Agree. Anyone who is truly open minded can see the simplicity and advantages of this type system.

(10-29-2016 08:08 PM)Paul M Wrote:  I appreciate that the two of you keep trying to educate people on this but it seems a few just don't want to understand.

I really don't understand why fair/flat hasn't caught on. So much better.

One of the basics of our system is wherewithal to pay. Progressive rates tax the wealthier at higher rates.

The tax system also uses incentives to encourage certain behaviors such as investment in capital assets and long term investments in companies.

These are all good things. The problem is that it has been carried to an extreme with too many incentives that are too contradictory and policies that give with one hand while taking with another. It leads to a lot of economic and tax preparation activity that is not value added.

The flat tax does away with a lot of these things. And it already exists for the upper middle class. Its called the AMT.

The biggest problem with the VAT is that it is hidden. Its too easy to generate massive sums for the government with no political repercussions.

(10-29-2016 08:08 PM)Paul M Wrote:  I appreciate that the two of you keep trying to educate people on this but it seems a few just don't want to understand.

I really don't understand why fair/flat hasn't caught on. So much better.

Mostly because polticians (especially the left) have made hay for decades now on the idea that their plans 'tax the rich' and that consumption taxes tax the poor, ignoring such simple solutions as a prefund or exemption...

and it sells because people don't care to become informed or lack the ability to comprehend.

Poor and even most middle class people don't think about money the way rich people do, and that often keeps them from becoming rich, or at least richer.

See below

(10-30-2016 11:02 AM)bullet Wrote:  One of the basics of our system is wherewithal to pay. Progressive rates tax the wealthier at higher rates.

They're supposed to, but they often don't. The poor pay little in taxes, the middle class pay around 10-15%, the upper middle class pay 25%+ (amt) and the wealthy pay 15%, but not on all of their earnings... in fact on a small portion of it. That's the reality.

Quote:The tax system also uses incentives to encourage certain behaviors such as investment in capital assets and long term investments in companies.

Which is precisely why the wealthy don't pay more.

Quote:These are all good things. The problem is that it has been carried to an extreme with too many incentives that are too contradictory and policies that give with one hand while taking with another. It leads to a lot of economic and tax preparation activity that is not value added.

You say it's been taken too far... but that gets people focusing on meaningless deductions and not on the simple point that taxing income at 40% (for the wealthy) and gains at 15% (to attract investment, because overseas taxes are closer to 15%) leads to them reporting almost all of their earnings as gains.... OR paying those taxes overseas at 15-20% rather than here at 40.

Quote:The flat tax does away with a lot of these things. And it already exists for the upper middle class. Its called the AMT.

Not really and IMO a bad comparison, since the AMT is part of what keeps the wealthy wealthy and the upper middle class NOT wealthy. The AMT HELPS the very wealthy at the expense of others and needs to go away. I understand your point, but the Fair tax is far different.

Quote:The biggest problem with the VAT is that it is hidden. Its too easy to generate massive sums for the government with no political repercussions.

Is it? I know it's reported when you buy things (like your gasoline tax is) and I think people would notice if they wanted to push the rate from say 20% to 25% knowing that it would add 5% to their costs. The political repercussions in MY Mind would be greater, since NOBODY would be exempt from that price increase. The only way it is politicized is if they want to increase the taxes AND increase the prefund by the same amount... which because you're increasing the prefund, doesn't generate massive sums for the government, and to the extent that it does, at least it's progressively on those who spend more which is generally the wealthy.


The future of the Republican Party requires a more educated voting population (on both sides of the aisle)... otherwise we simply get more of the same, where the only difference between left and right is WHICH rights they want to take from you

(10-30-2016 11:02 AM)bullet Wrote:  Progressive rates tax the wealthier at higher rates.

No, they don't. They drive the "wealthier" to tax-shop for better tax rates. And when they find them overseas (which is where they usually are) that means that middle-class jobs go overseas. Not that they move overseas so much as they start overseas and were never here.

If you have looked at the AMT form (6251), it has continued to grow as more and more tax incentives are included and then taken away from the middle class with the AMT.

The rates do tax higher income individuals at higher rates. Which is why the AMT doesn't impact them. The truly wealthy mainly have capital gains which is taxed at a lower rate that is factored into the AMT, meaning it doesn't apply to those people either.

If its something that gets taken away by the AMT, its probably something that shouldn't be an incentive in the first place. Either it is something you want all the time to be a tax benefit like charitable contributions or capital gains, or you need to eliminate it.

Then the progressive system does work as intended. But the rates have gotten too high. The top tax rate is 39.6%. Then there are state income taxes. In Georgia its 6%. Obamacare taxes investment income at 4%. There is an additional medicare tax of .9% for Obamacare. And then there is medicare and social security at 15.3%, half paid by the employer. Now if you are self-employed you pay all of it, but you do get a deduction for half of it.

If you are self-employed, you might bring home only 40%. Less in a high tax state like California. Then when you add in the costs of employment-transportation, clothes, childcare (a particularly expensive component), you might net very little.

This is a really interesting subject, and I wish I had more time to spend on it. That and the health insurance stuff (I still owe a reply from long ago in the @#&*(!#&*! thread to Ham ... sadly not sure if I'm gonna get to it!)


I wonder, has anyone looked at a system where you do sales taxes but not at a flat rate? Say, based on your income you pay a different rate of sales tax.

So, a poor person buys a $2 hot dog and pays no sales tax. A middle class person buys a $2 hot dog and pays $0.50 sales tax. A rich person buys a $2 hot dog and pays $2 sales tax. That type of thing.

(10-31-2016 01:19 PM)MplsBison Wrote:  This is a really interesting subject, and I wish I had more time to spend on it. That and the health insurance stuff (I still owe a reply from long ago in the @#&*(!#&*! thread to Ham ... sadly not sure if I'm gonna get to it!)


I wonder, has anyone looked at a system where you do sales taxes but not at a flat rate? Say, based on your income you pay a different rate of sales tax.

So, a poor person buys a $2 hot dog and pays no sales tax. A middle class person buys a $2 hot dog and pays $0.50 sales tax. A rich person buys a $2 hot dog and pays $2 sales tax. That type of thing.

Sounds kind of like some of the European VAT taxes where they have rebates.

But doesn't a flat tax actually tax the rich more than the poor?

(10-31-2016 01:19 PM)MplsBison Wrote:  This is a really interesting subject, and I wish I had more time to spend on it. That and the health insurance stuff (I still owe a reply from long ago in the @#&*(!#&*! thread to Ham ... sadly not sure if I'm gonna get to it!)
I wonder, has anyone looked at a system where you do sales taxes but not at a flat rate? Say, based on your income you pay a different rate of sales tax.
So, a poor person buys a $2 hot dog and pays no sales tax. A middle class person buys a $2 hot dog and pays $0.50 sales tax. A rich person buys a $2 hot dog and pays $2 sales tax. That type of thing.

That's the one that is a nightmare to administer. Think about it. How would you do it?

(10-31-2016 01:52 PM)Owl 69/70/75 Wrote:  

(10-31-2016 01:19 PM)MplsBison Wrote:  I wonder, has anyone looked at a system where you do sales taxes but not at a flat rate? Say, based on your income you pay a different rate of sales tax.
So, a poor person buys a $2 hot dog and pays no sales tax. A middle class person buys a $2 hot dog and pays $0.50 sales tax. A rich person buys a $2 hot dog and pays $2 sales tax. That type of thing.

That's the one that is a nightmare to administer. Think about it. How would you do it?

Agreed. You'd have to present your W-2 to buy a stick of gum.

You either exempt things (which is what states and most of Europe does) or you prebate it. I originally preferred the exemption, but have come around on the prebate.

The only substantive difference between VAT and Sales Tax is the way it is apportioned and administered. The net impact on the consumer is essentially identical

The advantage of the flat vat/sales tax is that everyone pays the same... easy to calculate and collect. The prebate is easy to administer because there is no incentive to under-report income, except within a range of say $40,000-$65,000.... but the 'reward' is only a few thousand dollars, and the 'costs' are much higher.

It'd still be hard to get me to sign up for it, because of ideology. No matter how tempting it is, from a practicality standpoint.

There should be no way that a person earning a lot of income can simply say "I don't want to pay taxes this year, so I won't buy anything this year".

(10-31-2016 03:18 PM)MplsBison Wrote:  It'd still be hard to get me to sign up for it, because of ideology. No matter how tempting it is, from a practicality standpoint.

There should be no way that a person earning a lot of income can simply say "I don't want to pay taxes this year, so I won't buy anything this year".

And who would that be.

(10-31-2016 03:18 PM)MplsBison Wrote:  It'd still be hard to get me to sign up for it, because of ideology. No matter how tempting it is, from a practicality standpoint.
There should be no way that a person earning a lot of income can simply say "I don't want to pay taxes this year, so I won't buy anything this year".

What is your ideological objection? Do you think it hurts the poor and middle classes? Do you think it hurts them as much as our current tax structure does by driving good jobs overseas?

(10-31-2016 01:29 PM)Fitbud Wrote:  But doesn't a flat tax actually tax the rich more than the poor?

No.

By definition a flat tax taxes everyone equally. If you offer a prefund, then yes it ultimately does.

Of course we all realize your question wasn't genuine.

(10-31-2016 03:18 PM)MplsBison Wrote:  It'd still be hard to get me to sign up for it, because of ideology. No matter how tempting it is, from a practicality standpoint.

There should be no way that a person earning a lot of income can simply say "I don't want to pay taxes this year, so I won't buy anything this year".

How can you do that? Why would you?

Right now he's saying, I don't want to pay taxes this year, so I'm going to keep all my winners and sell all my losers, matching those gains agains any income to net a 'zero' income, despite creating perhaps millions to be spent and increasing my net worth by millions through unrealized gains. I'm also going to take a loan against my unrealized gains, either his art or real estate or securities and even take a deduction on his taxes from the interest he pays... so he might even get a carry forward to do the same next year. For the truly wealthy, this is an incredibly easy game to play.

(10-31-2016 08:45 PM)Hambone10 Wrote:  Right now he's saying, I don't want to pay taxes this year, so I'm going to keep all my winners and sell all my losers, matching those gains agains any income to net a 'zero' income, despite creating perhaps millions to be spent and increasing my net worth by millions through unrealized gains. I'm also going to take a loan against my unrealized gains, either his art or real estate or securities and even take a deduction on his taxes from the interest he pays... so he might even get a carry forward to do the same next year. For the truly wealthy, this is an incredibly easy game to play.

I don't think the general public has any remote concept of how tax planning for the truly wealthy is like being on a totally different planet from tax planning for ordinary people.

Ham,

I have yet to state that our current system of income taxes is perfect, or even "good". I think you obviously raise valid hypothetical scenarios where people exploit the system for their own personal gains and shortchange society in the process.

But that does not convince me we should scrap income taxes for sales taxes, especially a flat rate sales tax with an income-based refund.

What it really does is just motivate me to think that we need to cut out all these loopholes in the income tax structure that these people are exploiting.


I will restate my true feelings, even if they somewhat betray what I've said above: the main thing that's important to me is that the $X the government needs to collect to fund govt spending should come mostly from the wealthy. Maybe .75X should come from the wealthy, .25X from the middle class, and 0 from the poor. But those exact coefficients aren't critical to the discussion.

You and I and anyone can recognize when someone is wealthy. What's more difficult is to pin that person down with rule language that they can't wiggle out of, regardless what mechanism is employed.

(11-01-2016 01:41 PM)MplsBison Wrote:  Ham,

I have yet to state that our current system of income taxes is perfect, or even "good". I think you obviously raise valid hypothetical scenarios where people exploit the system for their own personal gains and shortchange society in the process.

Fair enough

Quote:But that does not convince me we should scrap income taxes for sales taxes, especially a flat rate sales tax with an income-based refund.

That's not really an accurate picture. The Fair tax plan taxes far more than just sales, and the VAT is essentially a replacement for corporate taxes and other taxes on the wealthy and not intended as a 'replacement' to it all. Other taxes can (and usually do) still remain. The overall burden remains the same, though it is shifted around somewhat towards consumption.

And it's not really an income based refund... It's just that for the less wealthy, income = expenses... and it's easier to manage that way.

Quote:What it really does is just motivate me to think that we need to cut out all these loopholes in the income tax structure that these people are exploiting.

But 90% of them aren't loopholes. They are either specific incentives intended to drive activity (like taxing gains at 15% and income at 40%) OR defining 'corporate expenses' or simply declining to sell something of 'difficult to determine without selling it' value.

The wealthy aren't doing ANYTHING substantially to exploit income other than not reporting it HERE. They keep it overseas or encumbered in trusts or assets until it becomes 'gains'. As Owl says, they go 'rate' shopping.

THEY don't need the paycheck/income. They just need 'money'. Those aren't the same thing.

If I buy two blocks of 1000 shares of a $50 stock one goes to $100 and the other stays at $50 and I need $50,000... I can sell the one that went up and pay taxes or I can sell the one that didn't and pay nothing. If one goes down I can even sell SOME of that one and some of the other, netting zero taxes... yet my net worth HAS gone up substantially. Those aren't loopholes. That's accounting.

If you make me mark my assets to market, then i either hold them in a trust or offshore OR I buy art, which would be impossible to value annually every art holding in the US.

No offense, but you're not thinking about money the way the wealthy do... and until you do, you can't address the problems.

Quote:I will restate my true feelings, even if they somewhat betray what I've said above: the main thing that's important to me is that the $X the government needs to collect to fund govt spending should come mostly from the wealthy. Maybe .75X should come from the wealthy, .25X from the middle class, and 0 from the poor. But those exact coefficients aren't critical to the discussion.

You and I and anyone can recognize when someone is wealthy. What's more difficult is to pin that person down with rule language that they can't wiggle out of, regardless what mechanism is employed.

I generally agree. Hard to live here and not spend money. CAN they get around it? Sure... some of it... but the experience globally is that it is a FAR better way to attack the problem than what we do here.

Why else does literally everyone employ it?

I also think it important that everyone have a stake in tax collections... otherwise you simply have 'this group' voting for benefits for themselves, paid for by 'another group'.... even if we're paying the taxes for the less fortunate.

(11-01-2016 01:41 PM)MplsBison Wrote:  What it really does is just motivate me to think that we need to cut out all these loopholes in the income tax structure that these people are exploiting.
I will restate my true feelings, even if they somewhat betray what I've said above: the main thing that's important to me is that the $X the government needs to collect to fund govt spending should come mostly from the wealthy. Maybe .75X should come from the wealthy, .25X from the middle class, and 0 from the poor. But those exact coefficients aren't critical to the discussion.
You and I and anyone can recognize when someone is wealthy. What's more difficult is to pin that person down with rule language that they can't wiggle out of, regardless what mechanism is employed.

How do you propose to do that without driving all investment and job growth and economic growth offshore?

Here's the thing. You and some of your leftist fellow travelers like to talk about taxes in theoretical, abstract terms. Hambone and I are familiar with the results you get from those tax approaches in the real world. Bottom line, you're not going to stick it to people with taxes if they have other options, and the "wealthy" have other options, and at the end of the day you have no way to take all those options away.

The rest of the world does not have our deductions and loopholes, but the rest of the world does not have our marginal tax rates either. I'm perfectly happy with eliminating loopholes if we tie that to a significant reduction in rates. That's the approach that both Bowles-Simpson and Domenici-Rivlin came up with. If you eliminate loopholes without reducing rates, all you accomplish is chasing investment offshore. If you cut rates without eliminating loopholes, all you accomplish is losing tax revenues.