New Tax Schemes

[Naturist Mark]

This topic is for redirecting off topic discussions in other threads about changing the tax system.

Please copy and repost your good comments in other topic here so we can discuss them on topic in a collegial and respectful exchange of ideas.

[Naturist Mark]

This topic is for redirecting off topic discussions in other threads about changing the tax system.

Please copy and repost your good comments in other topic here so we can discuss them on topic in a collegial and respectful exchange of ideas.

[Naturist Mark]

quote:

How does (income) tax stifle production?

It doesn't stifle productivity.

When people say they "stifle production" what they really mean is that taxes reduce income from investment.

You see ... investment is supposed to expand or create new business ... which creates new jobs ... which creates new production ... etc. on around the circle.

Not entirely untrue, but due to interconnectivity I can just as easily claim that a toothpaste excise tax increases productivity; Tax increases toothpaste prices -> decreases sales -> lowers oral hygiene -> increases professional services needed by dentists -> increases income earned by employees of dental clinics and dentists -> increases investments and savings by employees of dental clinics and dentists -> which is used to expand and create new businesss etc.

What is really happening is that those who are re-aligning our society believe that passive income - from investment - is superior to income earned through labor, and deserves to be taxed differently - or not at all.

Formerly the major tax on investment - the capital gains tax - was levied at a rate that was equivalent to the effective income tax rate - or higher. It is now taxed much less than the income tax rates of those at the top of the economic pile. The goal of the new aristocracy movement (the neo-cons and dominionists) is to eliminate it entirely. They want America to become a nation of economic serfs and aristocrats, and with 95% of us seeing our real income dropping over the last 5 years, while the top 1/2% has seen theirs double or more, we are well on the way - America has the highest income inequality rate among the major industrial nations - about the same as China.

One of the major features of the Fairtax proposal is that it entirely eliminates taxation of passive income along with labor and business taxes, to be replaced by a consumption tax that is easily avoided by the very wealthy and business.

If you think income inequality in America has gone out of control, just wait till you see what happens under the 'Fair Tax'.

-Mark

[Sanslines]

quote:

If you think income inequality in America has gone out of control, just wait till you see what happens under the 'Fair Tax'.

I do not think that the only solution is to raise taxes on the wealthy and then call the tax problem 'solved'. It is true that the wealthy have all kinds of schemes to avoid paying taxes. This will always be the case to a certain extent as neither party can afford to enrage the wealthy class and thereby cut off badly needed campaign contributions.

What is the real purpose of a tax system? Is it only to fund certain basic and critical programs or to control people through economic means? If it is to control people through economic means, then we must conclude that too many people are unable to properly manage their finances, take risks and pay the price when those risks don't work out, or can not be trusted to live their lives without strick government control and supervision.

A major problem with the current tax system is the fantastic waste that permeates the entire system. Waste such as the $250 million federal transportation subsidy to federal employees to encourage them to use mass transportation. This subsidy was envisoned as a solution to save gasoline, cut air pollution, and unclog roads in the Washington DC area by giving federal workers about $250 million in free bus and subway passes. However, many of the employees continued to drive to work after receiving the free passes and then sold their passes on the internet (ebay) for cash. Those government employees who sell their free passes are commiting fraud - pure and simple - and this fraud is widespread and continues with no oversight, controls, or prosecutions. Do American workers want to continue to pay additional taxes for obvious waste and fraud such as this??

Another controversy in NYC right now is the so called 'congestion tax' which is a new tax proposed by the NYC mayor to reduce traffic congestion on Manhattan streets. The tax proposal is basically an $8 charge for autos and $21 for commercial trucks that enter Manhattan below 86th Street during weekday business hours. This is clearly a way to control human behavior through the levying of taxes. Is this the best way to control human behavior? Who is affected most by this tax - the poor and middle class or the wealthy? Will this tax reduce the number of huge limos from prowling the streets of Manhattan shuffling very important and wealthy people around town?

It always seems that every tax scheme always affects the working poor and middle class the most. The same old lesson is taught over and over again - make huge piles of money so that you can insulate yourself from bearing the greatest burdens of our society. University students all across our nation hear this lesson loud and clear and most can't wait to get out there making 'big bucks' so they don't have to suffer as a memeber of the working poor or middle class.

[Naturist Mark]

quote:

What is the real purpose of a tax system? Is it only to fund certain basic and critical programs or to control people through economic means?

In practice the tax system is used for every purpose under the sun. If you recall during his first campaign George Bush's answer to every social and economic woe was to "lower taxes", hilariously he often gave the same prescription to opposite problems - labor shortage? CUT TAXES - Unemployment? CUT TAXES. As well as totally unconnected issues: Gingivitis? CUT TAXES.

Of course it would be far more honest to just tax at a level proper to meet those social needs entrusted to government, and to directly fund from revenues those purposes that are worthy of government incentive. But tax incentives, deductions, or exclusions are politically possible where direct subsidy is not. Many people would consider a direct government payment to help people buy a home to be socialism, but that is what our tax code does indirectly. No one would support the US government paying US corporations to outsource US jobs to foreign countries, yet we have a tax credit that does exactly that indirectly. Most people would think that a government program designed to reimburse up to one third of the amount that the very wealthy give to charity, but reimburses the contributions middle class by smaller percentages, and gives no reimbursement at all to the poor to be absurd. Yet that is exactly what our tax system does indirectly (this could be easily solved by changing the charitable deduction to a tax credit, but that isn't going to happen while the dominionists and neo-cons call the shots).

The tax system is used to reward the powerful in ways that direct government actions would never be permitted - if known.

-Mark

[usmc1]

I would like to make a suggestion or two. I think we should be honest and own up to certain things. I would like to offer the notion that capitalism is an aggressively competitive economic system and that without tremendous upheaval it will continue to be the dominent economic system. And, the natural aim of capitalism is to acquire, hold and concentrate wealth in the hands of a powerful few.

In the United States the wealthiest upper 1% has acquired and holds as much wealth as has the lower 90%. That should scare you.

The so-called middle class bears a disproportionate share of the tax burden and the Bush tax breaks unfairly rewarded the 1%.

We really need to acknowlege that there is a redistribution of wealth component to any fair taxation system. Redistribution of wealth really is the only means to mitigate the basic hunger of capitalism to acquire hold all the wealth in a few hands.

My belief is that any discussion of taxation that does not take these things into consideration misses the point.

We'll see how it goes.

[alfredr]

Another example of a bumper sticker showing up just when it's needed. I just saw this one this week, Thursday I think.

"If ten percent is enough for God, it's enough for the IRS"

(I will put this in "Fun and humor/Bumper stickers of the week" someday soon.)

Capitalism is exploitation. Exploitation of resources, whether natural resources or human resources is a vital ingredient of capitalism. Unrestrained capitalism will concentrate wealth in the hands of the few. In this country we have had periods when controls on capitalism were not adequate and saw things such as sweat shops, robber barons, monopolies and child labor.

But because we have had a "government of the people, by the people and for the people" we have been able, by electing representatives at all levels who really did represent the people, to enact laws protecting us and restricting the power of business and the rich to run roughshod over us.

We seem to be losing that now though. Voter apathy and the high cost of getting elected (and the financing of candidates) and who gets heard and who doesn't have a voice? And just see what happens.

I really didn't think the third world was going to buy Reagan's idea that the solution to all their problems was capitalism because he wasn't talking about a system of capitalism balanced by a fair social system. I thought they would have had their fill of that when it was called colonialism. I guess you can fool most of the people for a good long while though.

Have I hijacked your topic, Mark? No. I still have a tax suggestion to put forth. My suggestion is instead of eliminating the Estate Tax (called the Death Tax) it should be raised to 100 percent to keep wealth from accumulating from one generation to another. In the interest of full disclosure (heck, I'm a nudist, I've got nothing to hide.) I should say that I will one day be inheriting some land thanks to my parents many years of hard work and sacrifice and if my suggestion were put into effect, I would lose out on that. So be it, but it would be fair.

The fairness would come in that every generation would have to start fresh; no one would have a head start. It would increase the turnover on property if it all had to be sold on the open market on the death of the owner. Everyone would have a chance to buy the assets of the deceased.

The ones who are opposed to an Estate Tax call it a Death Tax to make it sound more onerous; not only are you dead, but you're being taxed too. To me, it sounds like a Natural Law; When you die, you have to let go of everything you had here.

[usuallylurk]

quote:

Originally posted by Naturist Mark:
[
One of the major features of the Fairtax proposal is that it entirely eliminates taxation of passive income along with labor and business taxes, to be replaced by a consumption tax that is easily avoided by the very wealthy and business.

If you think income inequality in America has gone out of control, just wait till you see what happens under the 'Fair Tax'.

-Mark

Some people are taken in by that -- the concept of a "Fair Tax" scares the hell out of me.

First of all, let me state, that at this stage of my life, the "Fair Tax" would benefit someone like me -- no kids, no debts, no financial obligations and a pretty good income. I currently manage to save and invest roughly half of my income as I am racing toward retirement. House paid for, and other than a car payment, I am now on easy street.

Contrast this with a guy who makes half of what I make, and is trying to maintain a family of four. He's actually going to pay MORE in taxes than I will.

The "Fair Tax" is extremely UNfair to those who invested and saved (and paid taxes on investments -- remember, those that are in their 70s did not have 401K plans, and IRAs came along too late to really help them out) --- this consumption tax will hammer them again. Many have limited income and are living off of the principal of their lifetime investments. Is it fair to hit them AGAIN?

The fair tax is not a good idea -- but it did sell a lot of books and made a celebrity out of its author. Steve Forbes attempted to run for the White House some 12 years ago or so -- on one equally crazy issue = the "Flat Tax". It would have reduced taxes for the wealthy. It would have increased taxes for those making under $35,000 a year, and it would have knocked out the home mortgage interest deduction, which would blow away home ownership possibilities for a lot of people.

Finally -- is the income tax system complicated today? No, it isn't. I spend a grand total of one evening doing my income tax. I have --

- a federal 1040 to fill out
- to determine if I'm better off itemizing or accepting the standard deduction.
- federal schedule B for dividends (a laundry list there)
- federal schedule D for capital gains
- and then I do it all over again for the Commonwealth of Massachusetts

For those who think it's too tough, my recommendation is to spend the $10-15 on one of those little tax programs. If you get one or two or three W-2s and a dozen other documents, it is very easy. One of the common cries to justify this is the "complication of the current tax codes" -- but for most Americans, the 1040 system is not complicated whatsover.

[nudeM]

Why not stay with the same system as it is now until they adapt an 'across the board' tax system?

0 - $12,000 - 0 tax
$12,001 - $50,000 - 15% tax
$50,001 - $100,000 - 20% tax
$100,001 - $200,000 - 35% tax

Granted, the figures are approximate, but the wealthy do pay more. It's just, they have more loop holes that enable them to write off more to 'pay less'. Trust me, I have my own little side business, and I try to find ways every year to deduct as much as possible to save at the end of the year.

I agree with the across the board concept in that everyone will pay the same. But to me, the ones who 'already have' will still have it, but the ones who are in the working class, won't be so over burden with the majority of the tax load. Everyone will be on the same level, IF everyone played by the same rules. BUT, you can throw that out the window.

[missouriboy]

quote:

quote:

How does (income) tax stifle production?

It doesn't stifle productivity.

When people say they "stifle production" what they really mean is that taxes reduce income from investment.

As mentioned elsewhere in this thread, the tax system is also used to influence social behavior, which gives rise to the adage "If you want less of something, tax it more. If you want more of something, tax it less."

If the adage is true, it applies to all things, not just social behavior. Do you believe the adage is true? Is it a good rule of thumb? Or not?

[Sanslines]

quote:

Finally -- is the income tax system complicated today? No, it isn't. I spend a grand total of one evening doing my income tax.

Hi Lurk,

It is wonderful that your federal tax situation is relatively simple. For many people, it is even simpler. Many single filers who have no savings and therefore no interest, dividends, capital gains, etc can file the 1040EZ form and be done within 1/2 hour. However, for others who have sold their homes, have capital gains, have businesses, rental income, and a whole host of other income generating transactions, their situations become very complicated very fast with a whole myriad of forms to fill out. Complicated situations are prone to error - intentionally or not - and this is where the problems arrise. May your life never get so complicated that you ever have to spend countless hours agonizing over a stack of forms!

[missouriboy]

quote:

Originally posted by alfredr:
...My suggestion is instead of eliminating the Estate Tax (called the Death Tax) it should be raised to 100 percent to keep wealth from accumulating from one generation to another.

...The fairness would come in that every generation would have to start fresh; no one would have a head start.

Yes. Just like it was during the days of the caveman. To which we would quickly revert.

It would increase the turnover on property if it all had to be sold on the open market on the death of the owner. Everyone would have a chance to buy the assets of the deceased.

With what? How does one buy property with no assets?

It is well known that the "accumulation of capital" is what enables the higher standards of living in our modern times. When mankind still lived hand-to-mouth (for centuries) we had no time left over for devising ways to improve those standards.

"He who does not learn from history is doomed to repeat it."

[missouriboy]

quote:

Originally posted by Sanslines:

quote:

Finally -- is the income tax system complicated today? No, it isn't. I spend a grand total of one evening doing my income tax.

Hi Lurk,

It is wonderful that your federal tax situation is relatively simple. For many people, it is even simpler. Many single filers who have no savings and therefore no interest, dividends, capital gains, etc can file the 1040EZ form and be done within 1/2 hour. However, for others who have sold their homes, have capital gains, have businesses, rental income, and a whole host of other income generating transactions, their situations become very complicated very fast with a whole myriad of forms to fill out. Complicated situations are prone to error - intentionally or not - and this is where the problems arrise. May your life never get so complicated that you ever have to spend countless hours agonizing over a stack of forms!

Good post, but the question is much larger than any one individual situation, so why not cut to the chase? From Mark's link to Wikipedia:

quote:

Effect on tax compliance costs
The cost of preparing and filing all business and personal income tax returns is estimated to be $250-$300 billion each year. Approximately the same amount of money was estimated for calculating the tax implications of business decisions. That means approximately $500 to $600 billion was spent in the process of collecting roughly three times as much in taxes. According to a 2005 report from the U.S. Government Accountability Office, the efficiency cost of the current tax system — the output that is lost over and above the tax itself — is between $240 billion and $600 billion every year. Supporters argue that the FairTax system would reduce these compliance and efficiency costs by 90% and return a larger share of that money to the productive economy.

Is the elimination of such egregious waste a worthwhile goal? Or not?

[usmc1]

Mine took just a bit longer, probably becuase I graduated from the Shoe Box School of accountancy and despite good intentions put off until the 11th hour some things I find onerous.

I used Tax Act online and it was free. Got our refund back straight to our joint bank account in exactly 14 days. Shazam! The only downside was having to close an "Offer" window about 15 times.

We have to do a business P & L in additon to our joint incomes..and my acting P & L and supporting forms take awhile. There are some very involved rules with that. But, I do get to deduct my makeup, haircuts, classes, workshops, some clothing costs and some travel.

One thing about taxes which always resonates in my mind is what I learned old Judge Nettles' U.S. Gov 101 class; The Power to tax is the power to destroy!

Thus the reason churches and religons avoid taxes. But, now that so many churches have become political base camps(mostly right-wing, but quite a few left-wing) I seriously believe we need to reconsider their exemptions and determine what of churches and religions gets taxed and what doesn't.

[Sanslines]

quote:

The fairness would come in that every generation would have to start fresh; no one would have a head start. It would increase the turnover on property if it all had to be sold on the open market on the death of the owner. Everyone would have a chance to buy the assets of the deceased.

The only problem with the idea of a 100 percent Death Tax is that it would encourage people to save nothing and accumulate nothing. It would discourage people from working. The government would then be 100 percent responsible for providing everything for the elderly and much more responsible for providing for the rest of society. Society would lose more of their independance and become much more dependant on government. Younger people would lose most motivation to work and to save anything if they know that in the end the government would be the full beneficiary of their hard work. People who acquire property and who have worked hard to plant trees and improve their land would lose all incentive to do so if they knew that once they die their land could be aquired by ruthless developers who would destroy all of their hard work. The environment would suffer as well.

Family has a very powerful place in this country. Part of being within a family structure (traditional or not) is to share and to take care of one another. If families are forced to lose control of what they have spent a lifetime working hard to accumulate, then society will be further demotivated and demoralized. I think that we must always keep the goal in mind of a society where people are still able to pull themselves up by their bootstraps and get ahead through hard work -physical or mental. Take this away from society and you take hope in a better future away from society. Mankind without hope is a mankind that is lost.

Another thought is that in communist countries, the state owns everything and there is no private ownership of anything. People are just mindless drones in a system where there is no motivation to work hard as the individuals would never receive any benefit from their hard work.