Taxes - how should the federal government get its money?

[Bill Peckham]

Because of the esteem with which I hold Okarol and because I know how hard she has worked to keep IHD going, I will start this thread here even though the name of this board is, as I have said before in various ways, wholly inappropriate.

I will say though, that Epoman never shied away from a political discussion but given the real need IHD serves I think it is a good idea to keep overtly political discussions sequestered from even the Off Topic board, so that the Off Topic board can be a place to get to know IHD members without, horror, the discussion of politics. I think MM was right on the OWS v TP thread that the reason people like to talk about politics is that it matters, and the people on this board matter, so naturally what they think re: politics is of interest.

IMO the trouble starts when people imagine that one side is trying to win them over to their side rather than just asking them to explain themselves. I mean, there are fundamental choices to be made at every turn in deciding how to govern ourselves ... Hamilton/Jefferson, this is not a new thing, in fact compared to our first 120 years today's politics aren't even that rough. Running this show is by necessity a very large enterprise. And it takes a lot of money! We are talking about a federal budget so large that in a moment of frankness a Senate staffer could tell me that to them the 30 billion dollar ESRD program is budget dust. A rounding error. So really when we argue politics, we're arguing money and that's what families do.

So in the name of taking serious things seriously, change the name of this board to 'Politics'

On to taxes.

How should the federal government get its money? I think an income tax makes sense but not the one we have. I would make it vastly simpler and eliminate all deductions. All deductions. Doing this would allow tax rates to be much lower.

If the electorate wants to support home ownership, that's fine, just don't do it through the tax code. Writing checks directly to homeowners would be a better system than allowing the deduction of mortgage interest.

If the electorate wants to support charity, I know I do, great! Just don't do it through the tax code. Do a match like some large employers, a 20 or 30% federal match is fine by me. Anything but through the tax code.

Same goes for any other deduction. Especially all the corporate deductions. No individual or corporate deductions. It would be a shock to the tax preparers but it is not worth the price to keep them doing what they are doing.

And I would tax oil to the point that the price per barrel never fell below a certain point - it could be more than $80, but it wouldn't go lower at the pump. I think that would open some great opportunities.

I'd try to match user fees to the use but not if it meant that pharmaceutical companies paid the cost for the FDA to look into their drug. I think these user fees to business can be corrosive, I would want vital federal oversight responsibilities funded through general revenue.

A value added tax (VAT) is efficient but I think in general it is better to leave that on the table for the states to use in the form of sales tax.

Capitol gains should be taxed the same as all other income.

How do you think the federal government should get its money?

[MooseMom]

Oh gosh, this is quite the big topic!  I'll have to think about it, but I wanted to reply and second the notion of renaming this forum "Politics" and maybe even consider making it accessible only to premium members.

I confess to having no idea what kinds of programs are funded by the federal government.  I don't think most of us do.  There are all sorts of worthy things that are subsidized that mean nothing to me but might mean everything to some family in Topeka. 

I think most agree that the tax code needs to be simplified, and I personally would be in favor of having no deductions despite the fact that they are of an advantage to me.

Great post, Bill.

[Jean]

Flat tax I think might work. I have done income taxes for about 25 years or so and now the state and federal are trying to squeeze the little Mom and or Pop offices. At this point, it would cost me close to $1000.00 to renew my license, so okay they pushed me out, but, that is okay, I wanted to anyways. But, that is beside the point and yes, I agree with you in re-naming this forum to Politics.

[SugarBear]

I also agree with a flat tax rate.  This way those who have more and thus spend more pay a greater amount in taxes.  Those who have less and, if are budgeting correctly, will spend less thus pay a smaller amount in taxes.

[MooseMom]

I also agree with a flat tax rate.  This way those who have more and thus spend more pay a greater amount in taxes.  Those who have less and, if are budgeting correctly, will spend less thus pay a smaller amount in taxes.

But here's the tricky part...we don't want the people who have less to spend less.  We want them to have more money to spend because these are the people who drive our economy.  These are the people who are the REAL job creators.  If you have one person with an extra $30,000,000 to spend, s/he isn't going to buy 30 cars worth $1m.  However, if you have 30,000 people with an extra $1,000 to spend because of an overall decrease in the amount of tax they pay, they'll spend it on the consumer goods that are the foundation of our economy's strength.  And every time they buy something, there is sales tax...

[cariad]

Not really up for a tax argument right now, but I did want to put my in on the other issue raised.

So in the name of taking serious things seriously, change the name of this board to 'Politics'

I wanted to reply and second the notion of renaming this forum "Politics" and maybe even consider making it accessible only to premium members.

I also think Obamania (how is this pronounced, anyway? I have puzzled over this for years! ) is unwieldy and frequently inaccurate. I would *not* like the section to be exclusively for premium members - we would miss the range of opinions that makes these discussions interesting, and I fear it would just be MM, Bill and I nodding at each other and congratulating each other for being so clever. (Hmmm, on second thought.... )

Perhaps we could have it sequestered so that members must log in to view it, like the Vegas board? I do worry about the readers who come here, terrified about some aspect of CKD, and then the first thing they see is a highly-charged, often-emotional political debate and could be scared off without realising what an amazing support system this place is. I think all of us have shown that we can put the politics aside and support everyone and anyone facing CKD, but a new person arriving at just the wrong moment may not get that impression.

To be perfectly clear, I too have enormous respect for the mods and admins and their work and if they choose to leave everything as it is, then I understand.

Don't think I like the idea of a flat tax at all. But not sure I could coherently express my thoughts right now.

[Jean]

MM you are correct I feel in the analogy of a person having $1000.00 more they will spend it. The opinion of a lot of people is that we need to abolish the IRS. People hate to "appear" at an IRS session because they are terrified. Having to have your taxes done has got to be one of the scariest things you have to deal with every single year, and forever if you have a little tiny pension too. The Earned Income Credit is the biggest joke ever!!! I feel that should be abolished too. I dont really know how a flat tax could be put into place, but something needs to be done and soon!!

[Bill Peckham]

I think there are societal advantages to a progressive tax structure. If all the deductions were eliminated the rates would be very low: 5, 10, 15, 20, 25%. Everyone would pay the same tax rates. The CEO would pay 5% on her first bit of income, (first hour's work), then 10% on the next bit and so on until her earnings above $250,000 (or some level) when she would pay 25% on that bit earned above $250,000. You should want to be paying 25% because it would mean you already earned $250,000 (over $200,000 after taxes). Without deductions and different classes of income it becomes a simple system. Most people would receive an invoice at the end of the year.

But really anything would be better than what we have now. Somehow it has to be changed but there are so many people making a living based on how the system stands ... profoundly simplifying it would be very destructive but it would pay off pretty quickly.

The underlying issue, why this is a political discussion, is the size of the federal government. How big a government do we want? I think this complicated, aggravating tax system is a political tactic - I believe the thinking goes: the harder it is to pay taxes the less money the government will be able to collect and with less money the size will be constrained. That running deficits constrain the future size of government. If that's the logic I think they have it backwards and have undercut themselves but in any case this costly tax system has got to go.

[Rerun]

I have notified the Admins that the name should be changed.  So we shall see.  I don't know how and I don't think as a Moderator I have the capability of doing that. 

                   

[SugarBear]

I also agree with a flat tax rate.  This way those who have more and thus spend more pay a greater amount in taxes.  Those who have less and, if are budgeting correctly, will spend less thus pay a smaller amount in taxes.

But here's the tricky part...we don't want the people who have less to spend less.  We want them to have more money to spend because these are the people who drive our economy.  These are the people who are the REAL job creators.  If you have one person with an extra $30,000,000 to spend, s/he isn't going to buy 30 cars worth $1m.  However, if you have 30,000 people with an extra $1,000 to spend because of an overall decrease in the amount of tax they pay, they'll spend it on the consumer goods that are the foundation of our economy's strength.  And every time they buy something, there is sales tax...

In my opinion this is the main problem with Americans and their debt load.  If I had an extra grand a month, I would not spend it.  I would save what was leftover after paying for necessities until I had enough to retire comfortable. Only then I would be more liberal with my spending as I could afford it or reach my desired retirement age.

[cassandra]

Ahum, I agree with the Capital Gains tax being the same as income tax. And the corporation tax can be included. That's where most money is, isn't it?

[Willis]

... And the corporation tax can be included. That's where most money is, isn't it?

Just keep in mind that corporations don't really pay taxes. Any "tax" they pay must be included in their Cost of Goods Sold (though in accounting terms it is a separate line item and not technically an "expense"); thus they must charge more respectively for their products if they want to remain in business. So in effect, any taxes on corporations are nothing more than a hidden consumption tax on consumers.

A related issue is the tax on corporate dividends paid by individuals as income tax. Since dividends are issued post-tax (i.e., out of the net profit), they have already been taxed once when they are taxed again as personal income--thus, double taxation. Pretty smooth trick by our government that most people do not know about.

(All of the above relates to U.S. tax law of course.)

 

[Gerald Lively]

Interesting thread!

Federal income tax as an isolated subject, is not a solvable problem.  Oddly enough, I prepared government budgets for a living.  What I take away from that experience is that there are many taxes we pay and adjusting our Federal income taxes to a simplified (flat tax) may represent an opportunity for other levels of government to raise taxes.  Hey, it happens!

Consider the various levels of government commonly established in the US: Federal, State, County, City, Special Districts, Schools and even mosquito Abatement.  Then understand that business who pay taxes merely pass these along in the form of price increases.

Let me think:  federal taxes on income, capital gains, excise tax, sales tax, property tax, unsecured property tax, driver’s license, car registration, multiple permits and fees, and all sorts of iddy-biddy sneaky things that creep into your wallet and nibble away at those dollar bills.

I would be in favor of a simplified tax system whereby three levels of government are allowed to charge one tax:  federal, state, city. (subject to amendment). 

Okay, so I am rambling.  I have never put my head into our system of taxes.  I know that government budgeting deals with many sources of revenue and it is complex.  Since I haven’t really thought this out, or even edited this item, go ahead and rip it apart.

gerald

[cassandra]

No ripping from me GL. Me (as former NL, and now UK taxpayer) would like to know what the VAT is on consumergoods. Do you also have 3 or 4 different rates? And is your tax-avoidance etc in the US as bad as it is in ....... Europe?

[Hober Mallow]

End corporate welfare. Lower the top tax rate but close loopholes so corporations actually pay those taxes. No more subsidies, no more bailouts. The oil industry, raking in record profits and avoiding paying American taxes, doesn't need welfare money. If the nuclear industry wants to build a power plant, they do it on their dime, not the taxpayers'.

[Whamo]

Personally I think inheritance taxes should be larger for large estates.  Otherwise you have the same families enjoying the wealth somebody else earned.  There's no incentive for them to become productive citizens.  Trust fund hedonists abound in today's society.  The rich are too greedy.  At my nephew's wedding I met a billionaire.  The guy pops in his helicopter, after flying to the local airport in his family plane, and stays at one of his family's ten houses.  I don't mind seeing the rich enjoy themselves.  Genius at work like this billionaire, well, deserve it.  But it's a waste to have 10 houses, 9 of which stand empty most of the time.  Why can't they just stay in luxury hotels or something?  Why can't they fly in a rented plane or even a first-class seat in a commercial airplane?  To be fair, the billionaire's son works.  If it was me it would be party time, 24/7, if I had that kind of loot. 

[Gerald Lively]

The Supreme Court held that corporations are people.  The context of that decision had to do with campaign contributions and free speech. Well, Folks, if corporations are people then corporations should be subjected to the very same income taxes that you and I pay.  No more capital gains tax because it is income.  And a penalty should be paid for deposits in offshore accounts.

Too radical for you?  Consider this; eliminate subsidies and tax breaks to business and corporations including subsidies in the Farm Bill.  Then, on the expenditure side, change the procurement practices of the Pentagon so they are in line with procurement practices imposed on State and Local governments. 

Ha!  Back to taxes.  Eliminate all state income tax, raise federal taxes so that there is a net zero followed by the old “revenue sharing” program of the 1970’s.  Then, reconsider all of the myriad little taxes we pay like sales tax, excise tax, etc.  Lastly, require all states to adopt the California prop-13 real estate tax rules.

Of course, this won’t happen.  If it did the middle class would return, a federal balanced budget would possible and surpluses would be available to be paid against the National Debt. 

Hey, I have nothing to do but use the memory of my government budgeting experience to imagine what I would do if I were the US benevolent dictator.