Is the tax code fair?

Do you think the tax code is fair? If not, what changes would you make?

I would flat tax, and throw out all of the deductions, except for medical, catastrophic loss, and dependents.

Everyone would fall under the same tax code, INCLUDING the damn Congress. Everyone plays by one set of rules.

No one would pay tax on the first $15,000 of income (so $30,000 for a couple). Adjusted annually for inflation.

Interest, dividends, capital gains, etc. would all count as income.

I would allow capital gains from a home sale to be applied to the purchase of a new home and not be taxed as income (the old rules).

I would allow a tax credit for each kid, up to 3 kids. After 3 kids, the next kid is at a reduced tax credit, and would phase out completely at 6.

Trust me, at a 20% flat tax rate, the family making $60K, and paying $6,000 in taxes is feeling it much worse than the family making $1M, and paying just under $200K in taxes.

Quote: RaleighCraps

I would flat tax, and throw out all of the deductions, except for medical, catastrophic loss, and dependents.

I know a lot of people, including me, who love the idea of a flat income tax. Simplify the tax code and make it fair. I just don't think it's possible because:

1) A complex tax code is a very powerful tool by which the government can control the behaviors of it's citizens, one it will not easily give up.

2) I've read comments from several forum posters stating how such a large proportion of the population pays no income tax. This is only half true, because a large portion of those not paying actually receive a payment through EIC, making work pay, and additional child tax credits. That's a big difference. How many people do you know who probably pay $100k in federal income taxes? Now how many people do you know with 2 or three kids that make under about 35k/yr? Or families with 6 kids who give away dependents to relatives at tax time for a share of the refund because you only get EIC for 3 children (you may not know them but there are lots). There could not be a flat income tax while keeping these tax credits.

3) It's ironic that an injustice integral in the formation of our country, taxation without representation, now has been reversed and bitten us in the behind. What successful organization would ever allow someone who is not productive, doesn't pay their dues, and doesn't perform their duties, to have a say in that organization?


I realize yours is a hypothetical case scenario for the tax code, but now, how do we get it done?

A flat tax still isn't fair, even if you discount the first 15k of earnings. The marginal value of a dollar does not remain constant as personal wealth, income, or cost of living varies. If we want a "fair" tax code, we have to define "fair" in a way that makes economic sense, not one that merely makes sense to schoolchildren.

There are ways to approximate "sharing the pain" fairly, but trying to reduce the tax code to a single number simply can't get us there. The idea that it can is simple and seductive, but unfortunately, also wrong.

Quote: MathExtremist

A flat tax still isn't fair, even if you discount the first 15k of earnings. The marginal value of a dollar does not remain constant as personal wealth, income, or cost of living varies. If we want a "fair" tax code, we have to define "fair" in a way that makes economic sense, not one that merely makes sense to schoolchildren.

There are ways to approximate "sharing the pain" fairly, but trying to reduce the tax code to a single number simply can't get us there. The idea that it can is simple and seductive, but unfortunately, also wrong.

You calling me a schoolchild? ;-) I'm getting into a knife fight here, and all I have is a pair of brass knuckles.........

As soon as you start making concessions for classes (poverty, low income, middle, upper) and start trying to deal with each one, you run into problems. You now have special rules for each class, and soon the abuse starts. Next thing you know, we are right back to the same mess we have now.

Why can't it be a simple flat tax rate. Make the INCOME TAX that simple. There are still plenty of other ways of controlling the classes, if the government insists on doing that. A consumption tax could come into play. A usage tax in the form of miles driven on a car. There are plenty of other ways to get the upper class to pay more, while the poverty class can keep food on their table.

Quote: MathExtremist

A flat tax still isn't fair, even if you discount the first 15k of earnings. The marginal value of a dollar does not remain constant as personal wealth, income, or cost of living varies.

It doesn't, but you don't pay the same amount of dollars as your income grows. You pay a percentage of your income, which is, approximately equally "painful" at any level. Sure, giving away 10K out of 100K income may look less comfortable to you than giving away 100K out of a million. But so is making 100K instead of a million in the first place. Who said that the guy who makes ten times less money isn't supposed to fell less comfortable? If that was the case, why would everyone want to make money to begin with?

Think about it - the second guy would give away to the government as much as the first guy made in the whole year. And you still wants him taxed more?

Quote:

If we want a "fair" tax code, we have to define "fair" in a way that makes economic sense, not one that merely makes sense to schoolchildren.

There is only one definition of "fair". And if something does not make sense to schoolchildren, it has nothing to do with it.
Can you explain why you think that making everybody pay equal percentage of their income does not make economic sense?

The problem (from here) is not the tax brackets, it's the exception based (income) tax credits. Having tax bands is less the problem (as it's a marginal rate of tax), but allowing claims of 3,600 things makes it far more complex than it needs to be.

However, creeping featurism is a problem in tax codes as it is in software. Just one more change (military veteran Tax relief, say) leads to another and another and the whole towering edifice gets created.

Flat Tax rates with consumer-taxes are regressive tax structures and benefit those at the higher level of incomes. Sales taxes are in general regressive, and having a consumer tax and flat tax rate puts more burden on the lower income groups. And maybe that's an group you feel should pay more.

You also have to be careful for any call to end representation without taxation... does the unemployed car worker in Detroit lose his vote for not paying taxes last year? Or the person injured while at war? Or the elderly pensioner whose paid tax for the last 60 years? Or the Mother of 3 whose been divorced by her tax paying husband? etc etc.

Quote: thecesspit

The problem (from here) is not the tax brackets, it's the exception based (income) tax credits. Having tax bands is less the problem (as it's a marginal rate of tax), but allowing claims of 3,600 things makes it far more complex than it needs to be.

Complexity and fairness are not the same thing. Deductions make it complex. Tax brackets make it unfair.

Quote:

Flat Tax rates with consumer-taxes are regressive tax structures and benefit those at the higher level of incomes.

Only in the sense that they'd end up paying less than they do now, which is exactly the goal. I would not cal it "benefit". It's the other way around - progressive tax benefits those with lower income levels.

I'D ARGUE THAT THE UNFAIR PROGRESSIVE TAX ACTUALLY HELPS MITIGATE POLITICAL INSTABILITY BY RELIEVING SOME ECONOMIC MISERY OF HAVE NOTS AND WON'T DOS, AND ACTUALLY ALLOWS THE RICH TO FLOURISH DECADE AFTER DECADE.

I feel very strongly about that.

Do you really want a fair tax? Why? You can buy one more Ferrari to add to the collection, or what?

Quote: thecesspit

You also have to be careful for any call to end representation without taxation... does the unemployed car worker in Detroit lose his vote for not paying taxes last year? Or the person injured while at war? Or the elderly pensioner whose paid tax for the last 60 years? Or the Mother of 3 whose been divorced by her tax paying husband? etc etc.

Yes that's a good point. Since a president is elected only every 4 years it could be your average for those 4 yrs. House, 2 yrs, etc. for federal offices. Legitimate disabilities for a previous taxpayer could be an exception. Retirees don't receive payment, most times they just owe no tax, so I suppose I should clarify it to those who receive tax payments. Mother of 3 is an interesting example. She is already receiving a huge benefit receiving child support income that is not taxable, while if it was designated as alimony in the divorce agreement it would be taxable. With no taxable income she would have zero refund and zero tax liability. If she decided to work some and then receive a $5k refund check from the taxpayers for $10k earned, maybe giving up her vote is fair?

Maybe it's harsh, it just seems to me that rewarding burdensome behavior by equal representation has started a cycle of destruction.

Quote: weaselman

Can you explain why you think that making everybody pay equal percentage of their income does not make economic sense?

What does "make economic sense" even mean? That's as ill-defined as "fair". I can come up with several metrics for measuring "fair", and none of them are compatible. Suppose there are 400M people in the US, and the US government needed to raise $4T. Why wouldn't it be "fair" to just collect $10,000 from everyone?

Let me ask this hypothetical:

You're at a hot dog cart. There is a menu, but no pricing. You figure a hot dog can't be more than a few bucks, so you order your favorite combination. The vendor says "that'll be $3.50, please." and you hand him the money. Behind you is a well-dressed man in expensive shoes, wearing what you recognize to be a $40,000 watch. He is very clearly wealthy. As you put mustard on your hot dog, the man orders the same meal you ordered. The vendor says "that'll be $425, please."

Does that make economic sense? Charging different prices for the same goods or services simply because the customer has a different level of income or wealth? Because that's *precisely* what taxation does. The average millionaire exacts far less value per tax dollar from the services provided by government than the average earner at the $40,000 level. We all benefit from well-maintained roads, police, fire-fighters, etc. in roughly equivalent ways, so shouldn't they cost the same for everyone? A rich person pays far, far more for roads than a poor one. Is that "fair"?

Here's another scenario:

Bill lives in San Francisco, California. Ted lives in Barstow, California. Both make $50,000/year, so their taxes are roughly equivalent. But Ted's cost of living is less than half of Bill's, and as a result Ted is financially comfortable while Bill is barely scraping by in a tiny apartment behind a fast-food restaurant. Is it fair that their taxes are the same?

My point is not that I have all the answers -- because I don't. My point is that tax policy is not a trivial matter, and those who think it can be boiled down to something as simple as a postcard (Mr. Forbes, I'm talking to you) need to pay more attention to the fact that we're not all in the same situation, with the same level of income, wealth, and consumption. If we were, a blanket tax policy would work. But life is more complicated than that. Trying to shoehorn that wide disparity into a simple one-line formula won't make things any fairer. What it will do is make things much harder to adjust going forward. A tax policy that is just as unfair and less flexible sounds like a bad move to me.

Quote: clarkacal

Yes that's a good point. Since a president is elected only every 4 years it could be your average for those 4 yrs. House, 2 yrs, etc. for federal offices. Legitimate disabilities for a previous taxpayer could be an exception. Retirees don't receive payment, most times they just owe no tax, so I suppose I should clarify it to those who receive tax payments. Mother of 3 is an interesting example. She is already receiving a huge benefit receiving child support income that is not taxable, while if it was designated as alimony in the divorce agreement it would be taxable. With no taxable income she would have zero refund and zero tax liability. If she decided to work some and then receive a $5k refund check from the taxpayers for $10k earned, maybe giving up her vote is fair?

Maybe it's harsh, it just seems to me that rewarding burdensome behavior by equal representation has started a cycle of destruction.

So we replace a simple system with one just as hard to work and as confusing as the tax system is right now, in order to disenfranchise some of the population? You do know that ends badly in most cases (see Libya, Tunisia, Egypt to name but three), regardless of your thoughts on the idle poor.

Quote: thecesspit

So we replace a simple system with one just as hard to work and as confusing as the tax system is right now, in order to disenfranchise some of the population? You do know that ends badly in most cases (see Libya, Tunisia, Egypt to name but three), regardless of your thoughts on the idle poor.

How is it hard to work or confusing? It's all computerized now anyway, it would be simple to receive a statement every 2 or 4 years from the IRS. Also, I don't think it's accurate to characterize people who pay no tax and receive money from taxpayers as "idle". "Idle" would imply no direction or motion, while receiving payment is a negative or backward motion. I agree with your examples in Africa, but when we are afraid to make reasonable changes because of the threat of an overthrow by a majority, everything is lost by then anyway.

Also, you can always refuse that payment and keep your right to vote.

I'm surprised no one has mentioned the "FAIR TAX". Basically it abolishes the IRS and replaces it with a national sales tax. You can read up on it at FAIRTAX.org.

The best thing about this system is that America would have businesses from around the world fighting to locate here where there would be no corporate taxes.

I don't pretend to be any expert on it, but it makes sense to me. The problem would be getting it enacted since it would take power away from the politicians.

It is also interesting that every opponent of this proposal that I have heard finds it necesary to change the proposal to suit their critique. That is a polite way to say that they lie about it.

Quote: timberjim

I'm surprised no one has mentioned the "FAIR TAX". Basically it abolishes the IRS and replaces it with a national sales tax. You can read up on it at FAIRTAX.org.

The best thing about this system is that America would have businesses from around the world fighting to locate here where there would be no corporate taxes.

I don't pretend to be any expert on it, but it makes sense to me. The problem would be getting it enacted since it would take power away from the politicians.

It is also interesting that every opponent of this proposal that I have heard finds it necesary to change the proposal to suit their critique. That is a polite way to say that they lie about it.

Abolishing the IRS would also abolish the several thousand dollar check lower income families have come to depend on and expect come tax time. The first two problems I outlined in the 3rd post apply to the Fair Tax also.

What does the money give back to poor families have to do with Income Tax? Our tax code is complicated because we are adding in all of this crap that has nothing to do with Income TAXES.

I am not saying a single mother with 3 kids doesn't need help. She probably does. But it should be paid out in another form, via assistance, or welfare, or whatever program you want to call it. Giving people who live paycheck to paycheck a $2000 rebate on April 15 is just guaranteeing that money does not get spent wisely, in many cases.
Once you add up the cost of your programs, then you know how much money you need to collect. That becomes your Income tax rate. If the rate is going to be too high, then go back and cut some of your spend or programs.
A simple budget gets many a newlywed couple through the early years of adulthood, and that is what our government needs.

All the below are facts.

A family of four with two kids under the age of 16 and makes $50,000 is so valuable to the United States of America we pay them $34 not to leave here for Canada.

Run your Turbo Tax. Married Filing Joint, Two kids under 16, standard deduction, 4 exemptions.

AGI is $50,000
Taxable income is $24,000
Tax due is $2,766
Less $2,000 Child Tax Credit
Less $800 Making Work Pay credit.

Net refund $34. For living in the grand 'ol USA.

Let's say mom bolts for a new dick and leaves Dad and the kids high and dry. Dad and Mom each made $25k.

Now dad's 1040 looks like this:

AGI is $25,000
Taxable Income is $5,650
Tax due is $568
Less Child tax credit of $2,000 ($838 as credit and $1,162 as a refundable credit)
Less $400 Making Work Pay Credit
Less $3,230 Earned Income Credit

That family is so valuable to you and I we need to give them $5,062 just to keep them here in America! Not to mention all the free day care and school breakfast and lunches they qualify for.

Now institute a Flat tax, make it even 5%. The Married Couple go from an effective tax rate of -.0001 to a tax rate of 5%, or about $420 a month, pretty significant to most of America.

The second example has an effective tax rate of -20% and now 5%, or a $526 dollar a month decline in cash flow. If you make $25k and are not relying on the government in any way except tax credits, that would be an almost if not impossible amount of money to overcome.

And that't the problem with a flat tax. Right or wrong, you cannot cut someone off cold turkey, they can't do it. If you make it gradual, good luck with that, just ask the creators of EIC how that is going.

Again, I am not saying cut off the credit. They need it in many cases.
Make them pay the flat tax rate, same as everyone else on EARNED INCOME.

Then, if you need to give them payments to make ends meet, do it, but don't do it through the tax code.
And this money would not be considered EARNED INCOME, so they would not pay tax on that portion.

Need to separate the INCOME TAX from the payments to lift someone's standard of living. They should not be in the same program.

Quote: RaleighCraps

Again, I am not saying cut off the credit. They need it in many cases.
Make them pay the flat tax rate, same as everyone else on EARNED INCOME.

Then, if you need to give them payments to make ends meet, do it, but don't do it through the tax code.
And this money would not be considered EARNED INCOME, so they would not pay tax on that portion.

Need to separate the INCOME TAX from the payments to lift someone's standard of living. They should not be in the same program.

Oh no not ANOTHER expensive gov. program!

Quote: Maverick17

All the below are facts.

A family of four with two kids under the age of 16 and makes $50,000 is so valuable to the United States of America we pay them $34 not to leave here for Canada.

Just as an aside... immigrating to Canada as a US citizen isn't a bed of roses these days... it was easier for me as a Brit with a job than an American without to get in and settle here. The most popular route seems to be to marry (or be married to) a Canadian (see Mr Quaid).

Quote: clarkacal

How is it hard to work or confusing? It's all computerized now anyway, it would be simple to receive a statement every 2 or 4 years from the IRS. Also, I don't think it's accurate to characterize people who pay no tax and receive money from taxpayers as "idle". "Idle" would imply no direction or motion, while receiving payment is a negative or backward motion. I agree with your examples in Africa, but when we are afraid to make reasonable changes because of the threat of an overthrow by a majority, everything is lost by then anyway.

I think you miss the point... disenfranchising people from voting based on their payment or not of taxes (or any other reason) is rather a leap, and history suggests that kind of thing is rather unpopular. I believe a large nation just a few mile south of me claimed independence from a nation I was born in as a many people were not allowed to vote based on where they were living.

And another country had a bloody series of uprisings due to voting not being allowed by people of a certain ethnic background.

In fact, yet another country invaded somewhere or other (twice) purely to bring the vote to the masses, masses who may or may not have been paying taxes to the theocracy or dictatorship in power at the time. And several thousands of their country men died in the jungles defending another countries right to avoid a one party system without any form or elected representation.

But by all means, remove the vote from those who don't pay taxes... I don't live there, I'm not a citizen of the country, and you can run the place however you wish.

It's hard work as you already made note of some exceptions that could be made. One person, one vote seems a rather simple system that has it's own ease of use that's rather engaging... much like say... a flat rate tax :)

How is it fair that the top 50% of the wealthiest people in the US pay 96% of the taxes, and 46% pay nothing? The remaining 4% pay what the rich don't. How is that 'fair'? The 46% who are riding on the backs of the rich need to pony up their share, then it will be fair.

It all depends upon how you define 'fair'. If you define fair as 'everyone should pay equally for the upkeep of our country', then we are as far from fair as possible. We all know that the top 5% of earners pay well over half the taxes. If you define fair as 'everyone should pay proportionally to what they make', then we are also as far from fair as possible. Same reason as above. If you define fair as 'everyone, except 46% of the people, should pay something, after using 11,286 pages of possible deductions, and be placed in certain arbitrary percentages based on income after the deductions....' then our system is fair. If you institute a flat tax rate after some minimum exemption I think this accomplishes a truly fair system (my definition of fair). Say 25% after the first 30k is exempted. Also exempt up to 4 kids- first 8k, second 6k, third 4k, fourth 2k.
A family of 6 making 100k pays 12.5k
A family of 4 making 60k pays 4k
A family of 2 making 500k pays 117.5k
If not enough money will be collected then increase the %. Simple.

One other issue not discussed here yet is the social security 'tax'. It has previously been considered as a contribution into a plan, with the contributors expecting at some future date to be paid back, thus, not really a 'tax'. So someone making 90k pays exactly double what someone making 45k does, but the 90k guy will expect douible in benefits what the 45k will get. Our brilliant president has made proposals to 'tax' income over the maximum which you will receive benefits on. That number goes up every year and is around 100k. So a high earner will be paying an extra 14+% above what he is paying now in taxes on virtually all of his income. He shrewdly is planning on only restarting this tax on those earning over $250k, thus essentially exempting the salaries of the senators and representatives who will vote on his plan!

The other concept not discussed is what should an extremely wealthy person, who presently earns nothing, pay? Some retired football player with 80 million can certainly live out his years without ever having to pay any tax again. I forget who, but someone suggested that we pay tax on not what we earn, but what we are worth. Like if you were a farmer with 1000 cows you give your lord 10 cows every year. By NOT taxing income you end all of the under the table advantages in cheating our present tax system. (of course how to define your worth sets up a new system to cheat).

Quote: Maverick17

That family is so valuable to you and I we need to give them $5,062 just to keep them here in America! Not to mention all the free day care and school breakfast and lunches they qualify for.

Now institute a Flat tax, make it even 5%. The Married Couple go from an effective tax rate of -.0001 to a tax rate of 5%, or about $420 a month, pretty significant to most of America.

The second example has an effective tax rate of -20% and now 5%, or a $526 dollar a month decline in cash flow. If you make $25k and are not relying on the government in any way except tax credits, that would be an almost if not impossible amount of money to overcome.

And that't the problem with a flat tax. Right or wrong, you cannot cut someone off cold turkey, they can't do it. If you make it gradual, good luck with that, just ask the creators of EIC how that is going.

The tax laws were never meant to be "fair." They have always been instruments of social and governmental policy.

Quote: EvenBob

How is it fair that the top 50% of the wealthiest people in the US pay 96% of the taxes, and 46% pay nothing? The remaining 4% pay what the rich don't. How is that 'fair'? The 46% who are riding on the backs of the rich need to pony up their share, then it will be fair.

In the very large company that I work for, our CEO doubled his bonus from $20M to $40M this past year, and they just laid off another 800 workers last week.
Is that fair? Your DAMN right I expect the CEO to pay one hell of a lot more in taxes than everyone else.

That is why I advocate a simple flat tax. It is fair for everyone. Yep, the uber rich will pay way more than the lower class, but they can well afford to, and since society has seen fit to make them wealthy, they owe society a greater piece of the pie.

Raleigh- your CEO will pay far LESS tax with a flat tax than with the current tax code. The 'uber rich' would be the FIRST to sign up for a flat tax.

Quote: MathExtremist

Quote: weaselman

Can you explain why you think that making everybody pay equal percentage of their income does not make economic sense?

What does "make economic sense" even mean?

I don't know. You were the one to use that term, not me. So, you have to tell me what it means :)

Quote:

That's as ill-defined as "fair".

You said that we needed a definition of "fair" that "makes economic sense". Now you are saying that "makes economic sense" is "ill defined fair". It follows, that we need a definition of "fair", that is ill defined? Why do we need that?

Quote:

I can come up with several metrics for measuring "fair", and none of them are compatible. Suppose there are 400M people in the US, and the US government needed to raise $4T. Why wouldn't it be "fair" to just collect $10,000 from everyone?

I don't know. Wouldn't it be? I think, it would be stupid, but it would also be fair.

Quote:

Let me ask this hypothetical:

You're at a hot dog cart. There is a menu, but no pricing. You figure a hot dog can't be more than a few bucks, so you order your favorite combination. The vendor says "that'll be $3.50, please." and you hand him the money. Behind you is a well-dressed man in expensive shoes, wearing what you recognize to be a $40,000 watch. He is very clearly wealthy. As you put mustard on your hot dog, the man orders the same meal you ordered. The vendor says "that'll be $425, please."

Does that make economic sense?
Charging different prices for the same goods or services simply because the customer has a different level of income or wealth?
Because that's *precisely* what taxation does.

I don't know if it makes economic sense (because we still have not figured out what it means :)). I do know, that it is not fair.
The difference with taxation is that a business does not have to be fair to its customers - if I feel that it is not, I go elsewhere. But the government does not have competition, and it also does not work for profit. The measure of business' success is how much money it is making, the measure of government success is the happiness, the quality of life, the satisfaction of its citizens, not profit.
And also, at least in theory, you and I are not the customers of the government (like the guys at the hot dog stand), but the employers.

Quote:

The average millionaire exacts far less value per tax dollar from the services provided by government than the average earner at the $40,000 level. We all benefit from well-maintained roads, police, fire-fighters, etc. in roughly equivalent ways, so shouldn't they cost the same for everyone? A rich person pays far, far more for roads than a poor one. Is that "fair"?

No, it is not.

Quote:

Here's another scenario:
Bill lives in San Francisco, California. Ted lives in Barstow, California. Both make $50,000/year, so their taxes are roughly equivalent. But Ted's cost of living is less than half of Bill's, and as a result Ted is financially comfortable while Bill is barely scraping by in a tiny apartment behind a fast-food restaurant. Is it fair that their taxes are the same?

I think, this is really a different topic. But, yeah, I think, it is fair, that federal tax is the same. The local taxes can, and will, probably, be different accordingly though.

Quote:

A tax policy that is just as unfair and less flexible sounds like a bad move to me.

I think, the problem is that we are trying to lump too much different stuff under the tax policy umbrella. The tax policy should be about everybody giving the same portion of their income for the communal needs. It is as simple as that. I can see no reason whatsoever why that portion of the income should not be the same for everyone.
Now, you are correct sin saying that life is more complicated than a flat tax system. It does not mean that we need a tax system that would be as complicated as the life itself though. If we want to make concessions to support those with lower income (or, perhaps, those in certain occupations, or employed in certain areas of the country, or having more than six children etc.), I am not saying we should not consider doing that, but what does it have to do with taxation? Why can't we have a set of dedicated programs, each with its own clear goal set up for that purpose? If we want an incentive for people doing farming business, why does it need to be an obscure tax deduction, when it could be something a lot more useful and straightforward - like an interest-free loan or some kind of government aid credit?
And we think that Bill's cost of living is too high, why don't we do something about that explicitly - again, special purpose loans, real estate development incentives, education credits/loans, etc., etc., - instead of giving him (but not his neighbor, who happens to make 2 bucks more than the cut off) a meager tax break that just makes him feel good more than anything else?

Soopoo,
I am in complete agreement with you on the merits of a flat tax, after some minimum exemption. People who are fighting to feed themselves do not need to be worrying about paying taxes. At the same time, if they are buying non essential items, then they should be paying extra for that. I believe everyone should have the right to have a TV, but a 21" CRT is enough. If you want a 32" LCD, then you pay the extra consumption fee.
So goods to meet basic needs are non taxed, whereas finer things in life come at a greater consumption tax.

However, this starts getting gray. For instance, Internet Service. Is that a need, or a luxury? Try and get a job these days with no email address. People who do not have any Internet access are certainly at a disadvantage from those who have High Speed Access. And even dial up is still an advantage over those who have no access at all. This is certainly driving more distance between the haves and have nots, but it's not something I think we should be subsidizing with government funds either.

Quote: SOOPOO

Raleigh- your CEO will pay far LESS tax with a flat tax than with the current tax code. The 'uber rich' would be the FIRST to sign up for a flat tax.

Assuming he's not taking advantage of tax loopholes, credits, redistribution of income, and all the other tricks that are available to those interested in hiding income from taxes

Azduffman responded to me in another thread -- that the point that taxes aren't fair and the fact that people at the bottom would gladly change places with those at the very top EVEN if they had to pay a higher taxes is not the point. Well, it's exactly the point - who cares about someone yelling about unfair taxes when it's clear they would not switch places with the bottom. Talk is cheap, right? Actions matter. Unfairness falls on deaf ears for good reason. People don't care about the crocodile tears, and why should they?

Quote: RaleighCraps

I believe everyone should have the right to have a TV, but a 21" CRT is enough. If you want a 32" LCD, then you pay the extra consumption fee.

Why not 9"?
Why allow for a TV at all? You do realize, that your position is entirely arbitrary, and cannot be defended?
What criteria do you use to decide what people do or do not "have a right" to have? If I work two jobs to make twice as much money as my neighbor, because I want a bigger TV, why do you think I should be punished for that?
That does not make any sense. People should be encouraged to work and invest more, to make more money, and to raise the standard of living, not discouraged from that.

Quote:

So goods to meet basic needs are non taxed, whereas finer things in life come at a greater consumption tax.

Why not go even further - "goods to meet basic needs" are just distributed for free. There will, of course be a special body necessary to determine which needs are "basic", and which are not. Some people, that are more valuable to society will, of course, have more "basic needs" than the others ... etc.
Does not smell right ...

What's wrong with the simple basic principle - the more you work, the more "needs" you get to meet? I am not saying let people die on the streets from hunger, there is a need for the "safety net", some social programs, that take care of people, who are unable to work, help those who are temporarily out of work for reasons beyond their control etc. But, first, this should not have anything to do with tax code, second, it should not be possible to "meet" more needs without working than busting your ass at a low paying job, and third, people who are able to work, should have to work to make a living.

Quote: rxwine

Azduffman responded to me in another thread -- that the point that taxes aren't fair and the fact that people at the bottom would gladly change places with those at the very top EVEN if they had to pay a higher taxes is not the point. Well, it's exactly the point - who cares about someone yelling about unfair taxes when it's clear they would not switch places with the bottom.

What do you mean "who cares"? The government is not only there for poor people. The criteria is not (should not be) making the poor people as happy as possible as long as the rich ones do not riot. Making more money is not a bad thing, that people should be punished for, to the contrary, it is something that needs to be encouraged.
"Fairness" does not equate with stupidity. The tax code as it exists now is unfair. If it was set up in a way that those at the bottom would not even want to switch places with those on top, it just would be plain stupid (and still unfair, of course).

Quote: rxwine

Azduffman responded to me in another thread -- that the point that taxes aren't fair and the fact that people at the bottom would gladly change places with those at the very top EVEN if they had to pay a higher taxes is not the point. Well, it's exactly the point - who cares about someone yelling about unfair taxes when it's clear they would not switch places with the bottom.

I still do not see what one has to do with the other. Would I trade places with Steve Wynn? Sure, because I would be living far better off. Would Steve trade places with me? Doubtful as he would be worse off.

Should Steve be payign 34% of his income when a person making $40K with two kids pays zero? No, that is not fair at all. If that person was paying say a 10% flat tax and we had a standard that a tax increase for one is a tax increase for all that $40K person would be far less likely to be cheering for a candidate promising higher taxes, far less likely to support "free" health care, etc.

"Farirness" is not supposed to mean equal outcome for all.

Quote: SOOPOO

It all depends upon how you define 'fair'. If you define fair as 'everyone should pay equally for the upkeep of our country', then we are as far from fair as possible. We all know that the top 5% of earners pay well over half the taxes. If you define fair as 'everyone should pay proportionally to what they make', then we are also as far from fair as possible. Same reason as above. If you define fair as 'everyone, except 46% of the people, should pay something, after using 11,286 pages of possible deductions, and be placed in certain arbitrary percentages based on income after the deductions....' then our system is fair. If you institute a flat tax rate after some minimum exemption I think this accomplishes a truly fair system (my definition of fair). Say 25% after the first 30k is exempted. Also exempt up to 4 kids- first 8k, second 6k, third 4k, fourth 2k.
A family of 6 making 100k pays 12.5k
A family of 4 making 60k pays 4k
A family of 2 making 500k pays 117.5k
If not enough money will be collected then increase the %. Simple.

Okay, so the first problem with this is your already adding an arbitary condition to the tax law... marital status and the number of children. Why should a couple with a child pay less tax than one without?

I also think if you want to "flat tax" all income should be taxed, not some break point... again why 30K before taxation? If a flat tax rate is fairer, why the break point at 30,000? Why not 25,000? Why is there no break point at 100,000 to go up again? Surely (maybe) after 100K the person has met their needs for life, and contribute a little more (if we assume that the 30k mark is to meet the bare basics).

A low basic rate of tax for the first $x and then a jump after the median wage would seem "fairer" and another jump after at a much higher income would seem fair to me (a progressive tax system much like we have already but with different bands). I'd prefer taxation to be on income rather than consumption anyways, but that's just me. Sticking most of the sales taxes onto income taxes would probably cause problems...

Also, how much of the federal tax take is from income taxes applied to individuals over that applied to corporations and business profits? How much comes from capital gains? Is personal taxes really what drives the federal budgets or is it some other source (I have no idea on the numbers in the US, Canada or the UK). If income taxes account for a small drop of the receipts, then this is just shuffling deck chairs in the greater push to move to a balanced budget.

Quote:

The other concept not discussed is what should an extremely wealthy person, who presently earns nothing, pay? Some retired football player with 80 million can certainly live out his years without ever having to pay any tax again. I forget who, but someone suggested that we pay tax on not what we earn, but what we are worth. Like if you were a farmer with 1000 cows you give your lord 10 cows every year. By NOT taxing income you end all of the under the table advantages in cheating our present tax system. (of course how to define your worth sets up a new system to cheat).

I assume in the US that you pay taxes on interest and investment income? If not, then indeed the $60 million net worth ex-QB pays no tax... but he paid a boat load, I'd assume, when he was earning. Also, there's going to be a lot of people with a net worth of negative. People who'd be effectively bankrupt if it wasn't for the fact they are employed and have a pay check coming in. It seems odd to me to keep taxing net worth, and the government taking 5% of your value every year.

Which I guess it already does on property taxes...

Elsewhere, other people have mentioned that why are certain things given back as tax breaks rather than in a seperate programme? Possibly it's easier to implement and run (for the civil servants at least) via the income tax system, than giving back money via credits and social welfare programmes. That said, the UK and other countries run their taxation systems that way... I never filed taxes once in 15 years of earning in the UK, as it was all done by the employer, and there are few, if any, tax breaks.

Quote: thecesspit

I think you miss the point... disenfranchising people from voting based on their payment or not of taxes (or any other reason) is rather a leap, and history suggests that kind of thing is rather unpopular. I believe a large nation just a few mile south of me claimed independence from a nation I was born in as a many people were not allowed to vote based on where they were living.

And another country had a bloody series of uprisings due to voting not being allowed by people of a certain ethnic background.

In fact, yet another country invaded somewhere or other (twice) purely to bring the vote to the masses, masses who may or may not have been paying taxes to the theocracy or dictatorship in power at the time. And several thousands of their country men died in the jungles defending another countries right to avoid a one party system without any form or elected representation.

But by all means, remove the vote from those who don't pay taxes... I don't live there, I'm not a citizen of the country, and you can run the place however you wish.

It's hard work as you already made note of some exceptions that could be made. One person, one vote seems a rather simple system that has it's own ease of use that's rather engaging... much like say... a flat rate tax :)

Heyyy...you're talking about the USA in there aren't you? Why be obfuscatory, just say the names of the countries you're talking about, we're adults and we can take it. I hope you realize though that people outside of a superpower will and have always criticized that superpower. Also, I would like an example of a superpower in world history that didn't wage wars motivated mainly by self interest.

Let me reiterate, there is a big difference between "those who don't pay taxes" and people who collect money at tax time. And your example of Iraq, a dictatorship in which people received no government assistance and were being executed by this dictator/king, is so far from comparable to US citizens who are tax burdens that I won't attempt to analyze the comparison.

Quote: weaselman

What do you mean "who cares"?

I'm telling you how it is, not how it should be.

Look, how much do you worry about 1% of the population when it's not you involved? (Some people don't worry about 40% if it's not them)

What do you expect to happen?

It's still a society of one vote.

Quote: rxwine

I'm telling you how it is, not how it should be.

What's the point? I know how it is. :)
I thought the topic of this thread was discussing a fair tax code, which is exactly not how it is, and, as some (like myself) would argue, exactly "how it should be".

Quote:

Look, how much do you worry about 1% of the population when it's not you involved? (Some people don't worry about 40% if it's not them)

Why 1%? What 1% of population are you talking about? I would think, that a much larger percentage of population would benefit (as in pay less taxes than they do now) if the flat tax was enacted. Add to that some of those, who might end up paying a slightly higher tax, but would be better off because of various reasons - from saving time and money on tax preparation and accounting to the feeling of satisfaction from doing the right thing.

Taking your point to the extreme, why not just take all the money from that 1% of people you mentioned, and distribute it evenly (or, perhaps, unevenly) among the other 99%? By your logic, this should be done, because 99% of people would be for it?

Quote:

What do you expect to happen?

Frankly, not much. I don't think this will ever happen, unfortunately. I only talk about what tax system would be fair, and/or good for the economy, without implying that it is possible to ever have it implemented in this country. Unfortunately.

Quote: clarkacal

Heyyy...you're talking about the USA in there aren't you? Why be obfuscatory, just say the names of the countries you're talking about, we're adults and we can take it. I hope you realize though that people outside of a superpower will and have always criticized that superpower. Also, I would like an example of a superpower in world history that didn't wage wars motivated mainly by self interest.

I'm not critisicing the super power, though my obfuscation may have made it looked like it.

The US was founded due to taxation with out representation. The vote matters to people.

The US fought a war in Vietnam to defend the democracy of Vietnam against the Communist North. This means at some level, the vote matters to the US foreign policy.

The US invaded Afghanistan to remove an anti-democratic theocracy that was oppressing it's people, and to ensure free and fair elections. The vote matters.

The US, whatever the motivation, brought free and fair elections to Iraq. Democracy matters. The vote matters.

My point is, that the system of democracy is one vote, one person to all people at the age of majority. Wars have been fought over this, revolutions have happened and major changes have been made to bring the system of democracy to the people, by the US, by change in the UK election systems and throughout the world.

It's a HUGE step to remove that right to vote from some people based on them being a tax burden. It would move back to a system in place in the mid 18th century where only the wealthy could vote (I don't recall what the amount of money was in Britain, but it was out of reach of many).

Quote:

Let me reiterate, there is a big difference between "those who don't pay taxes" and people who collect money at tax time. And your example of Iraq, a dictatorship in which people received no government assistance and were being executed by this dictator/king, is so far from comparable to US citizens who are tax burdens that I won't attempt to analyze the comparison.

The comparison is merely that the right to vote is normally considered a universal right to everyone over the age of majority, NOT based on income, expenditure or any other value comparison of money. I thought this was a central plank of the US's constitution and culture.

My comparison is partly reductio ad absurdum, for sure. I'm not trying to debate the US foreign policy. I'm trying to cast your idea of removing the right to vote from people into some sort of sharp relief.

In regards to this topic I was looking at proposed constitutional amendments in Wikipedia - for instance one that passed both houses of congress but was never ratified by states... and yeesh, we would have over 6000 congressman in Washington in 2010 if the first unpassed amendment had been ratified. What a noisy hornet's nest that would be. Maybe it still technically could be -- it's only been awaiting approval over 200 years now.

Quote: thecesspit

The comparison is merely that the right to vote is normally considered a universal right to everyone over the age of majority, NOT based on income, expenditure or any other value comparison of money. I thought this was a central plank of the US's constitution and culture.

Yes I agree this is central to the US constitution and I don't foresee the change ever being approved or entertained at all. I think a problem has arisen though which the framers could never have envisioned.

It's interesting you bring up universal right to everyone over the age of majority. It's been accepted for so long as a threshold for voting it's hard to see it for what it is, an imperfect system for deciding who votes. To say that someone is too young and not sufficiently mature to vote isn't far from saying because you receive tax payments you also aren't entitled to vote.

Why does it need to be binary? How about letting everyone vote, but then weighing their votes proportionally to the amount of tax they have paid since they voted last time?

Personally, I feel that the government at the very least needs to go back to its constitutional mandates before changes to the tax code should even be discussed. However, as long as the republicrat party is in control, that won't ever happen.

I'd love to get out of paying taxes, as, not being a democrat or republican, I have absolutely no representation for my views in Springfield, and very limited in DC.

Quote: clarkacal

Yes I agree this is central to the US constitution and I don't foresee the change ever being approved or entertained at all. I think a problem has arisen though which the framers could never have envisioned.

It's interesting you bring up universal right to everyone over the age of majority. It's been accepted for so long as a threshold for voting it's hard to see it for what it is, an imperfect system for deciding who votes. To say that someone is too young and not sufficiently mature to vote isn't far from saying because you receive tax payments you also aren't entitled to vote.

Yeah, I put the age of majority in for that reason... I was expecting someone to point out "but what about age?". I don't see there is an equivalence between paying tax and being over 18, but thats okay. Personally, I'd make the voting age the same age as the age you can be tried as as an adult (or the same as you eligible to pay income tax... :)).

Of course the framers of the constitution (and this is probably not just a "problem" in the US, every country with income tax laws will have those who are net recipients of tax dollars, directly or otherwise) didn't think about this... as a) income tax is a relatively modern idea and b) one person, one vote has a nice simplicity to it.

Though I do see 5 voting amendments to your constitution (I was curious if I could quickly find the original voting rules... as they may have been based on the British ideas of being white, male and a landowner.. which they were until Andrew Jackson and the Second Party System around 1830-ish) :

24th Amendment :: "The right of citizens of the United States to vote in any primary or other election for President or Vice President, for electors for President or Vice President, or for Senator or Representative in Congress, shall not be denied or abridged by the United States or any State by reason of failure to pay any poll tax or other tax."

This -sort of- protects the right to vote regardless of tax payments. I realise it's more that non-payment of taxes doesn't remove your voting rights, rather than being a net recipient doesn't remove your voting rights, but if you wanted your plan in action you'd probably have to repeal the 24th amendment. Which is probably a lot of effort to solve an issue that I don't think you could run a party on, and I don't think would solve the problem you think exists... too many people being net recipients -directly- of income tax deductions.

Quote: INkyatari

Personally, I feel that the government at the very least needs to go back to its constitutional mandates before changes to the tax code should even be discussed. However, as long as the republicrat party is in control, that won't ever happen.

I'd love to get out of paying taxes, as, not being a democrat or republican, I have absolutely no representation for my views in Springfield, and very limited in DC.

I'm not sure what country you are referring to. In the United States of America, the Democrats control the presidency and the Senate. The only majority the Republicans have now is in the House of representatives, and it is not even a veto-proof majority at that.

Quote: SOOPOO

I'm not sure what country you are referring to. In the United States of America, the Democrats control the presidency and the Senate. The only majority the Republicans have now is in the House of representatives, and it is not even a veto-proof majority at that.

I'm not sure what you are referring to. I'm a libertarian, and I have no representation in Springfield, and the only one in DC that comes even close to my views is Ron PAul.

My error. I misread 'republicrat' as 'republican'.

Quote: weaselman

Quote: MathExtremist

Suppose there are 400M people in the US, and the US government needed to raise $4T. Why wouldn't it be "fair" to just collect $10,000 from everyone?

I don't know. Wouldn't it be? I think, it would be stupid, but it would also be fair.

Having thus determined that being fair would be stupid, what's more important? Being fair, or being smart? I vote for being smart.

Quote:

The tax policy should be about everybody giving the same portion of their income for the communal needs. It is as simple as that. I can see no reason whatsoever why that portion of the income should not be the same for everyone.

Well, for starters that is by definition not fair (if fair is as defined above, receiving the same dollar amount from everyone). But once we eschew fair for smart, is it smart to use a fixed percentage of everyone's income as the basis for tax? I'd say no, for at least the fundamental reason that a fixed percentage of income has a dramatically different impact on quality of life based on that income. The utility of $5000 to someone making $50,000 is much, much higher than the utility of $50,000 to someone making $500,000. Should someone making $50,000 feel much more pain via taxes than someone making $500,000?

Wouldn't it be smarter (and even potentially fairer, reconsidering that notion) to minimize the differences in pain each taxpayer feels from their tax amounts? In other words, if pain(X, Y) is the amount of economic pain felt by a taxpayer with income X by paying Y in taxes, wouldn't it be "fairer" to equalize pain(X, Y) across all X? Or, more generally, if pain(X, k1, k2, ... ,kn, Y) is the pain felt by a taxpayer with income X and additional factors k1..kn (such as # children, cost of living, and other policy-driven circumstances) paying Y in taxes, isn't it "fairest" to equalize that pain() across all taxpayers?

I'm not saying I know how to calculate such a function, nor what factors k1..kn should be, but it seems to me that such a setup would give the government plenty of levers to pursue social policy (adjust k1, k2, etc. up or down to decrease or increase consumption vs. savings by demographic, etc.). Why wouldn't that lead to better tax policy than a blatantly-unfair and inflexible fixed percentage regardless of income, cost of living, or any other factors?

While not *exactly* the same question, this is about as old as the USA itself ... should the people be represented by population or by region?

The founding fathers answer? Both. That's why there's both a HOUSE and a SENATE.

If the same answer is applied to taxes, then there would be some component that is irreducible, that everyone would pay (the "senate" tax). And, there would be a component that graduates with "population," i.e., income (the "house" tax).

As a matter of principle, I never had a problem with a graduated tax, and I don't think most people do. I also don't have a problem that everyone should pay something, I don't think most people have a problem with that, either (except those who have never paid before). The problem with this concept would be what minimum to make the "senate" tax ... what would be "fair."

Problems also lie with the difficulty of the tax code and the wastefulness of the government with our taxes. But those are different questions.

The question is not easy, practically or politically, but I always thought the beginnings of an answer lay in this concept.

Quote: ItsCalledSoccer

... there would be some component that is irreducible, that everyone would pay (the "senate" tax). ...

One of the "practical" problems that would arise immediately would involve the truly poor -- those who are unable to generate sufficient income to provide for their own subsistence. If the "senate" tax is irreducible, what do you do about those who are unable to pay it? Fine them? Or maybe reinstate the debtors' prisons? Would these and others who are incarcerated still be responsible for paying the "senate" tax? No, I think there has to be a tax exemption for a portion of income.

If the concept of exemptions sounds reasonable, then a tiered tax structure is just a system for gradual transition from "untaxed" income to "fully-taxed" income.