an approach to federal taxation

[muck]

I was thinking about the current tax system ... the calls for flat taxes / consumption taxes (which are regressive in nature) ... and calls for additional tiereing in income taxes ... and was curious what you guys thought about something like this:

 

 

**************************************

 

2% National Sales Tax (on everything but food at a grocery store (as opposed to restaurant food) and clothes) --- 100% of which is ear marked for social security, unemployment benefits, welfare, medicare, medicaid ... the thinking of which is that this 'regressive tax' would largely be reused by those who are having a hard time of things.

 

[NOTE: I can understand if some argue that 2% is high or is low. I consider it more of a place-holder for the discussion.]

 

***************************************

 

0% Income Tax on all income up to the poverty level

5% on all income between poverty level and $50,000 (indexed for inflation)

10% on all income between $50,000 (indexed for inflation) and $100,000 (indexed for inflation)

15% on all income between $100,000 (indexed for inflation) and $500,000 (indexed for inflation)

20% on all income between $500,000 (indexed for inflation) and $1 million (indexed for inflation)

25% on all income between $1 million (indexed for inflation) and $10 million (indexed for inflation)

30% on all income in excess of $10 million (indexed for inflation)

 

All dollar amounts are set to December 31, 2011 dollar values (for inflation indexing purposes).

 

Tiering this way makes the tax code pretty close to neutral with regards to caring about the source of a persons' income.

 

***************************************

 

Income tax deductions for charitable contributions only.

 

***************************************

 

10% flat "death tax" to be paid over 10yrs at 0% interest (thereby allowing family owned businesses and farms a chance to transition to new ownership (whether to the kids or otherwise) in a reasonable manner)

 

***************************************

 

Constitutional amendment for a balanced budget. Not sure if this requires a balanced budget annually or every ____ year period, though.

Edited August 15, 2011 by muck

[MrTed46]

Is the tax on income a flat tax system...without any allowable deductions?

[CaP'N GRuNGe]

I think everyone with a job should pay income tax, even if its minimal.

[bpwallace49]

Do capital gains remain at 15%?

[Ursa Majoris]

Is capital gains counted as income?

 

Also, the estate - not "death" tax - already gives exemptions for businesses. The whole family farm thing is propaganda. I could live with a change of rate but there would also have to be a floor to it. 10% of Grandma's $1,000 legacy isn't worth taxing, nor should it be. Why not do it along the exact same lines as income, which you already have rates for?

[MojoMan]

I think everyone needs to be taxed, at least to a small extent.

 

I see a problem with they way things have been going where the mid to high earners (excepting the super high earners) are getting taxed to death, a substantial proportion (I read 15%) are not paying any federal taxes (income and payroll taxes) and a substantial proportion (about 30% are not paying income (although they are paying payroll) tax).

 

What is to keep 50% of the populace from demanding more, more, more when they are paying nothing (15%) towards it or not their fair share?

[muck]

Is the tax on income a flat tax system...without any allowable deductions?

 

No. I didn't realize the phrase "all income" along side the varying tiers would be confusing. Also, the phrase "charitable contributions only" shouldn't be too confusing either.

 

I think everyone with a job should pay income tax, even if its minimal.

 

Everyone who buys anything besides food at a grocery store or clothes would pay a national sales tax.

 

Everyone who earns more than the poverty level (regardless of source, whether social security, etc.) would be taxed on the amounts in excess of the poverty level.

 

I can't really imagine too many scenarios where someone living in the USA isn't paying tax to the federal government.

 

Do capital gains remain at 15%?

 

No. The phrase "all income" shouldn't be too confusing.

 

Is capital gains counted as income?

 

No. The phrase "all income" shouldn't be too confusing.

 

Also, the estate - not "death" tax - already gives exemptions for businesses. The whole family farm thing is propaganda. I could live with a change of rate but there would also have to be a floor to it. 10% of Grandma's $1,000 legacy isn't worth taxing, nor should it be. Why not do it along the exact same lines as income, which you already have rates for?

 

I know. It's quite a cannard (I think I should use that word more often; probably should double check to make sure I'm spelling it right first, though). I made specific mention to make sure that it'd head off someone at the pass (if you will). Thanks.

 

I think everyone needs to be taxed, at least to a small extent.

 

I see a problem with they way things have been going where the mid to high earners (excepting the super high earners) are getting taxed to death, a substantial proportion (I read 15%) are not paying any federal taxes (income and payroll taxes) and a substantial proportion (about 30% are not paying income (although they are paying payroll) tax).

 

What is to keep 50% of the populace from demanding more, more, more when they are paying nothing (15%) towards it or not their fair share?

 

Did the part of the "2% National Sales Tax" hit you as being something that everyone (including those here illegally) would pay?

Edited August 15, 2011 by muck

[Azazello1313]

1) if we're going to go through the trouble of starting up a national sales tax, I'd much rather see that a bigger number and make it the primary method of revenue generation for the US treasury, eliminating income tax. exempt food and most health care items, rent would already be exempt...meaning the poor would still pay very little tax, and the tax they were paying would be on "stuff", rather than essentials.

 

2) I agree that charitable contributions should remain deductible, but I can see some tightening of that definition. subsidizing charity in that way, IMO, is one of the best things our government does toward helping the less fortunate. however, there are a lot of advocacy groups and such operating under the "non-profit" banner that I am not sure need the subsidy.

 

3) if you're going to tax income, I do agree with taxing all income (including capital gains) the same....provided the rates are low enough so as not to unduly burden investment.

 

4) 10% death tax is OK if there is a theshhold of say $1 million per estate below which it doesn't apply.

 

5) I don't like a balanced budget amendment. it would force severe pain in times of economic downturn. fiscal policy would exacerbate the business cycle, rather than acting as an automatic stabilizer. a far better idea would be an UN-balanced budget amendment....an amendment requiring surpluses in boom times, and deficits in hard times.

Edited August 15, 2011 by Azazello1313

[Yukon Cornelius]

Warren Buffet admits that he is only being taxed 17.4 % while most middle class families are between 33% and 41%. per his article in the NYT.

[yo mama]

It's not that I'm against it, but: (a) you'd need to see who the net winners and losers are; (2) whether the impact would generate more or less revenue for the government; and third, this proposal doesn't seem to address business-related tax reform, which is where most of the smoke and mirrors occurs.

Edited August 15, 2011 by yo mama

[muck]

1) if we're going to go through the trouble of starting up a national sales tax, I'd much rather see that a bigger number and make it the primary method of revenue generation for the US treasury, eliminating income tax. exempt food and most health care items, rent would already be exempt...meaning the poor would still pay very little tax, and the tax they were paying would be on "stuff", rather than essentials.

 

Point made.

 

I would like to see that the national sales tax be used to fund "entitlements" only, and the income tax be used to fund military, etc.

 

2) I agree that charitable contributions should remain deductible, but I can see some tightening of that definition. subsidizing charity in that way, IMO, is one of the best things our government does toward helping the less fortunate. however, there are a lot of advocacy groups and such operating under the "non-profit" banner that I am not sure need the subsidy.

 

I agree wholeheartedly. Related to this, charitable organizations should be restricted from political influence peddling.

 

3) if you're going to tax income, I do agree with taxing all income (including capital gains) the same....provided the rates are low enough so as not to unduly burden investment.

 

Exactly.

 

In the same vein, the tax hurdles to make an investment actually could be argued as raising the bar on the quality of the investments that end up getting made.

 

4) 10% death tax is OK if there is a theshhold of say $1 million per estate below which it doesn't apply.

 

Agree; have a minimum threshhold (say, "poverty level" x. "average life expectancy", adjusted for inflation), so that if "kid" inherits stuff from "mom and dad", then, if he's indigent (i.e., can't handle his own affairs and cannot work), then there is a "tax free" safety net for him that his mom and dad were able to put together for him during their lives.

 

5) I don't like a balanced budget amendment. it would force severe pain in times of economic downturn. fiscal policy would exacerbate the business cycle, rather than acting as an automatic stabilizer. a far better idea would be an UN-balanced budget amendment....an amendment requiring surpluses in boom times, and deficits in hard times.

 

Good point. I that that having some sort of governor on the throttle of spending would be a really really good idea, though.

 

******************************************************************

 

Warren Buffet admits that he is only being taxed 17.4 % while most middle class families are between 33% and 41%. per his article in the NYT.

 

His article, in conjunction with my own thinking on the subject, is what led to this post.

[CaP'N GRuNGe]

1) if we're going to go through the trouble of starting up a national sales tax, I'd much rather see that a bigger number and make it the primary method of revenue generation for the US treasury, eliminating income tax. exempt food and most health care items, rent would already be exempt...meaning the poor would still pay very little tax, and the tax they were paying would be on "stuff", rather than essentials.

 

2) I agree that charitable contributions should remain deductible, but I can see some tightening of that definition. subsidizing charity in that way, IMO, is one of the best things our government does toward helping the less fortunate. however, there are a lot of advocacy groups and such operating under the "non-profit" banner that I am not sure need the subsidy.

 

3) if you're going to tax income, I do agree with taxing all income (including capital gains) the same....provided the rates are low enough so as not to unduly burden investment.

 

4) 10% death tax is OK if there is a theshhold of say $1 million per estate below which it doesn't apply.

 

5) I don't like a balanced budget amendment. it would force severe pain in times of economic downturn. fiscal policy would exacerbate the business cycle, rather than acting as an automatic stabilizer. a far better idea would be an UN-balanced budget amendment....an amendment requiring surpluses in boom times, and deficits in hard times.

 

I agree with all of this.

[muck]

It's not that I'm against it, but: (a) you'd need to see who the net winners and losers are; (2) whether the impact would generate more or less revenue for the government; and third, this proposal doesn't seem to address business-related tax reform, which is where most of the smoke and mirrors occurs.

 

RE: Loopholes ---- If you mean on things like depreciation schedules, etc., I'm open to suggestions.

 

RE: Corporate Tax Rates --- If you note, I didn't delineate between individual and company tax rates in the table above...

[Azazello1313]

with respect to buffett:

 

The statistic I would like to see is the amount of tax paid relative to consumption. By that measure, it is possible that Buffett’s tax rate was more than 100 percent.

 

probably way more than 100%. it's an interesting thing to consider.

[yo mama]

RE: Loopholes ---- If you mean on things like depreciation schedules, etc., I'm open to suggestions.

 

RE: Corporate Tax Rates --- If you note, I didn't delineate between individual and company tax rates in the table above...

If the ONLY offset against gross revenue businesses get is charitable contribution deductions, you just killed America. Nice job.

 

Please excuse the hyperbole. It's just that if you mean taxing "profit" (as opposed to gross revenue) that means intend to give deductions for depreciation, lease expense, interest expense, wages of employees, etc. And once that Pandora's box is open, you'll never get the lobbyists out.

[MojoMan]

No interest in discussing that those who pay the least (sometimes nothing) can put pressure on those who pay the most to pay more since they pay nothing?

[CaP'N GRuNGe]

No interest in discussing that those who pay the least (sometimes nothing) can put pressure on those who pay the most to pay more since they pay nothing?

 

Yep, I can't believe how many lobbyists are running around Washington advocating for welfare mothers.

[muck]

If the ONLY offset against gross revenue businesses get is charitable contribution deductions, you just killed America. Nice job.

 

Please excuse the hyperbole. It's just that if you mean taxing "profit" (as opposed to gross revenue) that means intend to give deductions for depreciation, lease expense, interest expense, wages of employees, etc. And once that Pandora's box is open, you'll never get the lobbyists out.

 

Income is not gross revenue.

 

Lease expense. Wages. Rent. Etc. are deductable.

[muck]

No interest in discussing that those who pay the least (sometimes nothing) can put pressure on those who pay the most to pay more since they pay nothing?

 

Everyone (even the poor) pay the national sales tax.

 

Are you reading the same thread I'm reading?

[yo mama]

Income is not gross revenue.

 

Lease expense. Wages. Rent. Etc. are deductable.

Not to be overly picky, but IRC sec. 61 begs to differ. "Income" is everything that isn't specifically excluded from income (like gifts). Deductions (and related concepts) come into play when you start talking about adjusted gross income and the such. But without deductions, revenue and income are essentially synonymous.

 

In any event, if lease expenses, wages, etc. operate as deductions we're already expanding the scope of your proposal beyond charitable contributions. And once we "go there" it's just a question of how broadly and how deeply we choose to extend the concept, and how expensive we want the lawyers to be.

[muck]

Not to be overly picky, but IRC sec. 61 begs to differ. "Income" is everything that isn't specifically excluded from income (like gifts). Deductions (and related concepts) come into play when you start talking about adjusted gross income and the such. But without deductions, revenue and income are essentially synonymous.

 

In any event, if lease expenses, wages, etc. operate as deductions we're already expanding the scope of your proposal beyond charitable contributions. And once we "go there" it's just a question of how broadly and how deeply we choose to extend the concept, and how expensive we want the lawyers to be.

 

It's possible that some would consider the salaries paid to some of their co-workers to be no better than charitable contributions!

 

That said, let's see your idea if you don't like mine.

[yo mama]

It's possible that some would consider the salaries paid to some of their co-workers to be no better than charitable contributions!

 

That said, let's see your idea if you don't like mine.

I never said I didn't like your idea. I'm merely exposing the inherent impossibilities of any "simple" solution. Plus, no matter how theoretically awesome any plan is on paper, it won't matter unless you can fundamentally change how laws are made in DC.

 

Perhaps I'm overly pessimistic because of what I see every day at work. I just don't see any workable solutions that are also politically achievable - which is just the way certain people like it. I'm half serious that it might take armed revolt to scrap the Code and start over.

[Azazello1313]

If the ONLY offset against gross revenue businesses get is charitable contribution deductions, you just killed America. Nice job.

 

Please excuse the hyperbole. It's just that if you mean taxing "profit" (as opposed to gross revenue) that means intend to give deductions for depreciation, lease expense, interest expense, wages of employees, etc. And once that Pandora's box is open, you'll never get the lobbyists out.

 

as long as the income isn't double-taxed, it won't kill america. tax it once, no problem. and when muck says eliminate all deductions but charitable contributions, I am certain he doesn't mean tax all gross business receipts, that would be absurd. and no, it's not a slippery slope to tax gross receipts minus expenses. are there some minutiae with respect to what is expensable and how? of course, and that is unavoidable, because there is simply no way you can reasonably tax a business on its gross revenue.

 

but getting back to the double-taxation issue and warren buffett:

 

What he says, with the qualifications he uses, is true as far as it goes. It is, however, extremely misleading, because he’s left out the effect of the corporate income tax.

 

There are essentially two conceptual ways in which you can tax dividends. You can tax them as income to the people who collect them: this was the system in the UK, my home country and is effectively the system now. Or you can tax the profits at the corporate level and then dividends are tax free to the recipients. Several continental European countries use this system.

 

The United States is different: it has elements of both systems. First, corporate profits are subject to the corporate profits tax, some 35% currently as the headline rate. Then dividends are taxed again in the hands of the recipients at the rate of 15%. This means that the effective tax rate on Buffett’s dividends from Berkshire Hathaway was not the 15% that he’s using in his calculation

 

probably the most sensible thing would be to tax dividends and capital gains once as regular income.

Edited August 16, 2011 by Azazello1313

[yo mama]

as long as the income isn't double-taxed, it won't kill america. tax it once, no problem. and when muck says eliminate all deductions but charitable contributions, I am certain he doesn't mean tax all gross business receipts, that would be absurd. and no, it's not a slippery slope to tax gross receipts minus expenses. are there some minutiae with respect to what is expensable and how? of course, and that is unavoidable, because there is simply no way you can reasonably tax a business on its gross revenue.

 

but getting back to the double-taxation issue and warren buffett:

 

 

 

probably the most sensible thing would be to tax dividends and capital gains once as regular income.

Meh. Semantics. "Income" is a technical term, but I think everyone here gets the gist of what taxes business should be subject to.

 

Agreed on taxing cap gains and dividends at regular income rates.

[MojoMan]

Everyone (even the poor) pay the national sales tax.

 

Are you reading the same thread I'm reading?

 

I'm talking about the way things are now. I favor your national sales tax.