Talk:Taxation

A flat tax is regressive -- progressive taxation (taxation based on one's ability to pay) is the idea that gave birth to democracy in ancient Athens. A flat tax system ignores ability to pay, hurts the poor and middle class and favors the rich. That is why rich people are constantly pushing this crappy idea. Hatch and most GOPers would love your horrible postion on taxes.

A flat tax is only regressive because it takes as it's tax base only a tiny fraction of economic transactions, retail sales, personal and corporate income, captial gains, dividends, etc. These are but a small fraction economic activity in our economy. If you want to keep taxes low, build in automatic progressivity, and radically simplify tax collection, you don't want a flat tax - you want a transaction tax.

Transaction tax is the same as the FAIR tax discussed below. I don't understand how moving taxation from 300 million people to the products they buy is a simpler system. With flat, the taxation moves to the head of the income streams, so instead of 300 million people or 300 bajillion products, its roughly 10 million businesses that are responsible for sending in checks. The other problem with FAIR is that it does nothing to tax the products the wealthy may buy overseas. How is that fair to someone who doesn't have a choice?--pashdown 12:51, 18 May 2006 (MDT)

No, FAIR is a national sales tax; it only taxes a small portion of economic transactions. A genuine transaction tax also taxes financial transactions such as stock purchase or sale, direct investments, bank transfers, foreign exchange transactions, industrial purchasing, and more. A national sales tax ends up being very regressive, whereas a transaction tax is naturally progressive as a percentage of income based on wealth distribution while maintaining a uniform low rate.

Transaction Tax

The transaction tax, called by the economist who invented the concept the Automated Payment Transaction Tax, places an extremely low tax (less than 1%) on every transaction in the economy. With so many transactions already done through computerized payment systems, collection becomes largely automatic and compliance costs are very low. Such a low rate can replace all current revenues with such a low rate because the tax base is expanded roughly 100 fold.

The average family would pay a few hundred dollars a year in tax; a huge tax break from the current income system. The tax burden on the weathy, who initiate the majority of large financial transactions, would see a much greater portion of the economic activity taxed.

Representative Fatah already has introduced a bill that approximates such a system, and the possible effects on the economy has been studied by the Congressional Research Service.

If the goal is to reduce the average taxpayer's burden, to ensure that progressivity indexed automatically to income and wealth distribution, to lower the cost of compliance and collection, and to eliminate economic distortions and most tax avoidance, and to guard against the practice of purchasing favored tax treament through lobbying, then the transaction tax is the best method of achieving these goals.

Progressive versus flat

Ask your standard GOP flat-taxer about eliminating deductions and exemptions with the flat tax and their argument will fall apart. None of them want to do that. That is why their "flat tax" favors the rich. It isn't really flat. The "true" flat tax hits dividends and corporate income regardless on how much they can spend on tax attorneys to fight it. If the rich paid their fair share, the rest of the population would pay a lot less. Frankly, simplification to the point I've described is the only way I can see of doing it.

Right now the progressive tax isn't progressive at all. As I stated in my position, exemptions and loopholes enable many to get away with no taxes at all. Is that good for the poor?

Use taxes are far less fair than a flat income tax, as Pete has proposed, because the rich spend a much smaller portion of their income than the poor do. I don't believe in use tax and property tax, because it has a disproportionate negative impact on the underprivileged. Our current progressive tax system doesn't work the way it was meant to, for all the reasons that Pete describes. Besides which, do you have any idea what it costs to maintain our current complex tax structure? I'm not certain I'm a fan of flat taxes, but I'm certainly a fan of tax simplification. Dilvie 22:17, 14 September 2005 (MDT)

Put simply, if we replaced the current income tax with the FairTax, rich people would start paying their "fair share". Right now, if you're making a million bucks a year, and you really are coughing up 30+% of it to the tax man, then you have an utterly incompetent accountant. Under the FairTax, if you earn a million and don't spend any, you don't pay any tax. But, if you spend a million bucks, you will pay 23% of it in taxes.

Merging state with federal

I removed this addition that someone added:

"In addition to the simplification outlined above; significant tax savings could be realized as there could be a consolidation of federal and state tax collection agencies."

From a simplification standpoint, this sounds great, but I really doubt it would ever happen. It stomps all over states' rights. I'm not sure if it flies in the face of the constitution either.

People in different states have different ideas about what their money should be used for. Those ideas should be respected, and state-level taxes are the only fair way to handle it. I might be in favor of all taxes being collected by the state, if we could be assured that local corruption wouldn't come into play. Dilvie 22:12, 14 September 2005 (MDT)

Moved from article page:

Flat Tax is a separate issue from eliminating all exemptions, deductions, loopholes. If you simplified the system by eliminating all those things, but kept the tax as a progressive tax instead of a flat tax, you could still have emplorers sending checks to the IRS, still get that simplification, and still save resources that could be put towards enforcement. The problem with a flat tax is that it acts as a regressive tax in terms of people's spendable income. Possibly a flat tax where everyone gets one large standard deduction, say $20,000, would be OK.

This breaks down when an individual has more than one source of income. How can the employer calculate their progressive rate for the individual in these cases? How does the employer know when they've gone over $20K? The only way to place taxes at the head of the income stream is to make it flat so it is the same in every case.

Progressive vs. flat, except what we have now is not progressive, at best it has been demonstrated that the rich pay the same percentage as the lower and the middle class. At worst, they pay nothing. Moving the taxation input to the head of the income streams will eliminate abuse and loopholes. When everyone is paying their fair share, the tax burden on the middle and lower classes will drop.--pashdown 11:42, September 20, 2005 (MDT)

Quick off-the-cuff solution. To simulate a standard deduction, everyone fills out a "1040-TOO-EZ" form that says whether they are single or married, how many children they have, and a bank account number. The government figures out what your standard deduction is, and every month wires the taxpayer a payment based on their standard deduction. Say the joint deduction for a married couple is $30,000, and the tax rate is 20%, they should be exempt from $6000 in taxes. So every month, $500 is put in the account tax free. That way the government has two numbers to play with when considering their taxation policy (deduction amount and tax rate), which means we don't entirely lose control of the effects of tax policy.

What about people who earn less than the standard deduction? Just call it a gift from us to them. The reasons for this are twofold: first, because those on the lower end of the socioeconomic ladder should get some help. Second, one of the goals of reform is to make the system simple enough to easily enforce. Under this system, all that needs to be verified is that a person exists, has the number of spouses and dependents claimed on the form, and isn't collecting under multiple names. For employers, all employee wages are taxed at the same rate, so enforcement is easier there as well.

I respect your desire to simplify the tax code, and make it more "fair", but I believe fairness absolutely requires that some amount of income be exempt from taxation. For a single person trying to raise three kids on $15,000 a year, asking for a single penny is asking too much.

--Bryce 07:05, 7 October 2005 (MDT)

Progressive Corporate Taxes

You shouldn't vocally support this idea now, as it will hurt you politically with large companies, but you should think about it. A very good collection of tax ideas are the "progressive corperate income tax", "progressive sales tax", or "progressive VAT". The idea is simply to charge larger companies a higher tax rate to discurage monopolies. Such ideas are founded on the beliefe that it doesn't matter much if one individual makes more than another, but that monopolies are generally very harmful to the economy as a whole.

As a mild example, a corperations income tax rate could be a constant plus a logarithmic function of its income: if company A was 3 times bigger than company B, then company A wouls pay 1% more tax on all its earning than company B. Such a logarithmicly progressive tax reflect the belief that bigger companies are not inherently bad, but should pay more taxes to prove that they have clear economic reason for being larger.

One may worry about companies adjusting their tax rate by subcontracting or working together, i.e. its unfair to Walfhouse, which owns its own stores, if McDonalds pays less tax, as individuals own its stores. By & large, avoiding such distinctions is not problematic, as past anti-trust laws have already groked this. Infact, progressive corporate taxes would often move anti-trust cases to tax court, making them more effective.

The real difficulty with progressive corporate taxes is that one should attempt to access the size of the producer of an imported product, which current tariffs laws do not require. Sill, if you were replacing the current income tax situation with a progressive corperate income tax, the economy would see a net decrease in paperwork.

Good luck, Nyarlathotep 08:06, 1 December 2005 (MST)

Corporations don't pay taxes. People do. Either the customers or the owners. Corp taxes are just another hidden tax on the people. --Bryan 10:44, 21 February 2006 (MST)

Since over half of all stocks and bonds in this country are owned by people in the top 1%, I think that having the owners pay more taxes is kind of the point. --Bryce 20:31, 12 June 2006 (MDT)

One fascinating proposal I saw: eliminate the tax exemption for compensation paid to upper management in excess of 25 times the average worker's pay rate. By making excessive compensation more expensive, it puts a bit of pressure on management to not loot the company. Only a bit. But it seems like a reasonable enough measure that it could get passed.

Another thing that could be eliminated (though it would be harder to explain to people): the tax exemption for excessive advertising expenses. We've had decades-long wars of attrition between Coke and Pepsi, Coors and Miller, etc., and all it has done is blight our landscapes with billboards, while shifting market shares back and forth by a few percent. When we allow a corporation to write something off as an expense, we're basically saying, "What you're doing is good for society, so we want to encourage it." But we really can't say that about excessive compensation and excessive advertising. --Bryce 20:32, 12 June 2006 (MDT)

Progressive Taxation

Using Progressive Taxation prevents the gathering of wealth and power in the hands of a few rich individuals. That is something that Thomas Jefferson talked about in his letters, and Thom Hartmann talks about it a lot on his program. The fewer people we have with wealth and influence, the more the voice of the people is drowned out.

It does nothing of the kind. It simply provides a strong incentive for people who make more money to move it out of the USA.

We can create disincentives to discourage that. Chadlupkes 20:11, 17 February 2006 (MST)

I was once where you are. Now I don't think even a true flat tax would do what we need. The first thing we should do is raise all taxes to at least the maximum tax rate, instead of taxing Dividend income at 15% while taxing work at 30+%. But I agree with eliminating the deductions.

Chad Lupkes - Democracy for Washington

FAIR TAX: (NATIONAL SALES TAX) -- A BILL IS ALREADY IN THE HOUSE OF REPRESENTATIVES (SEE BELOW):

The problem with any type of flat tax or income tax is that it is too easy for Congress to manipulate and corrupt the system. Our current income tax system started out with just the rich paying taxes. It's in the mess it is today because of Congress. If we had a national sales tax, everyone would know immediately when Congress raised taxes. If a national sales tax is not progressive enough for some people, perhaps a refund program could be included in the bill for the poor. See: H.R.25 Fairtax legislation by Rep.John Linder (Ga.) http://linder.house.gov/index.cfm?Fuseaction=Resources.Home&Resource_id=1

So a tax change being immediately visible makes it the most fair? I don't agree with that. A National Sales Tax would hit the poor harder than any other type of tax. The first thing we need to do is restore the tariff system to encourage manufacturing in our country. Tax the companies that import, and see how long they continue. Chadlupkes 14:01, 29 December 2005 (MST)

Chad, you apparently haven't read the FairTax proposal. Part of it is a payment to each head of household of all sales tax that would be due for spending up to the poverty line. They call this the "prebate".

Far and away the biggest effect of the FairTax would be the repatriation of funds which are currently in offshore tax shelters. With income and corporate taxes eliminated, there's no reason to keep your money in Bermuda anymore. It's not just American citizen's money that would come back to the USA, it's all the EuroDollars, etc. It's somewhere in the neighborhood of eleven trillion dollars.

Pete, I strongly urge you get a copy of the FairTax book, read it, understand it, and advocate it. If the Berlin Wall can come down in our lifetime, then so can the IRS.

Could you answer a couple of questions about that first? I'd be happy to read the book once I understand how these issues are handled. If I buy everything I need from ebay sellers and overseas, when do I pay taxes under the "fair" tax system? If I am a retailer and I move my business and accounts offshore and do everything from a website, do Americans have to pay taxes when they purchase from it? Why or why not?--pashdown 13:11, 1 January 2006 (MST)

Are there no "Fair Tax" proponents who can answer these questions?--pashdown 12:56, 13 January 2006 (MST)

On the ebay questions, only new goods are taxed so new items and services on ebay would get taxed.

"The FairTax is inherently border adjusted. Exports are not taxed since they are not sold at retail in the U.S., but imports are taxed when sold at retail in the U.S. or when brought into the U.S. by a consumer." from http://www.fairtax.org/pdfs/American_manufacturing.pdf --Bryan 22:44, 4 February 2006 (MST)

Does this not expand the scope of not only the IRS but customs as well? Instead of collecting taxes on income, the IRS is now collecting taxes on a broad spectrum of goods and vendors?--pashdown 14:03, 5 February 2006 (MST)

45 states already have sales taxes and they would do the collecting and send the money to the treasury department. The states and collecting businesses would each be paid 1/4 of 1% of the tax to cover the cost. The IRS would be completely dissolved along with it's 100,000 employees and $10 billion budget.

As for expanding the scope of customs, I really don't know what kind of systems are in place and how big of a burden or expansion it would be. I think we already have a fairly comprehensive duty system in place. --Bryan 15:23, 5 February 2006 (MST)

What of the five states with no sales tax? Wouldn't states rights trump the feds dictating individual state tax policy?--pashdown 23:02, 6 February 2006 (MST)

I don't know if there is a constitutional rights issue, but there has been over $20 million spent on researching the fairtax, been studied by several think tanks and it's been sponsored by almost 50 congressmen so if there was such an issue I think it would have been addressed. "States without sales taxes have the option of initiating such an agency, contracting with another state to provide such services, or contracting with the federal government." from http://www.fairtax.org/pdfs/Whats_in_it_for_states.pdf --Bryan 09:38, 11 February 2006 (MST)

Estate tax

Is there a reason that the page on Taxation doesn't refer to the estate tax? Bush's phased repeal of the estate tax is a significant component of his giveaways to the rich that helped turn the Clinton surplus into a record deficit. Jim Lane 00:56, 26 March 2006 (MST)

Flat Tax

There does need to be a form of flat tax brought out but I belive that we should use more of a national sales tax. I figure add $0.02, not an exact figure but just for an idea, to every dollar an item costs. Do not tax on the income itself but when we SPEND this income. That way those who don't buy much or live extravagantly don't get reamed come April 15th of every year. Now mind you this may still be a skewed system but it is still another idea. There needs to be less loopholes for the rich while the poor only become poorer. A great example is my parents and myself. I hope that my field of study is enough to support not only myself but my family to make sure they retire comfortably. I applaud your step in the correct directions!

-Shawn T Thompson