Man ya know I tend to feel like I get screwed on taxes for a couple of reasons. First I'm in that top 25%, but not by much. Second I live and work in NYC which is a total income distortion. Third I have no kids and lastly I don't own a house or a co-op.
But ya know what, it really doesn't bother me that much. What bothers me is I don't feel like I get value for my money. I mean you look at countries like Denmark or Sweden that have really high tax rates and you know what they get value for their money. Great healthcare and education, good essential services.
Here's a hypothetical question: If a flat tax could be conclusively shown to yield the same amount of revenue as the current progressive tax, how many of our liberals here would be in favor of it?
<strong>Here's a hypothetical question: If a flat tax could be conclusively shown to yield the same amount of revenue as the current progressive tax, how many of our liberals here would be in favor of it?</strong><hr></blockquote>
It would depend on the balance between the size of the exemption and the tax rate. A flat tax could be fairly progressive if it had a high rate and a large exemption, like if you didn't have to pay taxes on the first $50,000 of income, but the rate was 40% (I have no idea if that would be revenue neutral).
But most of the actual plans I've seen have lower rates and exemptions, and so would keep things the same for poor people, lower the rates on rich people, and raise them for middle people. I wouldn't be in favor of that.
Those flat tax plans that every one and their mother proposed a few years back were mostly shams. They had absurdly low rates and high exemptions, making them seem better than they were, because they were not revenue neutral.
Also, people think flat tax = simple tax, and that's not the case. There can still be all the complex exemptions, deductions, loopholes, etc. in the system.
I support replacing the IRS and most other taxes with a national sales tax. Possibly with either exemptions for food and other basic costs of living or, instead, a refund system in which everyone (rich and poor) receives a monthly rebate equivalent to the taxes that would be spent on the basic costs of living. Such proposals have been worked out that show that with about a 23% sales tax you could bring in the same revenue as the current system. Here's the really cool thing- in a lot of cases the costs of things would drop nearly 23% because the added expenses of business tax on production would be eliminated.
As for purpose of taxation-
As I said, return on investment. The financial costs of 9-11 make it evident that a good defense is worth paying for. Education and research are important to keeping our people and country competitve. Some social programs are worth it if they reduce the need for prisons or healthcare and do not encourage dependency, Foreign aide can be an extension of defense if it cultivates democracies and an extension of healthcare if it reduces the spread of disease.
As for the disparity between rich and poor-
I believe that the mean quality of life has improved in the last umpteen years, mostly due to technological advances. I think the advancement of technology is much more critical to a continued improvement in mean quality of life than redistribution of wealth.
OTOH, I am concerned with the disparity of infuence people have in our government due to disparities of wealth. Reducing the influence of money in Washington requires several reforms, but among them is eliminating a complicated tax code which is the target of so much lobbying.
THT: For some reason when I tried to respond to your post it only qouted my statements and being the lazy guy I am I didn't put in the code to qoute yours so if I missed addressing anything I'm sorry.
I support replacing the IRS and most other taxes with a national sales tax.</strong>
Unless we move to a cashless society, perhaps not even then, there will always be a need for a bureaucratic agency to handle the paperwork. Ie, sellers will have to pay their share of the money to the government, and an IRS type agency needs to be there to keep them honest.
<strong>Possibly with either exemptions for food and other basic costs of living or, instead, a refund system in which everyone (rich and poor) receives a monthly rebate equivalent to the taxes that would be spent on the basic costs of living.</strong>
The system could be just as complex as the current one because a myriad of exceptions and loopholes can be made into law If I sell my car, is it taxed? If I sell stock, is it taxed? Are there exemptions if I have kids? If I give to charity is there a tax exemption for the things I sell?
Simplicity in the tax system needs to be fought for like it's a Constitutional right, otherwise, Congress will introduce laws that will make it messy.
<strong>Here's the really cool thing- in a lot of cases the costs of things would drop nearly 23% because the added expenses of business tax on production would be eliminated.</strong>
Yes. In theory, all businesses should not have any tax on it whatsoever because they'll pass the cost of their taxes to the consumers and employees anyways. But like in deregulated markets, businesses will sell at what prices they can get away with. That's not the same thing as the lowest price they can sell at. So, I'm not sure that there will be an actual reduction in costs of things. There should be, but it isn't a guarantee.
<strong>As I said, return on investment. The financial costs of 9-11 make it evident that a good defense is worth paying for.</strong>
The terrorist attack on 11 Sept was due to incompetence on the part of the DOT, FBI, CIA, DOD, NSA, and the West Wing itself. It's not because of the lack of money. All of the above agencies have more than enough funding. So sometimes, money doesn't solve everything
However, defense as whole a should wholly be dependent on the conditions of the world. We're in a situation where we really don't need a military of our size. There's nobody to fight anymore. We need more speed perhaps, and that may cost more money.
<strong>I think the advancement of technology is much more critical to a continued improvement in mean quality of life than redistribution of wealth.</strong>
If there is a great majority of people living at or below the poverty line and a very small minority super rich, the society might not be very stable and may require redistribution of wealth.
<strong>Reducing the influence of money in Washington requires several reforms, but among them is eliminating a complicated tax code which is the target of so much lobbying.</strong>
I'm sure there will be some sort of lobbying to make this and that exempt from taxation or this and that exempt from regulation. All systems can be messed up. It's only through vigilance that they can be kept clean.
It would depend on the balance between the size of the exemption and the tax rate. A flat tax could be fairly progressive if it had a high rate and a large exemption, like if you didn't have to pay taxes on the first $50,000 of income, but the rate was 40% (I have no idea if that would be revenue neutral).</strong><hr></blockquote>
No it wouldn't be. It would result in hundreds of billions of new revenue for the government if it didn't cripple the economy first.
[quote]<strong>Those flat tax plans that every one and their mother proposed a few years back were mostly shams.</strong><hr></blockquote>
[quote]<strong>Also, people think flat tax = simple tax, and that's not the case. There can still be all the complex exemptions, deductions, loopholes, etc. in the system.</strong><hr></blockquote>
But that's not what has been proposed. The plans that have been presented eliminated 99% of the loopholes. The only significant one that would survive would be the home mortgage interest deduction. If that was ever eliminated (in a perfect world it would be) it would raise hell with property values.
<strong>It would result in hundreds of billions of new revenue for the government if it didn't cripple the economy first.
</strong><hr></blockquote>
I tried to answer your question in a straightforward manner, and I admitted I wasn't sure if the exact numbers I proposed were really going to turn out revenue neutral.
I was just expressing the principle: high rate + large exemption = OK with me. How about a $75,000 exemption rather than a $50,000 one? Why don't you tell me where you disagree with the basic principles I stated.
[quote] <hr></blockquote>You're really good with those rolleyes. Congratulations. Now care to tell me where you disagree with why I said they were mostly shams? Even you said "if it could be conclusively shown to yield the same amount of revenue" as the current tax, so I know you're aware that that was a big issue when they were being proposed. So then why are you rolling your eyes?
[quote]But that's not what has been proposed.<hr></blockquote>I know, but you didn't specify that in your hypothetical question, so I thought it was important to address the issue. In theory, flatness has nothing to do with simplicity, and that's what I was trying to convey.
The reason the tax code is complex is not because it's progressive, it's because there are lots of deductions. Looking up your number in the tax table is not difficult. It's figuring your AGI after all the absurd deductions like for buying your grandma Pennsylvania-hand-made slippers for Christmas and investing in business larger than 18.3 employees that recycle their toilet paper for at least 87.4 days, but only if you make less than $62,761.81 dollars, including capital gains but excluding interest income.
Let me ask you a hypothetical question - which would you prefer:
1. Getting rid of all or most deductions, but retaining the progressive rate system, or
2. A single flat rate, but retaining all the deductions/credits/etc. that exist now.
<strong>Unless we move to a cashless society, perhaps not even then, there will always be a need for a bureaucratic agency to handle the paperwork. Ie, sellers will have to pay their share of the money to the government, and an IRS type agency needs to be there to keep them honest.</strong>
Much, much, much less bureaucracy with an NST is the key. All but a couple states already have systems for collecting sales tax. For the most part it simply requires upping the percentage collected (and maybe some more money for ensuring compliance). Also, common sense suggests that it takes less work to monitor the financial activities of all businesses instead of that of all people in the US.
<strong>The system could be just as complex as the current one because a myriad of exceptions and loopholes can be made into law If I sell my car, is it taxed? If I sell stock, is it taxed? Are there exemptions if I have kids? If I give to charity is there a tax exemption for the things I sell?</strong>
In the proposals I've seen everyone receives a rebate that is adjusted based on number of dependents. No taxes on used items or charity donations. Stocks I'm not sure about. I would suspect that the broker (providing a service) might have to charge something.
Personally I would be in favor of a system with no exemptions or rebates because it would lower the rate even more, but I don't think it would sell with the people or, frankly, the government. People don't want to feel like they are taxed for food or other basics of living even when an added cost of bureaucracy might negate the savings. And the government likes to do social engineering.
Honestly, I think an NST would eventually have both exemptions and rebates, but I just don't see how it could possibly be as intrusive as the IRS. Sure, they might start putting luxury taxes on certain things and "sin" taxes on others (like cigarettes). They might start quarenteening off part of it for social security (that might not even be that bad an idea). But so long as we are vigiliant, as you say, and resist taking money from people simply because they can afford it I think it would be a much better system.
<strong>Simplicity in the tax system needs to be fought for like it's a Constitutional right, otherwise, Congress will introduce laws that will make it messy.</strong>
Simplicity is another great advantage to an NST. If taxes are 23% on everything you buy then whenever congress wants to raise taxes to say 24% you can know immediately how it will affect your life. No more of this smoke and mirrors bullshit about targeted tax increases, deductions, credits with politicians promising that the "average" person won't even feel it.
As for the constitutional right thing- i would agree that it would be a good idea to dictate the extent and limitations of an NST in an amendment. An amendment might be required, after all, since we have to get rid of the IRS for good to make sure we don't end up with both an IRS and NST.
<strong>Yes. In theory, all businesses should not have any tax on it whatsoever because they'll pass the cost of their taxes to the consumers and employees anyways....So, I'm not sure that there will be an actual reduction in costs of things. There should be, but it isn't a guarantee.</strong>
First, under the NST businesses would have no taxes to pass off to the consumers. Second, with the exceptions of monopolies and price fixing (both already illegal) every competitive business will be forced by the marketplace to pass the reduced costs to the customer. As "theories" go this one is almost as strong as relativity and evolution.
<strong>However, defense as whole a should wholly be dependent on the conditions of the world. We're in a situation where we really don't need a military of our size. There's nobody to fight anymore. We need more speed perhaps, and that may cost more money.</strong>
Whatever. My point is simply that defense is a worthy expenditure of our taxes. Obviously, anyone can argue about the pricetag.
<strong>If there is a great majority of people living at or below the poverty line and a very small minority super rich, the society might not be very stable and may require redistribution of wealth.</strong>
What is considered poverty today in the US is 10x better than poverty 50 years ago, and 100x better than poverty in the rest of the world today. Investments in education and healthcare are necessary for equity of opportunity and to fuel the continued technological advance of our country. I shudder, however, at the thought that people might rise up against the better off simply out of a sense of greed. The only moral justification for redistributing wealth is if it was obtained by violating someones rights.
<strong>I'm sure there will be some sort of lobbying to make this and that exempt from taxation or this and that exempt from regulation. All systems can be messed up. It's only through vigilance that they can be kept clean.</strong>
I agree. But some systems are more prone to manipulation than others. IMHO, an NST beats an income tax if only due to it's visibility. People would notice on a daily basis the nature and extent of taxation instead of sitting down at the end of the year with a enyclopedia sized tax code.
I've read reports that say the National Sales tax proposal of 23% is bogus. They're doing exactly what the flat-tax proposals did: set a rate that would take in a lot less revenue than the current system in order to make the proposal look better than it really is.
<a href="http://www.ctj.org/html/nytsales.htm"; target="_blank">One analysis</a> says that the rate would actually have to be 56% in order to get rid of the income tax.
I do like that a sales tax would discourage spending rather than working, especially when a big problem right now is consumer debt. But the killer for me as a liberal is that the overall tax burden on the poor would go way up, and it's hard to find a way of counteracting that easily.
I tried to answer your question in a straightforward manner, and I admitted I wasn't sure if the exact numbers I proposed were really going to turn out revenue neutral.
I was just expressing the principle: high rate + large exemption = OK with me. How about a $75,000 exemption rather than a $50,000 one? Why don't you tell me where you disagree with the basic principles I stated.</strong><hr></blockquote>
And I'm just saying it's a lousy principle. 40% - That's the problem. That rate doesn't kick in today (to be precise it's 39.6%) until you are well over $100k (for a single filer). If you had it on everybody over $50k or even $75k what do you think will happen? And I'm not at all in favor of exemptions anywhere near what you are proposing. You'd essentially take most of the population off of the tax rolls.
<strong>You're really good with those rolleyes. Congratulations. Now care to tell me where you disagree with why I said they were mostly shams? Even you said "if it could be conclusively shown to yield the same amount of revenue" as the current tax, so I know you're aware that that was a big issue when they were being proposed. So then why are you rolling your eyes?</strong><hr></blockquote>
Yes, the rolleyes are not a very substantive argument but then again neither is just labling the various flat tax proposals as shams.
Much, much, much less bureaucracy with an NST is the key. All but a couple states already have systems for collecting sales tax. ... Also, common sense suggests that it takes less work to monitor the financial activities of all businesses instead of that of all people in the US.</strong>
I was just arguing that the NST wouldn't get rid of a tax agency. The size of the bureaucracy is dependent on the complexities of the tax codes. It'll get rid of the unsavory part of doing taxes for the great majority of people, but the IRS is still going to be there, not of the same size obviously. Whether you call it the IRS or the NSTS, it doesn't matter which, there will be an agency to control incoming money for the government.
I'm not against any tax system really. As long as it works and is fair and equatable, I pretty much don't care. A NST would be fine with me. I have the nagging suspicion that the gov't will have to shrink a large percentage to really make it work though.
<strong>But so long as we are vigiliant, as you say, and resist taking money from people simply because they can afford it I think it would be a much better system.</strong>
Well, government services costs money. If a tax system increases the tax burden too much on the lower class and breaks their back, than a progressive system (in this case, increased luxury taxes) NST will have to be implemented. Like, in the case of a major war, who pays?
When income taxes were illegal, the US gov't had a very small military, virtually zero aid programs, and virtually no oversight agencies.
<strong>First, under the NST businesses would have no taxes to pass off to the consumers. Second, with the exceptions of monopolies and price fixing (both already illegal) every competitive business will be forced by the marketplace to pass the reduced costs to the customer. As "theories" go this one is almost as strong as relativity and evolution.</strong>
No, I don't think that's the way the whole system works. Yes parts of the system work that way (commodities), but not all. I said businesses will price their product at what they can get most away with, not at the minimum they can sell it at. The former denotes price competition can go up or down depending on the nature of the product or market involved.
With public companies, the value of their shares is dominated by the amount of profit the company makes. This forces public companies to maximize their profits, not sell their products at the lowest prices. The fact there's competition doesn't mean it will force the companies to sell their products at the lowest prices.
The theory would always be true if the product was only judged on its merits (quality, functionality, et al), but popularity of things isn't entirely based on that. There's marketing, business acumen, cost of entry into the market sector, market dominance, etc., that can negate the advantages of having a competitive market. That's if the competitor wants to play the "lowest prices wins" game in the first place. They can just go along and increase prices lockstep with its competitors.
<strong>I shudder, however, at the thought that people might rise up against the better off simply out of a sense of greed. The only moral justification for redistributing wealth is if it was obtained by violating someones rights.</strong>
They did it in France
When I hear the argument that the tax system is a redistribution of wealth, I cringe a little. The system doesn't make the wealthy poor and the poor wealthy, which the language of "redistribution of wealth" seems to imply. What it does is help the poor get by on deterministic level of funding while the wealthy still stay awfully wealthy.
If the society is such that the lower classes are suffering badly, and the gov't needs to provide aid, I don't think there is a choice but to have progessive system.
<strong>But some systems are more prone to manipulation than others. IMHO, an NST beats an income tax if only due to it's visibility. People would notice on a daily basis the nature and extent of taxation instead of sitting down at the end of the year with a enyclopedia sized tax code.</strong>
My only problem with it is that it would seem to make the low times very low (gov't deficits would balloon) and the high times sort of so-so, while an income tax would guarantee a revenue stream for the government. Otherwise I'm fine with it, though I think some more thought and detail needs to be put into it.
<strong>Man ya know I tend to feel like I get screwed on taxes for a couple of reasons. First I'm in that top 25%, but not by much.</strong><hr></blockquote>
Then you should be all right. If I read the numbers correctly the 15% that is between 11% and 25% pay 17% of total US tax. It looks like its the top 10% to 15% percent that is losing on your progressive tax system.
IMHO, the richer you are, the higher tax rate you should have. Why?
Simple. The rich typically get richer or stay rich by exploiting the poorer. The low-income earners are working their butts off to bring profits to their employers. Employers get rich from the profits and from their stock options that they so graciously award themselves. They also get even more money from buying and selling huge amounts of stock, because they have enough money to buy lots of shares.
The lower tier employees often get some stock but usually not enough to make too much of a difference.
So basically it's the low-income earners that allow the rich to get their money, so why not take some of it back in the form of paying to run the country.
Or maybe I'm just cyncical because I watched my retirement investments drop 66% in the last two years.
I don't know. I think rich people should get taxed for a reason other than being wealthy. Rich people should be taxed accordingly for what they indulge in, not what they make in a year.
<strong>I was just arguing that the NST wouldn't get rid of a tax agency. </strong>
True. I should say that I'm in favor of not eliminating, but reducing the IRS in power and size to the point where it would occupy only a few cubicles within the treasury department.
<strong> Like, in the case of a major war, who pays?</strong>
Hopefully, for once in history, our goddamn allies. No seriously, I'd have to look at the numbers, but in general I would say that part of defense is having reserves. If we are ever disciplined enough to create true monetary reserves (like a real SS fund) we could use that in desperate times. But yes, if we were cut to the bone and close to defeat i wouldn't have a fit about a temporary income tax being resurrected.
<strong>When income taxes were illegal, the US gov't had a very small military, virtually zero aid programs, and virtually no oversight agencies.</strong>
I could argue that our government could use some trimming (and given your views on defense you might agree with me in some areas), but that is another discussion. The simple point to take home here is that the 23% NST proposal I mentioned is revenue nuetral. So unless we need to spend a lot more it should work well.
<strong>I said businesses will price their product at what they can get most away with, not at the minimum they can sell it at.</strong>
And in general businesses can't get away with charging much more than their competitors even for more favorable products. Coke doesn't cost much more than Pepsi and DVDs all cost roughly the same despite the content. We could argue all sorts of different examples, but the big question is whether in the aggregate you believe that capitalism works- that competition tends to lower prices and increase product quality.
<strong>If the society is such that the lower classes are suffering badly, and the gov't needs to provide aid, I don't think there is a choice but to have progessive system.</strong>
The NST is progressive because the rich buy more things, thus paying more taxes. With exemptions and/or rebates you can have a situation where the poor pay no taxes at all. It is important to point out that after this point any money given to the poor is, indeed, taken from the rich.
Such taxation cannot be justified simply because the poor can use the money (I could use Steve Job's money, but I don't deserve it) especially when people have put themselves in bad circumstances through their own choices (having kids they can't afford). No, at this point one must be able to substantiate how the taxed (the rich) can expect some return on their investment. In some cases (education, health care) this can be justified, but the better off are by no means obligated to give their money to the poor just because the poor want it.
<strong>My only problem with it is that it would seem to make the low times very low (gov't deficits would balloon) and the high times sort of so-so, while an income tax would guarantee a revenue stream for the government. </strong>
Actually, the numbers show that spending is more constant than income as people tend to dip into savings when times are tough. Also, although I've never seen any of the NST people propose this, I think it would be interesting to have a national sale (drop the percentage to 20 or something) when the economy dips. I'd bet it would work better than $300 tax rebates that people just put into savings.
A national sales tax simply would not work, for two interlocking reasons:
1. If it's universal, it would be horribly, horribly, horribly regressive. The poorer you are, the greater portion of your income you spend. And the poorer you are, the more you spend on "things" (rent, food, diapers - all easily taxed and reported) and the less you spend on services (golf lessons, massages, consultants - all more easily hidden and unreported). The net result is inescapably to transfer the burden of taxation from the rich to the poor.
2. It's simply not practical to make it progressive. There's probably three ways to go about de-regressifying a NST.
One is to exempt basic items - food, clothing, shelter, maybe schooling. But how do you draw the lines? A $400/mo apartment on 130th St should probably be exempt, but should a $12,000/mo penthouse in the Upper East side? Bread and cheese, yes. Beer? Gourmet cheese? Organic bread? Wine? REALLY expensive wine? It would quickly become a nightmare of companies lobbying Congress to have their products exempted.
Or, we can do it by income. Under a certain income, pay no NST. But how does a retailer know someone's exempt? Easy solution! National ID cards with biometric data plus a government-certified income level! Intrusive, Orwellian, demeaning, and just imagine the black-market possibilities!
Or, you could try end-of-year rebates based on income. Wouldn't this make the current IRS bureaucracy look tame? Everyone in the country would still have to file a tax return. Everyone in the country would have to have their income verified by their employer. Since you'd be talking about massive sums here (the rebate checks would probably represent a significant percentage of government outlays - maybe as high as 25%, since poor spend out of proportion to their income, in contrast to how the rich currently pay income tax out of proportion to their income), the IRS would actually have to be able to catch cheaters. Lots of them. Plus, since you can't verify every penny people spend, you can't actually replace the money they give to the NST. You end up simply cutting them a check to boost their income. Anyone who thinks welfare is bad is gonna have a heart attack over this. The incentives are all wrong for a purportedly free, capitalist society. Not to mention the fact that you're setting up a massive Ponzi scheme - the poor spend, paying NST, so they get a check , which they spend, generating more NST, giving them a bigger check, more NST, bigger check, more NST...
All in all, you'd be replacing one milquetoastian nightmare with a flaming enchilada of a nightmare. Not worth it. In any event, why muck with the current system at all? The only ultimate reason can be that you think it doesn't distribute the burden of taxation fairly. So why hide behind a NST facade? Just propose changes to the current system that would distribute the burden the way you'd like. Wouldn't that produce a more honest debate?
Comments
But ya know what, it really doesn't bother me that much. What bothers me is I don't feel like I get value for my money. I mean you look at countries like Denmark or Sweden that have really high tax rates and you know what they get value for their money. Great healthcare and education, good essential services.
<strong>Here's a hypothetical question: If a flat tax could be conclusively shown to yield the same amount of revenue as the current progressive tax, how many of our liberals here would be in favor of it?</strong><hr></blockquote>
It would depend on the balance between the size of the exemption and the tax rate. A flat tax could be fairly progressive if it had a high rate and a large exemption, like if you didn't have to pay taxes on the first $50,000 of income, but the rate was 40% (I have no idea if that would be revenue neutral).
But most of the actual plans I've seen have lower rates and exemptions, and so would keep things the same for poor people, lower the rates on rich people, and raise them for middle people. I wouldn't be in favor of that.
Those flat tax plans that every one and their mother proposed a few years back were mostly shams. They had absurdly low rates and high exemptions, making them seem better than they were, because they were not revenue neutral.
Also, people think flat tax = simple tax, and that's not the case. There can still be all the complex exemptions, deductions, loopholes, etc. in the system.
I support replacing the IRS and most other taxes with a national sales tax. Possibly with either exemptions for food and other basic costs of living or, instead, a refund system in which everyone (rich and poor) receives a monthly rebate equivalent to the taxes that would be spent on the basic costs of living. Such proposals have been worked out that show that with about a 23% sales tax you could bring in the same revenue as the current system. Here's the really cool thing- in a lot of cases the costs of things would drop nearly 23% because the added expenses of business tax on production would be eliminated.
As for purpose of taxation-
As I said, return on investment. The financial costs of 9-11 make it evident that a good defense is worth paying for. Education and research are important to keeping our people and country competitve. Some social programs are worth it if they reduce the need for prisons or healthcare and do not encourage dependency, Foreign aide can be an extension of defense if it cultivates democracies and an extension of healthcare if it reduces the spread of disease.
As for the disparity between rich and poor-
I believe that the mean quality of life has improved in the last umpteen years, mostly due to technological advances. I think the advancement of technology is much more critical to a continued improvement in mean quality of life than redistribution of wealth.
OTOH, I am concerned with the disparity of infuence people have in our government due to disparities of wealth. Reducing the influence of money in Washington requires several reforms, but among them is eliminating a complicated tax code which is the target of so much lobbying.
THT: For some reason when I tried to respond to your post it only qouted my statements and being the lazy guy I am I didn't put in the code to qoute yours so if I missed addressing anything I'm sorry.
I support replacing the IRS and most other taxes with a national sales tax.</strong>
Unless we move to a cashless society, perhaps not even then, there will always be a need for a bureaucratic agency to handle the paperwork. Ie, sellers will have to pay their share of the money to the government, and an IRS type agency needs to be there to keep them honest.
<strong>Possibly with either exemptions for food and other basic costs of living or, instead, a refund system in which everyone (rich and poor) receives a monthly rebate equivalent to the taxes that would be spent on the basic costs of living.</strong>
The system could be just as complex as the current one because a myriad of exceptions and loopholes can be made into law
Simplicity in the tax system needs to be fought for like it's a Constitutional right, otherwise, Congress will introduce laws that will make it messy.
<strong>Here's the really cool thing- in a lot of cases the costs of things would drop nearly 23% because the added expenses of business tax on production would be eliminated.</strong>
Yes. In theory, all businesses should not have any tax on it whatsoever because they'll pass the cost of their taxes to the consumers and employees anyways. But like in deregulated markets, businesses will sell at what prices they can get away with. That's not the same thing as the lowest price they can sell at. So, I'm not sure that there will be an actual reduction in costs of things. There should be, but it isn't a guarantee.
<strong>As I said, return on investment. The financial costs of 9-11 make it evident that a good defense is worth paying for.</strong>
The terrorist attack on 11 Sept was due to incompetence on the part of the DOT, FBI, CIA, DOD, NSA, and the West Wing itself. It's not because of the lack of money. All of the above agencies have more than enough funding. So sometimes, money doesn't solve everything
However, defense as whole a should wholly be dependent on the conditions of the world. We're in a situation where we really don't need a military of our size. There's nobody to fight anymore. We need more speed perhaps, and that may cost more money.
<strong>I think the advancement of technology is much more critical to a continued improvement in mean quality of life than redistribution of wealth.</strong>
If there is a great majority of people living at or below the poverty line and a very small minority super rich, the society might not be very stable and may require redistribution of wealth.
<strong>Reducing the influence of money in Washington requires several reforms, but among them is eliminating a complicated tax code which is the target of so much lobbying.</strong>
I'm sure there will be some sort of lobbying to make this and that exempt from taxation or this and that exempt from regulation. All systems can be messed up. It's only through vigilance that they can be kept clean.
<strong>
It would depend on the balance between the size of the exemption and the tax rate. A flat tax could be fairly progressive if it had a high rate and a large exemption, like if you didn't have to pay taxes on the first $50,000 of income, but the rate was 40% (I have no idea if that would be revenue neutral).</strong><hr></blockquote>
No it wouldn't be. It would result in hundreds of billions of new revenue for the government if it didn't cripple the economy first.
[quote]<strong>Those flat tax plans that every one and their mother proposed a few years back were mostly shams.</strong><hr></blockquote>
[quote]<strong>Also, people think flat tax = simple tax, and that's not the case. There can still be all the complex exemptions, deductions, loopholes, etc. in the system.</strong><hr></blockquote>
But that's not what has been proposed. The plans that have been presented eliminated 99% of the loopholes. The only significant one that would survive would be the home mortgage interest deduction. If that was ever eliminated (in a perfect world it would be) it would raise hell with property values.
<strong>It would result in hundreds of billions of new revenue for the government if it didn't cripple the economy first.
</strong><hr></blockquote>
I tried to answer your question in a straightforward manner, and I admitted I wasn't sure if the exact numbers I proposed were really going to turn out revenue neutral.
I was just expressing the principle: high rate + large exemption = OK with me. How about a $75,000 exemption rather than a $50,000 one? Why don't you tell me where you disagree with the basic principles I stated.
[quote]
[quote]But that's not what has been proposed.<hr></blockquote>I know, but you didn't specify that in your hypothetical question, so I thought it was important to address the issue. In theory, flatness has nothing to do with simplicity, and that's what I was trying to convey.
The reason the tax code is complex is not because it's progressive, it's because there are lots of deductions. Looking up your number in the tax table is not difficult. It's figuring your AGI after all the absurd deductions like for buying your grandma Pennsylvania-hand-made slippers for Christmas and investing in business larger than 18.3 employees that recycle their toilet paper for at least 87.4 days, but only if you make less than $62,761.81 dollars, including capital gains but excluding interest income.
Let me ask you a hypothetical question - which would you prefer:
1. Getting rid of all or most deductions, but retaining the progressive rate system, or
2. A single flat rate, but retaining all the deductions/credits/etc. that exist now.
Much, much, much less bureaucracy with an NST is the key. All but a couple states already have systems for collecting sales tax. For the most part it simply requires upping the percentage collected (and maybe some more money for ensuring compliance). Also, common sense suggests that it takes less work to monitor the financial activities of all businesses instead of that of all people in the US.
<strong>The system could be just as complex as the current one because a myriad of exceptions and loopholes can be made into law
In the proposals I've seen everyone receives a rebate that is adjusted based on number of dependents. No taxes on used items or charity donations. Stocks I'm not sure about. I would suspect that the broker (providing a service) might have to charge something.
Personally I would be in favor of a system with no exemptions or rebates because it would lower the rate even more, but I don't think it would sell with the people or, frankly, the government. People don't want to feel like they are taxed for food or other basics of living even when an added cost of bureaucracy might negate the savings. And the government likes to do social engineering.
Honestly, I think an NST would eventually have both exemptions and rebates, but I just don't see how it could possibly be as intrusive as the IRS. Sure, they might start putting luxury taxes on certain things and "sin" taxes on others (like cigarettes). They might start quarenteening off part of it for social security (that might not even be that bad an idea). But so long as we are vigiliant, as you say, and resist taking money from people simply because they can afford it I think it would be a much better system.
<strong>Simplicity in the tax system needs to be fought for like it's a Constitutional right, otherwise, Congress will introduce laws that will make it messy.</strong>
Simplicity is another great advantage to an NST. If taxes are 23% on everything you buy then whenever congress wants to raise taxes to say 24% you can know immediately how it will affect your life. No more of this smoke and mirrors bullshit about targeted tax increases, deductions, credits with politicians promising that the "average" person won't even feel it.
As for the constitutional right thing- i would agree that it would be a good idea to dictate the extent and limitations of an NST in an amendment. An amendment might be required, after all, since we have to get rid of the IRS for good to make sure we don't end up with both an IRS and NST.
<strong>Yes. In theory, all businesses should not have any tax on it whatsoever because they'll pass the cost of their taxes to the consumers and employees anyways....So, I'm not sure that there will be an actual reduction in costs of things. There should be, but it isn't a guarantee.</strong>
First, under the NST businesses would have no taxes to pass off to the consumers. Second, with the exceptions of monopolies and price fixing (both already illegal) every competitive business will be forced by the marketplace to pass the reduced costs to the customer. As "theories" go this one is almost as strong as relativity and evolution.
<strong>However, defense as whole a should wholly be dependent on the conditions of the world. We're in a situation where we really don't need a military of our size. There's nobody to fight anymore. We need more speed perhaps, and that may cost more money.</strong>
Whatever. My point is simply that defense is a worthy expenditure of our taxes. Obviously, anyone can argue about the pricetag.
<strong>If there is a great majority of people living at or below the poverty line and a very small minority super rich, the society might not be very stable and may require redistribution of wealth.</strong>
What is considered poverty today in the US is 10x better than poverty 50 years ago, and 100x better than poverty in the rest of the world today. Investments in education and healthcare are necessary for equity of opportunity and to fuel the continued technological advance of our country. I shudder, however, at the thought that people might rise up against the better off simply out of a sense of greed. The only moral justification for redistributing wealth is if it was obtained by violating someones rights.
<strong>I'm sure there will be some sort of lobbying to make this and that exempt from taxation or this and that exempt from regulation. All systems can be messed up. It's only through vigilance that they can be kept clean.</strong>
I agree. But some systems are more prone to manipulation than others. IMHO, an NST beats an income tax if only due to it's visibility. People would notice on a daily basis the nature and extent of taxation instead of sitting down at the end of the year with a enyclopedia sized tax code.
<a href="http://www.ctj.org/html/nytsales.htm"; target="_blank">One analysis</a> says that the rate would actually have to be 56% in order to get rid of the income tax.
I do like that a sales tax would discourage spending rather than working, especially when a big problem right now is consumer debt. But the killer for me as a liberal is that the overall tax burden on the poor would go way up, and it's hard to find a way of counteracting that easily.
<strong>
I tried to answer your question in a straightforward manner, and I admitted I wasn't sure if the exact numbers I proposed were really going to turn out revenue neutral.
I was just expressing the principle: high rate + large exemption = OK with me. How about a $75,000 exemption rather than a $50,000 one? Why don't you tell me where you disagree with the basic principles I stated.</strong><hr></blockquote>
And I'm just saying it's a lousy principle. 40% - That's the problem. That rate doesn't kick in today (to be precise it's 39.6%) until you are well over $100k (for a single filer). If you had it on everybody over $50k or even $75k what do you think will happen? And I'm not at all in favor of exemptions anywhere near what you are proposing. You'd essentially take most of the population off of the tax rolls.
[ 01-30-2002: Message edited by: roger_ramjet ]</p>
<strong>You're really good with those rolleyes. Congratulations. Now care to tell me where you disagree with why I said they were mostly shams? Even you said "if it could be conclusively shown to yield the same amount of revenue" as the current tax, so I know you're aware that that was a big issue when they were being proposed. So then why are you rolling your eyes?</strong><hr></blockquote>
Yes, the rolleyes are not a very substantive argument but then again neither is just labling the various flat tax proposals as shams.
Much, much, much less bureaucracy with an NST is the key. All but a couple states already have systems for collecting sales tax. ... Also, common sense suggests that it takes less work to monitor the financial activities of all businesses instead of that of all people in the US.</strong>
I was just arguing that the NST wouldn't get rid of a tax agency. The size of the bureaucracy is dependent on the complexities of the tax codes. It'll get rid of the unsavory part of doing taxes for the great majority of people, but the IRS is still going to be there, not of the same size obviously. Whether you call it the IRS or the NSTS, it doesn't matter which, there will be an agency to control incoming money for the government.
I'm not against any tax system really. As long as it works and is fair and equatable, I pretty much don't care. A NST would be fine with me. I have the nagging suspicion that the gov't will have to shrink a large percentage to really make it work though.
<strong>But so long as we are vigiliant, as you say, and resist taking money from people simply because they can afford it I think it would be a much better system.</strong>
Well, government services costs money. If a tax system increases the tax burden too much on the lower class and breaks their back, than a progressive system (in this case, increased luxury taxes) NST will have to be implemented. Like, in the case of a major war, who pays?
When income taxes were illegal, the US gov't had a very small military, virtually zero aid programs, and virtually no oversight agencies.
<strong>First, under the NST businesses would have no taxes to pass off to the consumers. Second, with the exceptions of monopolies and price fixing (both already illegal) every competitive business will be forced by the marketplace to pass the reduced costs to the customer. As "theories" go this one is almost as strong as relativity and evolution.</strong>
No, I don't think that's the way the whole system works. Yes parts of the system work that way (commodities), but not all. I said businesses will price their product at what they can get most away with, not at the minimum they can sell it at. The former denotes price competition can go up or down depending on the nature of the product or market involved.
With public companies, the value of their shares is dominated by the amount of profit the company makes. This forces public companies to maximize their profits, not sell their products at the lowest prices. The fact there's competition doesn't mean it will force the companies to sell their products at the lowest prices.
The theory would always be true if the product was only judged on its merits (quality, functionality, et al), but popularity of things isn't entirely based on that. There's marketing, business acumen, cost of entry into the market sector, market dominance, etc., that can negate the advantages of having a competitive market. That's if the competitor wants to play the "lowest prices wins" game in the first place. They can just go along and increase prices lockstep with its competitors.
<strong>I shudder, however, at the thought that people might rise up against the better off simply out of a sense of greed. The only moral justification for redistributing wealth is if it was obtained by violating someones rights.</strong>
They did it in France
When I hear the argument that the tax system is a redistribution of wealth, I cringe a little. The system doesn't make the wealthy poor and the poor wealthy, which the language of "redistribution of wealth" seems to imply. What it does is help the poor get by on deterministic level of funding while the wealthy still stay awfully wealthy.
If the society is such that the lower classes are suffering badly, and the gov't needs to provide aid, I don't think there is a choice but to have progessive system.
<strong>But some systems are more prone to manipulation than others. IMHO, an NST beats an income tax if only due to it's visibility. People would notice on a daily basis the nature and extent of taxation instead of sitting down at the end of the year with a enyclopedia sized tax code.</strong>
My only problem with it is that it would seem to make the low times very low (gov't deficits would balloon) and the high times sort of so-so, while an income tax would guarantee a revenue stream for the government. Otherwise I'm fine with it, though I think some more thought and detail needs to be put into it.
[ 01-30-2002: Message edited by: THT ]</p>
<strong>Man ya know I tend to feel like I get screwed on taxes for a couple of reasons. First I'm in that top 25%, but not by much.</strong><hr></blockquote>
Then you should be all right. If I read the numbers correctly the 15% that is between 11% and 25% pay 17% of total US tax. It looks like its the top 10% to 15% percent that is losing on your progressive tax system.
Simple. The rich typically get richer or stay rich by exploiting the poorer. The low-income earners are working their butts off to bring profits to their employers. Employers get rich from the profits and from their stock options that they so graciously award themselves. They also get even more money from buying and selling huge amounts of stock, because they have enough money to buy lots of shares.
The lower tier employees often get some stock but usually not enough to make too much of a difference.
So basically it's the low-income earners that allow the rich to get their money, so why not take some of it back in the form of paying to run the country.
Or maybe I'm just cyncical because I watched my retirement investments drop 66% in the last two years.
<strong>Or maybe I'm just cyncical because I watched my retirement investments drop 66% in the last two years.
Yeah, it was scary looking at the annual report. Guess I won't be retiring at 35 like I had planned.
<strong>I was just arguing that the NST wouldn't get rid of a tax agency. </strong>
True. I should say that I'm in favor of not eliminating, but reducing the IRS in power and size to the point where it would occupy only a few cubicles within the treasury department.
<strong> Like, in the case of a major war, who pays?</strong>
Hopefully, for once in history, our goddamn allies.
<strong>When income taxes were illegal, the US gov't had a very small military, virtually zero aid programs, and virtually no oversight agencies.</strong>
I could argue that our government could use some trimming (and given your views on defense you might agree with me in some areas), but that is another discussion. The simple point to take home here is that the 23% NST proposal I mentioned is revenue nuetral. So unless we need to spend a lot more it should work well.
<strong>I said businesses will price their product at what they can get most away with, not at the minimum they can sell it at.</strong>
And in general businesses can't get away with charging much more than their competitors even for more favorable products. Coke doesn't cost much more than Pepsi and DVDs all cost roughly the same despite the content. We could argue all sorts of different examples, but the big question is whether in the aggregate you believe that capitalism works- that competition tends to lower prices and increase product quality.
<strong>If the society is such that the lower classes are suffering badly, and the gov't needs to provide aid, I don't think there is a choice but to have progessive system.</strong>
The NST is progressive because the rich buy more things, thus paying more taxes. With exemptions and/or rebates you can have a situation where the poor pay no taxes at all. It is important to point out that after this point any money given to the poor is, indeed, taken from the rich.
Such taxation cannot be justified simply because the poor can use the money (I could use Steve Job's money, but I don't deserve it) especially when people have put themselves in bad circumstances through their own choices (having kids they can't afford). No, at this point one must be able to substantiate how the taxed (the rich) can expect some return on their investment. In some cases (education, health care) this can be justified, but the better off are by no means obligated to give their money to the poor just because the poor want it.
<strong>My only problem with it is that it would seem to make the low times very low (gov't deficits would balloon) and the high times sort of so-so, while an income tax would guarantee a revenue stream for the government. </strong>
Actually, the numbers show that spending is more constant than income as people tend to dip into savings when times are tough. Also, although I've never seen any of the NST people propose this, I think it would be interesting to have a national sale (drop the percentage to 20 or something) when the economy dips. I'd bet it would work better than $300 tax rebates that people just put into savings.
[ 01-31-2002: Message edited by: Nordstrodamus ]</p>
1. If it's universal, it would be horribly, horribly, horribly regressive. The poorer you are, the greater portion of your income you spend. And the poorer you are, the more you spend on "things" (rent, food, diapers - all easily taxed and reported) and the less you spend on services (golf lessons, massages, consultants - all more easily hidden and unreported). The net result is inescapably to transfer the burden of taxation from the rich to the poor.
2. It's simply not practical to make it progressive. There's probably three ways to go about de-regressifying a NST.
One is to exempt basic items - food, clothing, shelter, maybe schooling. But how do you draw the lines? A $400/mo apartment on 130th St should probably be exempt, but should a $12,000/mo penthouse in the Upper East side? Bread and cheese, yes. Beer? Gourmet cheese? Organic bread? Wine? REALLY expensive wine? It would quickly become a nightmare of companies lobbying Congress to have their products exempted.
Or, we can do it by income. Under a certain income, pay no NST. But how does a retailer know someone's exempt? Easy solution! National ID cards with biometric data plus a government-certified income level! Intrusive, Orwellian, demeaning, and just imagine the black-market possibilities!
Or, you could try end-of-year rebates based on income. Wouldn't this make the current IRS bureaucracy look tame? Everyone in the country would still have to file a tax return. Everyone in the country would have to have their income verified by their employer. Since you'd be talking about massive sums here (the rebate checks would probably represent a significant percentage of government outlays - maybe as high as 25%, since poor spend out of proportion to their income, in contrast to how the rich currently pay income tax out of proportion to their income), the IRS would actually have to be able to catch cheaters. Lots of them. Plus, since you can't verify every penny people spend, you can't actually replace the money they give to the NST. You end up simply cutting them a check to boost their income. Anyone who thinks welfare is bad is gonna have a heart attack over this. The incentives are all wrong for a purportedly free, capitalist society. Not to mention the fact that you're setting up a massive Ponzi scheme - the poor spend, paying NST, so they get a check , which they spend, generating more NST, giving them a bigger check, more NST, bigger check, more NST...
All in all, you'd be replacing one milquetoastian nightmare with a flaming enchilada of a nightmare. Not worth it. In any event, why muck with the current system at all? The only ultimate reason can be that you think it doesn't distribute the burden of taxation fairly. So why hide behind a NST facade? Just propose changes to the current system that would distribute the burden the way you'd like. Wouldn't that produce a more honest debate?