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Civil discussion and debate on real world events and issues.


100 Days Until Taxmageddon

   
Quote:
Originally Posted by Solaris View Post
I see a pulpit and a declaration.
So do I, but he's declaring that he won't raise taxes on those making less than $250k a year, which is more or less what Savayan was saying.

That's why we need a flat tax. 10%. no exceptions, no write-offs,no deductions, and no tax havens. No fortune 500's paying no taxes and no well-fare cases paying none. Fair is Fair, and this is coming from someone in the low-income bracket.

So, you think that the poor carrying a disproportionate amount of the national burden is 'fair'?

@OP

The US owes 16 trillion dollars. Where do you think that's going to come from?

Please don't tell me trickle down economics Reagan style is the answer.

Quote:
Originally Posted by Flying Dutchman View Post
That's why we need a flat tax. 10%. no exceptions, no write-offs,no deductions, and no tax havens. No fortune 500's paying no taxes and no well-fare cases paying none. Fair is Fair, and this is coming from someone in the low-income bracket.
I'm not sure why people think a flat tax is a panacea, or that it's 'fair'. It's not; it's a poison, a fiscal trojan horse. If everyone pays the same percentage, the poor/middle class inherently suffer more, because:

#1: They shoulder _significantly_ more tax burden assuming revenue was to remain the same unless you're perhaps unjustifiably confident that gains from loophole destruction will permit a lower average flat rate to all vis a vis what the lowest brackets currently pay, because we're essentially moving from a progressive code to an averaging of tax burden. Going by the effective federal tax rates on Wikipedia (2007 data), featuring all those nasty loopholes, where the top 20% has an effective burden of 20% vs the 2-16% tax burden of those in the bottom 80%, I find it pretty much impossible that we could charge everyone an effective 10% (the average of the lowest quintiles) without decreasing revenues.

Let's do a preliminary estimate. The current effective federal tax rate for each quintile:

Lowest $18,400 *.02% = 368
Second $42,500 * .091% = 3867.5
Middle $64,500 * .127% = 8191.5
Fourth $94,100 * .157% = 14773.7
Highest $264,700 * .201% = 53204.7
Total: $80405.4

vs our theoretical 10% for everyone:

Lowest $18,400 * .1 = 1840
Second $42,500 * .1 = 4250
Middle $64,500 * .1 = 6450
Fourth $94,100 * .1 = 9410
Highest $264,700 * .1 = 26470
Total: $48420

As you can see, not only do we have a _huge_ deficit vis a vis the above progressive number, but the poorest quintiles pay substantially more tax. Say we use the average of all rates in an effort to avoid said deficit, including that of the highest quintile (14.9%):

Lowest $18,400 * .149 = 2741.6
Second $42,500 * .149 = 6332.5
Middle $64,500 * .149 = 9610.5
Fourth $94,100 * .149 = 14020.9
Highest $264,700 * .149 = 39440.3
Total: $72145.8

Still have a $8259.6 per taxpayer deficit vis a vis example 1 as expected given the greater (and now less taxed) incomes of the highest quintiles. Obviously we need to increase our flat tax rate even more; a rate just higher than 16.6% to bridge the gap. The impact on the amount the poor pay is equally apparent. The poorest quintile pay more than 8.3 times as much as they did before under this system. The second? Nearly double. The third? About a third more. By contrast, the wealthiest quintile sees an almost 20% reduction to their effective rate. In otherwords, the quintiles that need the most tax relief are actually _heavily_ penalized under a flat tax plan; no wonder the libertarian rich, and the PACs they fund absolutely love the idea of a flat tax! The poor and middle class get totally hosed while they save!

More contemporary information that factors in the impact of state taxation (which is regressive on average) as well:

http://www.economist.com/blogs/democ...7/tax-fairness

http://www.ctj.org/pdf/taxday2010.pdf

According to these, America is already pretty close to a state of flat taxation in net.

#2: They pay out much more money as a % of their income for the basic necessities of life (food, shelter, clothing, medicine/health care, and transport), thus suffering a larger adverse material impact to its quality. This compounds the impact of #1. Each % of tax on the lower/middle class is more detrimental to quality of life than on the upper classes for this reason.

#3: They are victimized by wealth consolidation which is absolutely guaranteed by design as above. Progressive taxation with regards to income and estate taxes is pretty much the only hope the present system has of preventing massive and accelerating upward wealth consolidation which is a clear and present danger to democracy and capitalism. Yes there are loopholes which can be exploited; the solution is clearly to fix the loopholes and fortify the tax code, not assure disaster with a flat tax.


In addition to the above problems, you effectively eliminate tax credits/discounts as a policy tool for encouraging socially responsible, and good long term behaviours that are otherwise un or under-rewarded by the marketplace.

Interesting, I ran my general proposal (40% tax on income-$40,000), and came up with teh following:

Lowest $18,400 = -8640 (-47%)
Second $42,500 = 1000 (2%)
Middle $64,500 = 9800 (15%)
Fourth $94,100 = 21640 (23%)
Highest $264,700 = 89880 (34%)
Total: $113680.00

which allows for a graduated tax with the simplicity of calculation of the flat tax.

@silveroak, you'd need to close so many loopholes to make that effective. Including regulation of superfunds, trusts, etc. that allows a measure of redistribution of your income down to a lower marginal rate.

Between that and the malpractice from companies showing that they are cashflow negative when they really aren't.

E.G.: Mr X is running company A as managing director, part of group C. The flat company tax rate is 30% of company A's net profits before tax.
On the side, I run Trust B, also part of group C. This trust is formed of beneficiaries and a trustee.

Company A nets a profit (after paying all its employees, all other expenses) of $1,000,000.00
It decides that instead of paying tax, it'd rather pay none.
Trust B charges Company A a management fee of $1,000,000.00 (Even though they're part of the same organisation)
Company A pays no company tax.
Trust B then distributes the income ($1M) among its beneficiaries. (Executives, Managers, anyone listed as a beneficiary)

All the beneficiaries would then be taxed at a lower marginal tax rate than the company tax rate, typically.

And it ain't over yet.

Individual D received an income of $265,000.00 out of Trust B to his own Trust: Trust D.
He decides he'd rather not pay as much tax on it.
This family trust distributes $50k to each kid (He has 3 - There wouldn't much point if the kids worked though, so they're typically young or not yet working for themselves) and another $60k to his wife. (Stay at home)
He nets a personal income of $55k.

Bear in mind this is not me calling for public lynching or anything, but I'm just trying to illustrate how government actually gets its income from people that are uneducated about how to best structure their incomes in this environment

The answer, however, isn't for the government to give up on its income if everyone becomes privy to this kind of knowledge. Unless you want to completely unravel the power of government and the Social Contract. Then yeah, it's a great idea.

Yes, there are many loopholes that would need to be closed, and frankly some that would need to be created (reducing taxes for those people who actually create jobs instead of participating in fiscall tomfollery) but analysing the tax plan on an equal footing basis to other tax plans, which are looking at similar loophole issues, I think mine does come across as the superior model.

Quote:
Originally Posted by silveroak View Post
Yes, there are many loopholes that would need to be closed, and frankly some that would need to be created (reducing taxes for those people who actually create jobs instead of participating in fiscall tomfollery) but analysing the tax plan on an equal footing basis to other tax plans, which are looking at similar loophole issues, I think mine does come across as the superior model.
I don't mind the core of the idea, but as I've said before the numbers could use some tweaking, and yes, there _definitely_ needs to be provisions for tax incentives in the right places.




 

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