unless you get all your income from investments and trusts. For them, it’s unfortunately fair.
douglasfactors
How does that help if you bought your house before the implementation of the FairTax and already paid the hidden taxes you describe?
RSA
One of the things I’ve had a hard time figuring out (I’m no tax expert) is where FairTax fits into the list above. That is, presumably FairTax will shift the tax burden around, or it wouldn’t be worth doing in the first place. The material at the FairTax web site, however, indicates that everyone’s taxes will be lower under the the system, significantly lower for most. Call me cynical, but I simply don’t find this believable. What I’d like to see is the overall savings produced by the FairTax system, say, for a given year, broken down by income quintiles, and then an explanation of where that amount of money is being wasted under the current system. If the argument is that the FairTax will boost the economy sufficiently to produce the savings, color me unconvinced.
Michael D.
Why would that matter? Six of one, half dozen of t’other. You can still sell the house for $250,000.
Admittedly, I could be missing something in what you’re asking. But you will still be making the same money on the gain on your home. And if you have owned it for less than 2 years, you WON’T be paying Capital gains. And, if you’ve rented it, you won’t be paying the CG either.
jake
I am in favor of any tax that makes the idle rich squeal for their mommas and accountants.
Or put another way: The less you do to earn your money, the more of that money you owe to the government.
bpower
See the rich? Tax the bollox off every last one of them.
glasnost
Flat tax, FairTax, leave it as it is, tax the rich more, tax the rich less, no taxes!
That’s deep, Mike. Really deep. Weave some more of that wonky macroeconomic smell.
All the hidden taxes on the wood, the doors, the lights, the cement, the shingles, the appliances, the electrical – everything – would be gone. In fact, those hidden taxes account for about what the FairTax would add.
You must be kidding, gullible, or a liar.
Or, I suppose, I could be gullible or deeply misinformed. But you’d better have a link explaining exactly what kind of hidden taxes you’re talking about and demonstrating in numbers that they add up to the equivalent of a 30% sales tax, because frankly everything I’ve heard from economists sounds a lot like Jay.
I mean, I may only have some old macroeconomics under my belt, but if the FairTax is going to be revenue neutral – right now we give away large chunks of our paycheck every two weeks. If you’re going to eliminate that and replace it with a revenue-neutral tax on goods, you’re going to see the price of those goods go through the roof. You may have more money to pay for them – but someone who claims that “getting rid of the invisible taxes will make the price stay the same even while adding a 20-30% sales tax” without a detailed macroeconomic analysis behind them must think his audience is stupid.
Personally, I think the consequences of making everything we could purchase much more expensive will lead to a serious slump in consumer spending and an economic crash. We need to return to fiscal confidence, but I think we’d all prefer a soft landing. No, thank you.
That doesn’t even get into the explosion of inequality the system would create. And I don’t believe any given bell or whistle would fix that without a lot of spadework behind it. And frankly, probably not even then.
Dougfactors’ point regarding the relative deterioration in price of fixed assets you already own is also relevant here.
Dennis-SGMM
That makes the assumption that the full amount of savings from reducing the hidden taxes would be passed along to the consumer. My guess is they wouldn’t. Everyone in the chain from the producer to the retailer would decide that there are sound reasons why they should raise their profit margins and therefore keep some of the savings for themselves. Prices might go down, but not anywhere near as much as they should.
You face the daunting task of getting various sectors to part with cherished deductions. I’m sure that the mortgage deduction, for instance, would be grafted on to this in the form of a rebate of percentage of taxes paid.
The marriage penalty would become a child penalty. Everything from diapers to college tuition would be taxed.
Finally, there’s the fact that this is strikes me as a regressive tax. Those at the bottom and middle spend most of their money on everyday items; food, clothes, shelter, transportation, medical bills, etc. If I have to buy a new refrigerator, it’s a bigger bite out of my disposable income than that of a wealthy person and the wealthy person is not likely to buy a refrigerator that costs much more than the one I buy. The amount that a wealthy person spends on everyday items is a smaller portion of their disposable than it is of mine. Less of the income of the wealthy is subject to taxes.
Rudi
In actual tax burden, the US is near the bottom in taxes. Forbes or Fortune had a article about aggregate taxes for most Western countries. Germany(and most of the EU)has a higher tax burden. They also have mass transit, the Autobahn and commie medicine.
Michael D.
There are detailed macroeconomic analyses of the FairTax out there, and I’m not going to explain it here because I’d hope you can use google.
But if you can’t find that information for yourself, then yes, you are stupid.
Dreggas
Quite honestly I prefer a progressive tax system. What we have now thanks to Bush is horrendous. I was reading the other day that some of the top billionaires (in this case Warren Buffet) were paying only 18% in income taxes. Whereas when I figure out my taxes they fall anywhere between 27.5% and 30%. This is complete and utter bullshit unless your name is Cheney, Bush, Murdock or any of the other top 1%.
Meanwhile there is a report out today that if you make more than 40k a year you are making more than half the households in this country. That, in this day and age, is just incredible.
Flat taxes, to me, are rather regressive. While everyone talks of equality in that system they miss the trees for the forest in not seeing that the poor schmuck making 25-30k can’t afford being taxed at the flat rate the way I could or the way the rich, of course, can.
I say fix the loopholes and repeal the fucktards tax cuts. If you make 50 million dollars a year you can afford to pay the 35% rate in taxes, I sure as hell can’t. As it is, most of your money you most likely made off of my labor to begin with.
rachel
And better Internet access, in many cases, although that has more to do with their governments regulating the telecoms than with taxes.
Mr. Sifter
I support a progressive tax rate.
Bob In Pacifica
Restoration of tax rates from the FDR era.
Gregory
someone who claims that “getting rid of the invisible taxes will make the price stay the same even while adding a 20-30% sales tax” without a detailed macroeconomic analysis behind them must think his audience is stupid.
The fact that they call it the “FairTax” pretty well indicates they think their audience is stupid.
Gregory
…And if you truly think the so-called “FairTax” will be immune to the kind of loopholes and exemptions that hav made a mess of the current tax system, they’re probably right.
Kynn
LOL, he’s been here less than a week and he’s already resorting to “I refuse to give you proof of my crackpot theories, go GOOGLE for them!” — which, as you’ll recall, was John Cole’s big argument (and only argument) as to why Juan Cole was really an anti-Semite.
Dude, in a few years, you’re going to regret using “logic” like this.
Kirk Spencer
Michael D,
There are a number of flaws with the fairtax plan. Some are endemic to universal sales taxes to the exclusion of everything else, others are specific to the plan. As some have noted, not least is the (to my eyes) underhanded misrepresentation the writers use in trying to sell it. Let me take each of these in turn.
Given I’ve written several thousand words on the subject, I could go on and on. Instead, I’m going to focus on one aspect of it – the one I think is most devastating.
It increases taxes the middle to pay for the high and the low’s benefit.
If you are poverty stricken, you get a tax rebate. (Ignore the flaws in the plan and stick with the intent – that you should not be taxed on what you need to survive.)
On the other end, you are not taxed (specifically, according to the bill submitted to the house every year for the past few years) on sales of investments. There are other “wealthy are the ones who do this” exemptions but that’s the one that’s most glaring. Buy and sell stock, no tax.
No, I need to add one more focus to the ‘benefits rich and poor’. Quite simply: what proportion of income do various levels spend instead of invest? Answer – the greater your income and wealth, the less (proportionally) you purchase. Add to this the simple escape clause that exists – if you purchase it outside of the country and import it for your use, there is no tax. Excepting the ‘out of country’ exemption this is a flaw in all non-progressive taxes. But with the fairtax exemption the poor are ‘saved’.
Under the fairtax plan, if your income is between 30,000 and ~80,000 per year, your overall taxes will go up. If your income is over $200,000 per year, they’ll go down. Between 80 and 200 is a grey line where “it depends” is the only honest answer.
dwetzel
As a flaming Liberal, I’m for balance. You can’t tax the investing class (ie rich) out of existence but if the middle class isn’t spending we’re also doomed. So you have to balance the tax code. The problem is we’ve been leaning on the middle class and giving the rich a free ride. It’s time to rebalance.
As a father, I’m for a very high inheritance tax (ie what the deluded and dishonest call the the Death Tax) over a certain amount. We’re not supposed to have a rigid class of landed gentry. Removal of the inheritance tax is welfare for the children of the wealthy. Sorry, but Paris Hilton should have to work. It would be better for her and better for the country.
As a taxpayer, I also think the code is too complicated. It’s really the loopholes. We should never have more deductions/special cases in the tax code than we have fingers to count them.
But I’m not impressed with the FairTax. It would have a negative effect on middle class spending and I really believe that would trash the economy. Plus the wealthy have an easy way to avoid paying the tax (shop out of the country) that would further hurt the economy. And it completely screws the poor even if you give them money back in April, that doesn’t help when they need food in March.
And if you think that businesses are going to drop their prices because of FairTax, well, that’s just delusional. The oil companies made record profits last year, did they cut prices? That would have to be written into the FairTax law — businesses would be required to drop their prices by law. Yeah, that will happen too.
I’m also very concerned that the FairTax people won’t be honest with their proposal. They are LYING about the 23%. The way people will pay the tax, it’s 30%. If they’re LYING about the rate what else are they LYING about?
ImJohnGalt
Well-crafted consumption taxes are progressive. We just had a huge debate here in Canada because the conservative government reduced our Goods and Services Tax (GST) by a 1%, when most every economist in the country though it would be far better to reduce the marginal income tax rates.
Lowering the GST (from 6% to 5%) is mostly advantageous to the wealthy, who now save $800.00 on their $80000.00 sports car. The bulk of the poor’s money goes toward necessities like groceries (which aren’t taxed), and rent (which, under a certain amount also isn’t). Eyeglasses are also not taxed. For my money, I’d like to see the GST go back to 7%, see the lowest marginal tax rate reduced by 2%, and the basic exemption raised to, like, $15,000.00. The extra cash from reduced income tax should encourage savings, something which Canadians are woeful at (although not as woeful as you Yanks, yet). I’d also be happy to exempt a few more things from the GST, such as books and as someone mentioned above, individual pieces of clothing worth under, say $50.00.
I’m also all for taxing all income at the same rates. Cap gains, dividends, and inheritances. Although I’m an entrepreneur, I’d also like to see some sort of alternative minimum tax for corporations that have any locations in-country, regardless of where their “HQ” is. The tax rate shouldn’t be too high, because you want companies investing and hiring, but any company who shows a profit for shareholders should not be able to get away with paying no taxes on it by off-shoring or accounting legerdemain.
Tim C
I am a big supporter of the FairTax. What I like most about it is that it makes it very hard to use the tax code to reward your friends and punish your enemies. It’s transparent. It is there for one reason — to raise the monies that run the government. If you want to reward or punish behavior, you have to find some other way to do it. Some other way that’s probably a lot more obvious than tinkering with the current tax code. And, unlike a VAT or sales tax, it does contain provisions for reimbursing the poor for purchases of necessities.
Disgusted Beyond Belief
I recently had a post about income taxes, in general, which I directly link to in this post (under my name).
The basic gist of it is, I wonder if we would be better served by having most of our income taxes be collected (and set) locally, rather than federally, since that would give us far more control over them (and what they were spent on).
Kirk Spencer
Intentionally separated from my previous because I want to go universal instead of on a single tax plan…
Way back when I was taking Federal Income Taxes in college, the professor made a statement that still resonates:
“The reason the tax code is so complex is that we want to be fair.”
The simplest tax is easy. A head tax, no exemptions, no modifications. But… head taxes are hell on the poor, and a pittance for the rich. So to be fair, we try to design a progressive tax – inherently complex, not least because we want to prevent the rich from pretending (on paper, at least) to be poor and so pay a lesser share.
And then we… “It’s not fair that charity organizations, which are doing benefit that supplants and supplements the services for which taxes pay, also pay taxes.” “It’s not fair that people who help drive the economy by investing in businesses get taxed so hard, especially since they’re getting money from companies that have already been taxed.” “It’s not fair for someone caring for a disabled parent…” You get the idea.
Add to it the “discouragement/encouragement” aspect – a penalty or break (respectively) for certain behavior. “We’d prefer it if people would make their houses more efficient. Tax break if they do.” “We’d like people to go to college. Tax break.” And so on, and so forth.
It is this which makes all the discussion of simplifying taxes shortsighted at best. Somebody is going to be screwed by any simple plan. And USians (heck, most of the world) get nasty when they’re screwed – nasty enough to work at getting the screwing stopped. And once you add a single exemption or exception, you’ve greased the skids for more – they’re inevitable.
Let’s put it this way. There exists, already, an easy form for anyone who wants to use it for their taxes. Over 80% of the US could use it if they wanted, in fact. That’s the 1040EZ. Of course, if you use it you’re going to pay more – the 1040A and the 1040 — with schedules galore — will typically reduce your tax burden by a measurable amount. Now, every person who says what they WANT is an easy tax form but who could (and does not) use the 1040EZ is confused at best, but more likely lying – sorry, misrepresenting their priorities (even to themselves).
I do think the current tax code is exceptionally complex. And I think we need to clean it up. But it’s not going to happen as long as more than three people are involved. Even a gut and replace will, within a generation, be well on the way to returning to the same morass. What we have to do, I think, is get the big things right and then stay in constant flux and discussion and action about the various tweaks.
Tom Gellhaus
I’d prefer NO income tax at all.
But if we have one, I would prefer a Flat Tax of no more than 10%, with no deductions.
There are several problems with the Fair Tax idea, which other people have explained better than I can. (One problem is the insistence on being revenue-neutral, i.e. no attempt to force the government to cut spending.)
Yes, I support Ron Paul.
Yes, the Libertarians have a number of blind spots. I like the anarchist/left-libertarian theory better.
Face
FairTax is that Neil Boortz bastard child that he pimps constantly on his show. Repulsive in every manner. Having the rich pay the same as the poor (same percentage) is fucking ridiculous.
RareSanity
Hmmm…you must be a pompous know-it-all, who paid very little attention in economics class.
There is also an economic concept called pricing. For the lumber yard, they can pay employees a little less, relatively, because they don’t have to make up for income taxes being taking out of paychecks. The company pays less per $100 of salary for the worker to “take home” $100. Now, they can try and pocket the difference and not change prices, but what about the other lumber yard that says, “You know what, if I lower my prices (because of the break on wages), I can sell more lumber than they other guy, and gain market share.” Heck, he might even cause a price war.
That in turn makes the cost of constructing a house less money, and the process repeats itself. Because if the home builder that does not translate that lower cost of construction into a lower price, they will be undercut by the builder that does.
That is how the “hidden, embedded taxes” start to disappear. Quit being a jerk, if you don’t understand a concept ask the person to explain it further.
I am not for any sales tax without a repeal of the 16th amendment that allows Congress to levy an income tax. Because without the repeal, even if a sales/consumption/flat tax came into being, at some point in time an income tax could rear it ugly head again. First a 1% income tax for something, then another 1%, before you know it you have a 23% sales tax and a 15% income tax.
Just my two cents…
AM
Warren Buffett pays such low taxes because his income is not in fact so high. His net worth is so great because of unrealized capital gains, which are dicier to tax. I think the Fair Tax people are just frustrated with the complexity of the tax code, which is fair.
As far as Buffett goes, I think he has even said that he supports increasing the tax on dividends and capital gains (15% or income bracket rate – http://www.irs.gov/taxtopics/tc409.html). I think a progressive income tax is still the best solution. If reflects a greater need of government services, and – since all that wealth doesn’t accrue in a vacuum – a greater responsibility.
Rangels’ proposal got it right on eliminating the AMT.
(not a CPA)
Dreggas
Oh I also support one tax that affects everyone equally. A 10 cent a roll flat tax on toilet paper. Rick or poor you have to wipe your ass sometime. And unless you are Cheryl Crow using only one sheet (it’s a joke people) or plan to start using a magazine there’s no getting around it.
sparky
I’m not an economist so excuse me if my points are um uninformed, but–
1. this looks like a flat tax dressed up to make it less regressive. i’m not opposed to some form of VAT/consumption tax but perhaps that should be in addition to a simpler income tax structure.
2. what about state and local taxes? i would think changing the national system would have some consequences for the state systems.
3. as to the above comments about wages and whatnot–i’ve worked in a variety of occupations, including the construction business, and i have NEVER heard anyone calculate wages on the basis of take home pay. so i am not buying that notion.
4. it would seem to me that a 23% rate (i think 30% is more accurate in terms of perception) will engender terrific compliance problems. everyone will simply be “in business” and have a resale certificate to avoid paying the tax. it’s just too high.
Grumpy Code Monkey
Are we talking about just federal taxes, or about taxes at all levels of government (municipal, county, state, federal)?
Interesting bit of trivia I saw a little while ago while googling; apparently Texas ranked #1 in property taxes as percentage of income as of 2005 or 2006. That was one unfortunate result of the Robin Hood school finance plan.
Punchy
I don’t get the joke. Explain?
Fwiffo
Here’s what I’d do:
1. Tax dividends, capital gains, etc. as regular income.
2. Increase the cut-off point for the AMT and tie it to inflation.
3. Increase the estate tax.
4. Drop the regressive payroll tax and replace the revenue with a carbon tax.
random
REVENUE NEUTRAL = Someone pays less, someone else has to pay more to make up for it.
In a revenue neutral “Fair Tax” or “Flat Tax”, who do you think will be paying more than they currently do? Do you really think the people behind these proposals are looking out for the lower incomes?
To paraphrase: the current system’s the worst except of course for all of the others.
fecapult
I’m not so sure Paris Hilton working is necessarily better for anyone, but that’s not really the point of this post.
Seems as though everyone more or less agrees that those who have benefitted more from the American dream can be asked fairly to shoulder a little more of the burden for those still trying to make it. On that assumption, I can’t see how a ‘fair tax’ or a ‘flat tax’ is in any way going to help encourage income parity.
In fact, the only benefit that I can scry from this proposal is that it may alter people’s consumption habits as they realize that the more frivolous spending in their daily habits has become exorbitantly expensive.
What’s the story with the repeal of the 16th Amendment in the fair tax link? Should the government no longer have the power to levy taxes on the populace? I’m not sure why that’s included in the tax proposal, but I’m smelling a rat.
Grumpy Code Monkey
Just did a little more reading at the FairTax link. So it’s essentially a national sales tax at 23%? Is that in addition to state and local sales taxes? If so, I’d be looking at over 30% sales tax for new purchases.
RSA
On a practical front, my understanding is some aspects of the FairTax have been implemented in Florida and Texas. First, are the results clear enough to generalize to the entire U.S.? (It doesn’t look that way to me.) Second, I’m a bit leery of experimenting with drastic changes to the tax code of the largest economy in the world. It would be interesting to see a worst case analysis. What happens if the expectations for the large boost to the economy are too optimistic?
ImJohnGalt
Uh, maybe I’m being obtuse here, but what are the fiscal issues unique to gay people? My cousin is gay, and he has a mortgage, pays taxes and worries about his kid’s education, same as me.
ImJohnGalt
Survivor benefits, mebbe?
Sock Puppet of the Great Satan
“Just out of curiosity, I’d like to know where you all stand on taxes.”
Quoting a Dead White Male on progressive taxation:
‘The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.‘
Source is some pinko commie Euro-peon called “Adam Smith” in a leftist tract called the ‘Wealth of Nations’.
Jim
Ron Wyden’s proposal, which is a riff on something Gephardt proposed years ago, and something not too dissimilar to Reagan’s 86 reform: Progressive rates, with the only deductions being charitable and mortgage, nothing else. Very simple, progressive and equitable. Therefore, it will never happen.
Jimmmmm
Michael, are you sure you want to go to the mat for Neil Boortz’s pet theory?
Sock Puppet of the Great Satan
“Personally, I would like something like the FairTax.”
Why?
“The reason for that is because it would take care of almost all of the fiscal issues faced by gay people.”
I’m all for it as long as we tax music by ABBA at 500%.
I’m curious what the fiscal issues are faced by gay people that aren’t faced by the general population, save the marriage tax penalty.
“There are detailed macroeconomic analyses of the FairTax out there, and I’m not going to explain it here because I’d hope you can use google.”
You wouldn’t be civil enough to point us to a reliable one?
rbl
Ok, how about this:
An asset tax. Beyond the first $100,000 in assets (all assets: real estate, stocks, etc.) everyone pays 3% or so annually. It doesn’t disincentivise economic growth by targeting purchases or income, but encourages people to use their money to make money. If you can’t grow your assets by 3% per year, surely there is a member of the bourgeoisie somewhere that would make better use of them. I dunno, I thought of this a little while ago, and it seems like a progressive tax that even the Laffer curve zealots could get behind, if they weren’t just shills for the plutocracy.
Kirk Spencer
Grumpy Code Monkey, no, you’ve run into one of the obfuscation points of the Flat Tax that causes most people to wonder what other nifty bombs are being hidden. Others have pointed it out, but I’ll do so again. It is not 23% as most of us calculate it. It is 30% (well, 29.87%).
It’s 23% of the total collected. As in: The store charges you $129.87. Of that amount, $29.87 is given to the government in taxes. See? “Only” a 23% tax.
Again, doesn’t the discovery of that bit of fast-talk leave you with total trust that the rest of the plan is above-board?
Andrew
The Fair Tax is yet another Republican plan to reduce taxes on the rich. They probably don’t even know or care about the other effects. It’s horrible fiscal policy, and the justifications for it are a joke (and lies).
However, it’s a useful tool. It allows to quickly segregate the people who should never, ever be taken seriously about fiscal matter from those of us with a basic understanding of math.
Sock Puppet of the Great Satan
“Progressive rates, with the only deductions being charitable and mortgage, nothing else.”
There’s no particular reason to have mortage interest deductible*. It inflates housing prices, and really doesn’t make life easier for homebuyers: it just leads to a bigger capital gain for homeowners or their inheritors if/when the the house is sold, and also adds to labor inflexibility. Hence the reason why, starting under Thatcher, the UK started to phase out mortgage interest tax relief (MITR) in 1987.
[Of course, any cap on mortgage interest tax relief would hit blue states harder than red states: DeLay was considering introducing a cap a few years back.]
Now, any tax reform which didn’t perpetuate mortgage interest tax relief wouldn’t even reach the level of “dead in the water”. But from an economic point of view, it’s a general negative, and works against the progressivity of the income tax.
[* I guess one could do an end-run around stopping mortgage interest being deductible by having the house owned by a corporation, which could deduct the interest: this is probably the reason why there are more renters in Continental Europe, where there’s no or minimal mortgage interest tax deduction.]
TenguPhule
Sales Tax are regressive, calling them ‘FAIR’ is GOP style Orwelling.
Return that 90% tax rate to those making $1 million and more.
Reinstitute the old higher tax rates on corporations.
End all the stupid tax credit loopholes for businesses and institute a single basic credit.
Remove the cap on SS taxed income.
And give the IRS their shark teeth back.
Pb
Tax the rich more; it worked for WWII, after all. Come on, patriots, the higher taxes let us beat the Nazis! Where’s the 90% top bracket “fighting Islamofascism” tax? You won’t be able to spend that money if you’re dead!
And, yes, the FairTax is a fraud; note that even the folks over at FactCheck.org couldn’t manage to hold their noses long enough to justify it either.
ImJohnGalt
Mortgage interest isn’t deductible up here in Canada, either. Much like the stock market prices things into their corporate valuations, the mortgage deductible is priced into your real estate.
The only way I could see ever changing the mortgage interest deduction in the US would be if the “no deduction” rule only applied to new homes as of a certain date, *and* the selling price of those homes was adjusted accordingly.
Andrew
Indeed, Sock, one of the arguments against the HMID is that it reduces labor market liquidity by encouraging people to stay in one location for longer periods of time, when they would otherwise be renting and more flexible.
Rudi
Here is the Forbes link to a pdf file and a little snippet.
http://www.forbes.com/media/2006/05/Overall_Tax_Burden_Governemt_Spending.pdf
TOTAL TAX
BURDEN
2004
1 Sweden 50.7
2 Denmark 49.6
3 Norway 44.9
4 Finland 44.3
5 France 43.7
6 Austria 42.9
…
18 Germany 36.2
…
27 USA 25.5
28 Japan 25.0
29 Korea 24.6
30 Mexico 18.5
Source : OECD latest report available
The Overall Tax Burden and Government Spending at all levels of government (federal and local) for comparative OECD countries 2004 in % of GDP and comparisons
Forbes Global Tax Misery Index—2006
But the US taxpayers are so burdened, not. Factor in the CIA/Pentagon and …
Jimmmmm
RareSanity: Dr Martens shoes cost approx $100/pair. Recently, Dr Martens moved their entire production operation to China, where labor and component materials cost less than 1/10 than they did in England. Dr Martens shoes still cost approx $100/pair — virtually the only thing that’s changed is the profit margin. Others STILL sell shoes for less; others STILL sell them for more. Dr Marten aren’t engaged in a race to the bottom. They’re a quintessential mass-marketer, yet they see greater value in making more per pair of shoes than they do in increasing market share.
Your assumption exists in a vacuum: that price alone drives consumption patterns. Profitability will be as strong an inducement for pricing policies as the desire to increase market share — in fact, the primary impetus for the latter might be to reach a level where one merchant or a cartel of colluding merchants could exert undue influence on the marketplace, thereby raising prices more or less at will.
I have a hard time believing that buliders or anyone else who adds value to raw materials will sneeze at the chance to fatten margins. The chief differentiation may become quality of service, which MIGHT, translate into higher prices vis-a-vis the competition. But there’s as great a chance that the market will set the prices as there is that the prices will set the markets. At least in theory.
And good luck repealing the 16th Amendment. Then what, the power to tax becomes part of Hitlery’s “war powers”?
LITBMueller
The problem with the Fair Tax is that every single frickin’ industry lobbyist will work overtime to carve in exceptions because their product does not deserve to be taxed at such-n-such a rate. And every pol will bend over backwards to do what they want because they’re whoring for dollars.
So, its an intriguing idea that can’t work because politicians will be in charge of it.
My preference: throw the entire current tax code in the garbage and replace it with a truly progressive income tax without all of the deductions and other crap that only benefit the people who can afford creative accountants.
Randolph Fritz
Oh, gods. Let’s expand the divide between rich and poor some more, and really let the out-of-work people know that we hate time. Please, please, please, leave this one alone.
Dreggas
Ok maybe not much of a joke after all…
Kirk Spencer
LITBMueller,
Sure, wonderful idea. I even agree – as I said, I prefer a progressive tax, and income tax is pretty much the best place to apply it. Won’t work the way you want, however – even ignoring political favors attempted.
OK, let’s look at the first big problem — define income. I know I talked about “fair” and “encouragement”, but a huge amount of the tax code deals with defining what is and is not income. No, let’s be more accurate. It deals with trying to tax “net” instead of “gross” income for individual incomes. Example: how much should you tax a person who had a $100,000 income, but who had a major medical event that cost $95,000? Now make it more complex – what if it’s plastic surgery? Oh, don’t forget to differentiate between plastic surgery to ‘prettify the face’ by removing age wrinkles and plastic surgery to fix the face scarred by an auto accident plus fire. That is a small example of the details that will make the whole thing complex.
Second big problem – corporations/businesses. Are they taxed the same or differently? Oh, I know the easy arguments on both sides. The reality is that both sides are (mostly) right, and then it starts getting complex. Not least are the issues introduced when someone is the owner of a one-person business.
FWIW, the “real” fix (in my opinion) has nothing to do with the code itself. The “real” fix is one of TenguPhule’s points. Restore the IRS to being effective. First, allow it to be fully staffed. Second, remove the restrictions on audits that “equitably” distribute them across all incomes, and instead allow them to chase the money. (Hey, which is better for us. An agent spending 40 hours to recover back taxes on ten $40,000 income citizens, or ten $400,000 income citizens? Heck, allow for the fact the latter will fight it better, even ‘only’ getting TWO of the latter still makes for a better return. Chase that principle into the top 5% of income earners and… remember that the top 10% of income earners earn at least as much per year as the rest of the population combined, and figure it out from there.)
Jake
OMFG.
I won’t say you’re too dishonest to admit you don’t understand what you’re talking about, but I will say you’re fricking lazy.
Is it to much to ask you tell us some more about how the FT benefits gays more than the current system?
glasnost
That makes the assumption that the full amount of savings from reducing the hidden taxes would be passed along to the consumer. My guess is they wouldn’t.
What hidden taxes? Can someone name them? Demonstrate through a record of transactions that they are actually paid? They only hidden tax I’ve found actually specified anywhere so far are the compliance costs associated with paying taxes.
Someone out there is really claiming that finding corporate tax deductions amounts to twenty-five percent of the current prices of most consumer goods?
Is there something I’ve missed here, before I go on to flame this?
Notorious P.A.T.
I want taxes back the way they were in the Eisenhower years, which lead to the greatest economic expansion in history. Sorry, Paris Hilton!
Andrew
It benefits Republican gays who are selfish. Like the rest of the Republicans.
Ellison, Ellensburg, Ellers, and Lambchop
By last stats (2005) the top 1% of income earners pay 40% of the income taxes in the US (they earn 21% of the income). The top 5% pay 60% of the the taxes (they earn 35% of the income).
In contrast, the bottom 50% of earners pay only 3% of the taxes (they make 13% of the income).
Someone will have to explain to me how that is “giving the rich a free ride.”
Chris Johnson
Hey John, can you get rid of this fucker?
He’s pimping Republican bullshit with Orwellian names so obvious you can taste it, and when you tell him to explain the concepts _he_ brought up, he says “But if you can’t find that information for yourself, then yes, you are stupid.”
I do not come and read Balloon Juice for this bullshit. Debate about taxation is a fine idea but the thread maker is responsible for defending the points THEY intend to convince people of…
It’s not that he’s trying to con us, which he is- it’s that he is LAZY and doesn’t deserve to be there. Shame on you for promoting this piece of work, please take some responsibility for firing his butt.
D-Chance.
Keep everything as it is right now. I haven’t paid a penny in income taxes in almost a decade… don’t want to start, either.
But, if there HAS to be change… flat tax. Screw this “whaa… whaa… I paid (xx)% and HE paid only (xx- 0.005)%” envy and “well, we WANT xxx to happen so we’ll give a credit/deduction for xxx” social engineering crap.
As jon said early in the thread, personal/dependent standard deduction, then pay “x”% of everything above that and be done with it. Taxes are for raising revenue for necessary governmental operation, not for social policy or penis measurements. You want to shield the poor, set a high standard deduction. You need extra revenue (say… for a freaking WAR), notch up the % an integer or two. But drop this 22,000+ pages of individual deductions which get even more expansive every year as the tax courts add new rulings on individual cases, and drop this idea of bracketing and pitting quintiles of citizens against each other due to the rewards from their labors.
Andrew
The arguments against deductions have no logical connection to a flat tax.
We can have a progressive tax without deductions or a flat tax with deductions.
The argument that taxes are too complicated is really an argument against deductions and income classification, but the Republican dishonestly argue that taxes are too complicated because of different tax rates. Sorry, we can use trivial formulas to calculate tax payments for various brackets or a perfectly smooth progressive curve.
Republicans are just tax liars.
NIcole
I thought a progressive income tax was fair? I mean, the first $30,000 of my income (which is most of it, sadly) is taxed at exactly the same rate as the first $30,000 of Bill Gates’ income, right? It’s just that as one’s income increases, the percentage on the amount above certain benchmarks goes up.
Am I missing something here?
Andrew
Yes, Bill Gates pays taxes at a far lower rate than you, because he earns very little in salary.
grumpy realist
1. Any consumption tax beyond a certain level will cause sales to turn into the black market. What that level is depends on the country and the culture.
2. Let’s go to a source-based taxation system, same as most of rest of the world.
3. My own suggestions would be radical: make all corporations tax transparent, mark to basis yearly, and forget this distinction between capital gains and other income. All income should be treated the same, including inheritance income. Put the level high enough to deal with the “poor farmers’ kids who have to sell the farm to pay the inheritance taxes” (of which not a single example has ever been found, by the way), and treat the rest of the stuff like it should be: a windfall.
4. They keep kicking around the idea of getting rid of the mortgage interest deduction. Given the large interest groups involved, I really, really doubt that this will dissappear. Also imagine the drop in housing prices (with commensurate effect on states/cities property tax gleanings) if such were implemented. Although it makes sense economically, I wouldn’t hold my breath.
NIcole
Hmm… can’t figure out the blockquote thing. Me stoopid.
I see that Gates (and assorted other superwealthy) pay less in total percentage of income than working stiffs such as myself, so it seems the thing there would be to tax stock options, etc., differently than we do now, right? ( I think that was already mentioned above.)
NIcole
No, I did figure it out! Me brilliant! Or at least average.
Tax Analyst
“Flat Tax” – well, that sure sounds easy. And when someone tells me something about “Tax Reform” and uses the word “easy” I KNOW they DON’T know what they are talking about. Even if you could somehow make it work on a Federal level the States still need to raise revenue. Most States do this by levying an Income Tax – and they generally use a formula that STARTS with the Federal “AGI” (Adjusted Gross Income)and modify it according to their particular State Tax Code to come up with a “State Taxable Income” amount. If you shit-can the FED formula you basically trash the Tax code structure of the 29 states (as of Tax Year 2005) that currently use the FED AGI method – and the 7 other states that use a variation of this and start with Federal TAXABLE Income, then make the State Adjustments from that starting point. If you do that I guarantee you will have total chaos in State Houses across the nation as legislator’s try to gimmick-up a quick way to keep their state coffer’s out of the red – since unlike the Federal Government most States are required to have a balanced budget passed on a regular basis. Once you put your future Tax Fate in the hands of State legislator’s it’s anybody’s guess what happens – if you think your State Representative has more than a scintilla of fiduciary acumen you will likely be in for a rude awakening. “Tax Reform” makes a good slogan and beyond posturing and sloganeering your local Rep likely knows about as much about Nuclear Physics as he does about producing an equitable Tax Code. The new State Tax laws will likely be written mostly by lobbyist’s for, yes, those dreaded “Special Interests”. You will be lucky if your Rep even READS them before voting. You may as well just toss your money up in the air and see how much you still have when the dust clears – and then take a look around and see if your state still functions in any feasible fashion.
Guess I’ve gone on at least long enough.
For a very brief and clearly-stated, common-sense primer on the subject of “Tax Simplification” I recommend you take a look at the link to ITEP that I’m posting here.
http://www.itepnet.org/pb18simp.pdf
Tax Analyst
Grumpy – Agree with point #1. On point #2, what do you mean by “Source-based Taxation System”? Currently a U.S. citizen pays taxes on ALL World-wide income. Would a “Source-Based” system exempt a U.S. citizen from paying taxes on Income derived from Foreign Sources? If so it would like be an open-invitation to some very substantial Tax Avoidance games and could possibly worsen the current wealth distribution situation – the wealthy have the means and methods to work this type of loophole. On the State level most states also want to tax their residents on World-wide income, with exceptions often granted to income generated from investing within their particular state & local tax jurisdictions. You generally only get into “Sourcing” for Non-Resident State returns, which is fair – If I live in California but have a Rental Income property in Georgia I should only pay Georgia Taxes on that Net Rental income.
Geez, I’d like to ask some more about #3 and #4, but as luck would have it my BOSS asked me to do some TAX RESEARCH for her just now, so I’d guess that would probably be a good thing for me to be doing right now.
later…
LITBMueller
Kirk Spencer: I agree – trying to discern what is and is not income is probably the most complex part of the tax code (it definitely killed me in law school!), but what I’m more concerned with are the deductions. There are just waayyyyy too many of them, and they are waaaayyyy too easy to take advantage of. Even with a million man IRS army, it is impossible to crack down on all the people who make ridiculous claims on their returns for business expenses and home offices, and all of that crap.
A more progressive and fair tax rate would mean none of those deductions, or the money you deduct for having dependents, or just being alive, are even necessary.
Sock Puppet of the Great Satan
“The only way I could see ever changing the mortgage interest deduction in the US would be if the “no deduction” rule only applied to new homes as of a certain date, and the selling price of those homes was adjusted accordingly.”
In the UK, it first started by limiting the tax-deductibility to one income (in 1987) and then (under Labour, maybe earlier under the Tories) not raising the ceiling for the deductions with inflation, letting the deduction gradually wither away.
John Harrold
I’m in favor of a flat tax pegged to the previous fiscal years budget, any supplemental spending bills, and a little more to be applied to the deficit. I would also exclude those at and just above the poverty level. I’d like this because it would force people to consider the costs of government programs _now_ and not sometime in the distant future.
Emma
The fairest and simplest tax of all:
Congressional Research Service Report RL32266:
Transaction Tax: General Overview, December 2, 2004
“In order to replace all federal receipts with transaction tax revenues, the rate would have to be set at about 4.3% per transaction, possibly more.”
Andrew
Shorter John Harrold: I’m for a massive tax increase on the middle class and a massive tax cut for the moderately wealthy.
John Harrold
I should point out to Andrew that I hate the middle class.
Actually, I’m for fairness and paying for what you get.
Some folks define fairness in different ways. Andrew doesn’t seem to like my definition of fairness (e.g. everyone who can, contributes the same fraction of their income to taxes). As Ellison, Ellensburg, Ellers, and Lambchop explained above, this is not currently the case.
This is of course driven by my own selfishness to keep my huge income all to myself: the last two year’s I’ve been a Peace Corps volunteer ($4500 a year), the five years previous to that, I made a cool $16k a year as a graduate student. My concept of fairness doesn’t shift when I want someone else’s money.
I should point out that the tax rate would be on the income above the poverty level plus some margin. Any tax policy I support would in some way be pegged to spending. I would hope that as people actually had to pay for their government services, they would start to demand a decrease in those services. Or as liberals tend to think, people would be so happy with their services that they won’t mind pouring 35+% of their income into the government in the form of taxes. As it stands now, we barely pay a fraction of the costs of the services and don’t worry because our kids and grandkids will pay for them.
Andrew
Shorter John Harrold: I’m for a massive tax increase on the middle class and a massive tax cut for the moderately wealthy.
Nylund
All I want is to fix the capital gains tax problem where people making millions (if not hundreds of millions) a year pay a lower tax rate than someone making $50k a year. As Warren Buffet once said, he only pays about 17.7% in taxes.
When I pay 40% and some fund manager (or CEO paid in options) making millions and millions is paying less than half of that, I get upset.
I’ve also lived in Canada where people are PROUD to pay taxes and consider it an honor and a duty to know that their hardwork helps provide social nets for their fellow countrymen and to better their nation.
We have one of the lowest tax rates in the world and we are still a country where plenty of people don’t love their own country and countrymen enough to be willing to help with the general welfare of the nation as a whole.
Then again, when your taxes are helping to fund a 2.4 trillion dollar war, then its a different story.
If my taxes were providing college education or medical care as they do in other countries, I wouldn’t mind high taxes. When they are used for bombs, then I do.
John W Casey
Ellison, Ellensburg, Ellers, and Lambchop Says:
The problem is we’ve been leaning on the middle class and giving the rich a free ride.
It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.’
Source is some pinko commie Euro-peon called “Adam Smith” in a leftist tract called the ‘Wealth of Nations’.
By last stats (2005) the top 1% of income earners pay 40% of the income taxes in the US (they earn 21% of the income). The top 5% pay 60% of the the taxes (they earn 35% of the income).
In contrast, the bottom 50% of earners pay only 3% of the taxes (they make 13% of the income).
Someone will have to explain to me how that is “giving the rich a free ride.”
This ‘analysis’ glides over the fact that “income tax” does not equal all taxes paid. The lower the income, the greater is the share of wage taxes, i.e., FICA and Medicare, of the total tax bill.
Shade Tail
My perspective on taxes:
If you want to belong to the country club, you pay your membership dues before you can swim in the pool. And if you want the class-A gold card membership, you fork over the higher dues payment for it.
I don’t particularly care about the minute details of how taxation works, because I have my own life to deal with at the moment. But any fair tax scheme has to be progressive. Any kind of flat tax is *not* fair because it places an undue burden on the middle class and poor. If the government can find a workable way to create, for example, a progressive sales tax, I’d be fine with that. I can’t see how a sales tax could ever be figured progressively, but if it were done, I would be happy with it.
But the fact is, a fair system *does* tax the wealthy at a higher rate than the rest. They get the most benefits from our society and government, simply by virtue of being able to afford them. Those benefits shouldn’t be free, because then the rest of us have to subsidise them.
Chris
I must admit I have a sneaking fondness for the tax scheme employed by the duke in Norman Douglas’ novel South Wind. You gave the state as much of your income (and capital) as you thought was fair. It was entirely up to you; nobody would try to influence your decision in the slightest. Total libertarianism.
And if the duke didn’t think it was enough, he’d cut your hand off.
It strikes a balance, I think.
Kirk Spencer
In a perfect, science fiction kind of world, I’d use a variation of the rules for splitting a cake among kids.
For the cake, the rule is: Establish order (who is first, etc). First child marks his/her slice of cake. Any other child can object (in order) and make it smaller – at which time it becomes THEIR slice of cake, and the ‘any objections’ runs the line again. No objections, that slice is made and given to that child, and the highest in order goes again. Note the last child gets what’s left.
In a perfect, science fiction kind of world, I’d establish the bill to be paid – the budget – and establish the line in reverse order of wealth (poorest to richest). Lowest says how much they’ll pay – up to zero. Anybody can increase, but then it’s THEIR tax bill.
Ain’t never, ever going to happen. And oboy are there potential problems. but… it’s tempting.
Randolph Fritz
Hint: the total tax burden includes social security taxes and sales tax.
Which means what, exactly, when they can’t make the rent?
“The law, in its majestic equality, forbids both the rich and the poor from sleeping under bridges.”
Ian from Ann Arbor
Perhaps this will illuminate some minds on the simplicity – yet EFFICACY and EQUITABILITY of the FairTax:
There is no reasonable equity of distribution under the current INCOME tax system. What’s more, the Tax Code has become a “tinkerer’s paradise” for 53% of the lobbyists who game it in Washington DC. It’s a lucrative business, and the U.S. TAXPAYER pays for ALL of it in higher prices (i.e., a hidden tax which is incomprehensible to the average working person).
Prices after FairTax passage would look similar to prices before FairTax – not “30% higher” as opponents contend – competition would see to it. So, the FairTax rate (figured as an income-tax-rate-non-comparative, sales tax) on new items would be 29.85% (on the new, reduced cost of items because business isn’t taxed under FairTax – thus lowering retail prices by 20% to 30%), or 23% of the “tax inclusive” price tag – this is the way INCOME TAX is figured (parts of the total dollar).
The effective tax rate percentages, that different income groups would pay under the FairTax, are calculated by crediting the monthly “prebate” (advance rebate of projected tax on necessities) against total monthly spending of citizen families (1 member and greater, Dept. of HHS poverty-level data; a single person receiving ~$200/mo, a family of four, ~$500/mo, in addition to working earners receiving paychecks with no Federal deductions) Prof.’s Kotlikoff and Rapson (10/06) concluded,
Further, per Jokischa and Kotlikoff (circa 2006?) …
It’s well past time to scrap the tax code and pay for government the way that America’s working men and women are paid – when something is sold.
(Permission is granted to reproduce in whole or part. – Ian)
DCMKE
Dick Armey’s organization, FreedomWorks has a website dedicated specifically to the Flat Tax that has some good information, including a video from Dick Armey, as well as a Flat Tax Calculator. The page is located here: http://www.freedomworks.org/informed/key_template.php?issue_it=17
Ray McKee
I am running for Congress in North Alabama and my main platform is to get the Fair Tax bill passed. Most of you appear to be fairly smart since you know enough to blog over the internet. I suggest you read the books, go to fairtax.org and learn about the Fair Tax before you show your ignorance to the rest of the world. Listen to Ian. He understands the Fair Tax.