Build your own tax policy!

[Wraith]

I don't want a flat tax, but I wouldn't mind seeing a more flat tax. A two brackets plan would be nice, but I disagree with Hazir on what the lower bracket should look like. I think the first bracket should be untaxed, and then every dollar past that sees a flat tax rate. I don't see a reason to make the lives of people on lower incomes harder than it is. I wouldn't mind eliminating all deductions from this as well (though I'm not as dead-set against them as many are - they often have a good reason behind them).

[Loki]

Does anyone honestly believe that the main problem with the tax system in the US (and other developed countries) is that there are too many tax rates and not that there are so many loopholes as to make those tax rates obsolete? The flat tax has been demonstrated to be highly effective in countries with tax collection problems. The flatness of the tax makes tax dodging much harder. This is not a major problem in Western country, so I fail to see why we should be adopting a solution to a problem that does not exist.

[agamemnus]

Does anyone honestly believe that the main problem with the tax system in the US (and other developed countries) is that there are too many tax rates and not that there are so many loopholes as to make those tax rates obsolete? The flat tax has been demonstrated to be highly effective in countries with tax collection problems. The flatness of the tax makes tax dodging much harder. This is not a major problem in Western country, so I fail to see why we should be adopting a solution to a problem that does not exist.

So you agree with my idea, IPSO FACTO, QED.

[Loki]

I don't agree with your tax rates. They're ridiculous. I'm also not sure how much the logic of individuals applies to corporations.

[agamemnus]

Eet penalizes oligopolies, since the gov't won't.

[Loki]

No, it penalizes firms that make money.

[Hazir]

Does anyone honestly believe that the main problem with the tax system in the US (and other developed countries) is that there are too many tax rates and not that there are so many loopholes as to make those tax rates obsolete? The flat tax has been demonstrated to be highly effective in countries with tax collection problems. The flatness of the tax makes tax dodging much harder. This is not a major problem in Western country, so I fail to see why we should be adopting a solution to a problem that does not exist.

Administration is part of the tax-burden. So, yes, even if taxation itself stays identical there is a net gain. For the simple reason that there wouldn't be a system that gives part of your income to the state, to have a bureaucracy calculate how much you really owe, then give you back a part of it a lgain. Directly even. Just sit and think about it; it's sheer madness.

[Veldan Rath]

Administration is part of the tax-burden. So, yes, even if taxation itself stays identical there is a net gain. For the simple reason that there wouldn't be a system that gives part of your income to the state, to have a bureaucracy calculate how much you really owe, then give you back a part of it a lgain. Directly even. Just sit and think about it; it's sheer madness.

I believe the estimate is 500 to 600 Billion dollars a year spent by citizens and companies to comply with our tax code. Never mind the lost productivity.

[RandBlade]

No, it penalizes firms that make money.

It penalises success, those who plan for success and puts off potential investors looking to gamble their savings for success.

[Aimless]

I believe the estimate is 500 to 600 Billion dollars a year spent by citizens and companies to comply with our tax code. Never mind the lost productivity.

I dunno, maybe

http://www.politifact.com/ohio/state...sts-americans/

[agamemnus]

No, it penalizes firms that make money.

No, it penalizes firms that are fairly big. Typically oligopolies. We might have to adjust it by sector, but then the tax system blows up in size.

In fact, in Simcity 2000, I believe it was possible to tax by sector. Or something like that.

[Loki]

No, it penalizes firms that are fairly big. Typically oligopolies. We might have to adjust it by sector, but then the tax system blows up in size.

In fact, in Simcity 2000, I believe it was possible to tax by sector. Or something like that.

Except you're taxing revenue (or profit, that much is not clear), not company size. Let's put it like this. Imagine there are two banks, each with 1,000 workers and renting the same amount of space (and with the same amount of branches). Due to incompetence, one bank loses money. The other banks makes a $100 million profit. If you're not punishing success, you should be taxing them at the same rate...

[Hazir]

Except you're taxing revenue (or profit, that much is not clear), not company size. Let's put it like this. Imagine there are two banks, each with 1,000 workers and renting the same amount of space (and with the same amount of branches). Due to incompetence, one bank loses money. The other banks makes a $100 million profit. If you're not punishing success, you should be taxing them at the same rate...

Just for fun; explain how you think to tax negative income?

[RandBlade]

Just for fun; explain how you think to tax negative income?

Income != Profit.

Government taxes negative profit all the time. VAT/Sales, Payroll, Property etc, etc ... it can be the taxman which can be the one who sends bad businesses bust.

[GGT]

If you are going for simple and acceptable then you should move to flat right for individuals rather then progressive rate for the companies. I am greatly motivated to move back to Russia with its 13% flat tax rate and Switzerland is a solid step better most of the rest of the word in taxation (granted I should probably just move to a better canton then geneva) .

How about flat rates for companies, progressive rates for individuals? There's got to be a way to consider great differences between individuals, not just by their income but also stage of life. It's all relative:

$35K/yr income for a new college grad with no assets, and student loan debt, is wholly different than $35K/yr income for a senior with a mortgage and some retirement savings, but health problems. You don't want to discourage the young person from saving/investing, maybe buying a home, starting a family. But you also don't want to force the senior to sell their home in order to pay taxes, or afford the gaps in Medicare coverage.

AND the CEO whose salary is $1 but gets $35K/yr in dividends or capital gains, owns real estate or other assets, is very different than the secretary whose wage income is $35K/yr, renting an apartment, raising a couple of kids. aka Buffet Rule

[Asmodian]

How about flat rates for companies, progressive rates for individuals? There's got to be a way to consider great differences between individuals, not just by their income but also stage of life. It's all relative:

$35K/yr income for a new college grad with no assets, and student loan debt, is wholly different than $35K/yr income for a senior with a mortgage and some retirement savings, but health problems. You don't want to discourage the young person from saving/investing, maybe buying a home, starting a family. But you also don't want to force the senior to sell their home in order to pay taxes, or afford the gaps in Medicare coverage.

AND the CEO whose salary is $1 but gets $35K/yr in dividends or capital gains, owns real estate or other assets, is very different than the secretary whose wage income is $35K/yr, renting an apartment, raising a couple of kids. aka Buffet Rule

and these differences are taken in to account just fine by flat tax rate as it is flat in % terms not in absolute terms.

[GGT]

and these differences are taken in to account just fine by flat tax rate as it is flat in % terms not in absolute terms.

At the individual level....taxing X% of income doesn't account for necessary vs discretionary spending needs, and cost of living.

ps remember the US doesn't have a national healthcare system, and people are buying their own health insurance. Even with some employer subsidies, that can eat up 20-30% of middle income earnings.

[agamemnus]

Except you're taxing revenue (or profit, that much is not clear), not company size. Let's put it like this. Imagine there are two banks, each with 1,000 workers and renting the same amount of space (and with the same amount of branches). Due to incompetence, one bank loses money. The other banks makes a $100 million profit. If you're not punishing success, you should be taxing them at the same rate...

Taxing profit...

I am punishing success, I guess, at some level. The bank that loses money goes out of business, yes? In this case then it's mission accomplished.

The general aim is to extract the efficiencies of ginormous corporations (which includes being able to weaken the competition or keep new entrants away!) while allowing for continual growth of new players in the market.

[agamemnus]

I had another thought.

Let's increase and widen the luxury tax. I've always wanted to do that.

[RandBlade]

Increase it to what and cover what? How about (crazy idea I'm sure) simplifying the tax system?

Create a simple, flat tax rate for each of corporate earnings, individual earnings and sales. Minimise or eliminate exemptions.

That way you catch everyone regardless of how they shape it up and no individual tax is set so ridiculously high that everything is done to avoid it.

[agamemnus]

I don't think a flat sales tax is a good idea. You do have negative externalities and positive externalities from buying various things, and taxes are a good way to minimize those.

The rationale for a high luxury sales tax (think cars over $50K, boats over $40K, jewelry, houses over $750K) is that it reallocates economic power towards the production of other stuff that is generally more useful to maintaining and growing the economy. I do not think that such tweaks are a slippery slope to a state-planned economy.

[GGT]

I don't think a flat sales tax is a good idea. You do have negative externalities and positive externalities from buying various things, and taxes are a good way to minimize those.

The rationale for a high luxury sales tax (think cars over $50K, boats over $40K, jewelry, houses over $750K) is that it reallocates economic power towards the production of other stuff that is generally more useful to maintaining and growing the economy. I do not think that such tweaks are a slippery slope to a state-planned economy.

Instead of a direct Luxury Sales tax, we could cap FHA loans (well below the current $750K cap), and limit mortgage interest deductions. There's really no reason to justify million dollar deductions on multi-million dollar homes, or tax breaks for vacation/second home loans.

And to get more revenue for SS and Medicare, we could raise or end the cap on income contributions. It doesn't make sense to limit it to $110K (or whatever it is now).

[agamemnus]

Interesting thought. You'd think mortgage interest deductions are already capped.. they are not?

[RandBlade]

I don't get why you have mortgage interest deductions in the first place, abolish them.

[agamemnus]

It's an incentive to buy a house rather than rent (not a bad way to foster/strengthen the idea of individual rights and freedoms in a democracy, I think), though it distorts lending prices... but most of that risk is already carried by the government now, so meh.

[wiggin]

I don't get why you have mortgage interest deductions in the first place, abolish them.

Oh, I get why they exist, though I agree they do more harm than good. They were put in place to foster a home ownership culture in the US; just one of those weird American Dream things that people have. On a more practical level, it enforces saving in a way that other retirement schemes (e.g. 401(k)s do not); most wealth in the average American household is tied up in their home.

I agree they're a terrible idea and should be eliminated, though.

[Veldan Rath]

Even though I own a home, I agree. (shudder)

I think we need to admit that the big government D's and R's have no real interest in changing the tax code.

[GGT]

I'm not convinced "big government" is the obstacle, but legislators being too heavily influenced by special interest groups, lobbyists, and big donors.

Home mortgage interest tax deductions were pushed heavily by Banks, mortgage companies, loan officers/servicers, Nat'l Assoc. of Realtors, Nat'l Assoc. of Builders, and many more. It was the same thing in prior decades, when banks succeeded in making credit card interest tax deductible (since expired), as an incentive to get people to use credit instead of cash/checks.

[Veldan Rath]

Wow, are we gonna have this argument again?

Legislators ARE part of big government, and if they didn't have the power they have, then they wouldn't be influenced by these groups.

[GGT]

No, we don't have to rehash what BIG government means, or whom US legislators are elected to represent.

But I thought it was important to remind people how/why home mortgage interest payments became tax-deductible in the first place, since we're discussing tax policy. It wasn't just big government trying to encourage home-ownership, but also certain big businesses.