National sales tax, flat tax or ?

[newsstand 0]

Flat income tax of between 10 and 15 percent for anyone at twice the poverty level or above. Exemption for interest on first home valued at some multiplier to the national average. Child care credit to let people go to work. Again capped at some multiplier of the pverty level. Like five or 10 times.

This keeps it essentially equal for all. Sales taxes are inherently regressive as the poor use a bigger percentage of their income paying those taxes.

Capping the deductions places a slightly higher burden on those most able to afford it. They could still deduct or get cerdit for the amount up to the cap.

"Truth is tough. It will not break, like a bubble, at a touch; nay, you may kick it about all day like a football, and it will be round and full at evening."
-- Oliver Wendell Holmes

[lawrocket 3]

Well, I don't think it will affect the poor like that. I think that it will boost the economy, thereby giving more available jobs.

My wife is hotter than your wife.

[Steel 0]

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What about the home mortgage deduction . . . would people be willing to give that up? What would that do to what is most people's largest investment?

take away my property tax and I will gladly give up the mortgage interest and proerty tax deduction. Don't take away my property taxes and you will have me protesting the son of bi$%# who came up with this plan.

If I could make a wish, I think I'd pass.
Can't think of anything I need
No cigarettes, no sleep, no light, no sound.
Nothing to eat, no books to read.

[billvon 3,116]

> Flat income tax of between 10 and 15 percent for anyone at twice the
>poverty level or above.

And where does the other 75% of the money we need to run the government come from?

If we went to a flat tax _only_, you'd need to tax people at between 35 and 40% of their income (2000 census numbers, based on the 2003 federal budget.) If you exclude people below the poverty level that percentage would be slightly higher.

[billvon 3,116]

>I think a national sales tax plus a flat investment income tax. Otherwise
>there will be massive hoarding of dollars which could damage the economy.

If your objective is to help the economy, you can't beat a very progressive income tax (i.e. the poor pay almost nothing, the rich are taxed heavily.) The poor/lower middle class will put just about every dime you give them in tax breaks back into the economy; they are the ones who defer purchases a long time until they can afford them. That's an immediate benefit; those tax breaks go right back into retail sales, rental fees and major purchases (homes and cars.) The rich? Taxing someone who makes $1 million a year by another 5% will not cause him to defer purchase of a house, or a car. At worst perhaps he will have to buy the 24' boat instead of the 32', or cut back his investment in his 401k.

[PhillyKev 0]

Problem is that history has shown us who gets screwed the most by progressive tax. The middle class.

Suppose sales tax on non-essentials + capital gains, that's it.

Lower class. - Get taxed purchasing non-essentials. So, any disposable income they have, gets taxed. This class typically doesn't invest or save for retirement.

Middle class - Gets taxed on non-essential purchases and realized capital gains. This class typically spends a good chunk of disposable income, invests for retirement, and maybe some income investing. They would only get taxed on disposable income they spend or invest for income. Their retirement savings would not be taxed (until it's withdrawn and spent on non-essentials or invested in income investments)

Upper class - Same as above, however the majority of their money is spent on non-essentials and income investing. While money is invetsed, boosting the economy they catch a break. But when they sell those assets and realize a profit, they pay a tax on it.

Without running massive numbers, it seems to me this strategy is worth exploring.

[newsstand 0]

I didn't say it would generate enough money, just that it was fair

Then you are stuck with a progressive tax but we still need to simplify and I really mean simplify.

Mortgage on first home, child care credit, nothing else.

Treat investments like regular income. If you lose it lowers your income, all right now, not $3K a year for a long time, if you win it bumps you up in the brackets.

Sales taxes are unfair to the poor and property taxes are unfair to the elderly on fixed incomes.

Income tax is the one thing you can treat in a reasonably fair manner.

"Truth is tough. It will not break, like a bubble, at a touch; nay, you may kick it about all day like a football, and it will be round and full at evening."
-- Oliver Wendell Holmes

[livendive 8]

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I'm thinking that if you move to a flat tax or national sales tax, you basically throw out all deductions . . . otherwise, how would that work? So, do home sales plummet?

I don't think homes sales would plummet, but supply/demand suggests the values would adjust to reflect the lost deduction, sales tax due at closing, and the change in what buyers can afford (e.g. mansion values might go up because the rich have more money to spend, pre-fab values might go down because low-income people have less to spend).

Blues,
Dave

"I AM A PROFESSIONAL EXTREME ATHLETE!"
(drink Mountain Dew)

[Zennie 0]

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Sales taxes are unfair to the poor

Not if you exempt essentials.

- Z
"Always be yourself... unless you suck." - Joss Whedon

[DrewEckhardt 0]

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Thus putting many poor people in debtor's prison, where they _use_ taxpayer money to just sit there and do nothing. Who will pay for the jails, the guards, the judges? A very bad idea.

Other alternatives exist to prison. The constitution does not preclude slavery as a punishment. Outlawry would not be inappropriate when you decided not to provide for your FBI bill.

[DrewEckhardt 0]

In 1913, the exemption for single people was $3000 ($54,567 in 2003 dollars), $4000 ($72,756 in 2003 dollars) for married/

The first $20,000 beyond the exemption ($363,783 in 2003 dollars) was taxed at 1%.

Earnings over $500,000 a year ($9,094,578 in 2003 dollars) were taxed at the top rate of 7%.

We'd just need to shrink government spending to accomodate the reduced income tax revenues.

[Jib 0]

I don't think home prices would adjust down at all. Quite the contrary, you suddenly have 20% more income in cash to spend rather than a deduction of 30% of the mortgage interest payment.
Spend $1000 today.
The IRS doesn't take $300 in taxes.
No Income Taxes = $1000 (same) plus 20% more income.

What happens to charities?

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the depth of his depravity sickens me.
-- Jerry Falwell, People v. Larry Flynt

[billvon 3,116]

> Problem is that history has shown us who gets screwed the most by
>progressive tax. The middle class.

Oh, the middle class would be FAR more screwed by a flat tax. A flat tax would require everyone to pay 40% of their income (if all forms of taxation were replaced by a flat income tax.) Currently, someone who makes $40K with no deductions (around US average) pays 17%, and someone who makes $100K pays 22%. Even if you said that only half of the federal budget came from a flat income tax (i.e. an average of 20%) the middle class pays more and the rich pay less than the current system.

[billvon 3,116]

>The constitution does not preclude slavery as a punishment.

Yeah, but you'd get all those whiney civil rights types up in arms if you suggest bringing back slavery.

>Outlawry would not be inappropriate when you decided not to provide for your FBI bill.

I remember something similar from "Brazil." It's only fair that suspected terrorists pay for their own torture, especially if easy credit terms with low low monthly payments are available.

[billvon 3,116]

>Mortgage on first home, child care credit, nothing else.

Why even that? Progressive tax on income, period. All money you earn is income. Interest, capital gains, home sale proceeds, salary, rental property income, stock dividends etc - add it all up, plug it into the formula, pay the amount. Your tax form becomes one page long. The only thing the politicians would have left to argue about would be the coefficients of the formula.

[DrewEckhardt 0]

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>Outlawry would not be inappropriate when you decided not to provide for your FBI bill.

I remember something similar from "Brazil." It's only fair that suspected terrorists pay for their own torture, especially if easy credit terms with low low monthly payments are available.

Torture is the government doing something. Outlawry is the government not doing something - notably providing most legal protections.

[PhillyKev 0]

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Oh, the middle class would be FAR more screwed by a flat tax.

Yep. That's why I don't favor a flat tax. I was advocating sales tax for non-essentials plus capital gains.

[livendive 8]

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I don't think home prices would adjust down at all. Quite the contrary, you suddenly have 20% more income in cash to spend rather than a deduction of 30% of the mortgage interest payment.
Spend $1000 today.
The IRS doesn't take $300 in taxes.
No Income Taxes = $1000 (same) plus 20% more income.

So in your model, where does the government collect taxes? I thought we were talking about a national sales tax on all non-necessities, so if I went out and spent that $1000, the IRS *would* take some percentage of it. I agree that the rich would have more money available to spend on a home and higher end house values would go up, but the lower income people (those who would see a net increase in taxation in this model) would have less money available, and there'd be some percentage of the home's value (sales tax) tacked onto the closing costs, putting it farther out of reach.

Blues,
Dave

"I AM A PROFESSIONAL EXTREME ATHLETE!"
(drink Mountain Dew)

[PhillyKev 0]

How would low income have a net increase in taxes from ellimination of income tax and implementation of sales tax on non-essentials?

[Jib 0]

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So in your model, where does the government collect taxes? I thought we were talking about a national sales tax on all non-necessities, so if I went out and spent that $1000, the IRS *would* take some percentage of it. I agree that the rich would have more money available to spend on a home and higher end house values would go up, but the lower income people (those who would see a net increase in taxation in this model) would have less money available, and there'd be some percentage of the home's value (sales tax) tacked onto the closing costs, putting it farther out of reach.

Exclude the sales tax on HOMES under $250,000.00.

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the depth of his depravity sickens me.
-- Jerry Falwell, People v. Larry Flynt

[newsstand 0]

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>Mortgage on first home, child care credit, nothing else.

Why even that? ...

Of the two the child care credit is more important. It gives people on the edge of poverty the ability to say I can make more going to work than being on the dole. I would definately cap out the credit based on income.

Home ownership is part of the American dream and it is hard enouh to get that first one.

"Truth is tough. It will not break, like a bubble, at a touch; nay, you may kick it about all day like a football, and it will be round and full at evening."
-- Oliver Wendell Holmes

[newsstand 0]

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Sales taxes are unfair to the poor

Not if you exempt essentials.

Define essentials?

Sure liquor and smokes are not and food is but what is food? Meat and potatoes? Pre-packaged noodles? Frozen dinners? What do you do about clothing?

"Truth is tough. It will not break, like a bubble, at a touch; nay, you may kick it about all day like a football, and it will be round and full at evening."
-- Oliver Wendell Holmes

[livendive 8]

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How would low income have a net increase in taxes from ellimination of income tax and implementation of sales tax on non-essentials?

Right now they pay very little to no income tax. I thought I read earlier in this thread that we were basically limiting "non-essentials" to food and maybe some bare minimum clothing. You'll still be buying things like tools, appliances, electronics, toys for the kids, bedding, furniture, home decorations, etc. My suspicion is that those people who aren't drastically affected by our current income tax would be more substantially affected by a sales tax. Unless of course we're talking about some magical system that will give the rich a huge tax break without recouping that money from somewhere else farther down the chain.

Blues,
Dave

"I AM A PROFESSIONAL EXTREME ATHLETE!"
(drink Mountain Dew)

[billvon 3,116]

>Of the two the child care credit is more important.

Why reward people for having lots of kids? I think I'd rather reward people who realize they can't pay for kids - and thus don't have them.

>It gives people on the edge of poverty the ability to say I can make more
>going to work than being on the dole.

What does that statement have to do with the first one? Welfare is a separate issue unrelated to taxes (other than it's dumb to tax someone's welfare check; sort of pointless.)

>Home ownership is part of the American dream and it is hard enouh to get
>that first one.

Ah, but see, that's a trap. If that's the case, surely tax credits for solar power systems should be on the list too; they reduce our dependence on foreign oil (very important) keep the environment cleaner (less money spent on the EPA) and help people make ends meet (no gas/electric bills.) And what about credits for poor old people who can't afford medicine? That's only fair. And parents of Down syndrome children? Surely they need a break!

Once you decide "there are just a few things that we need to help people out with" the floodgates open. Soon you're back to tax breaks for SUV's, which is where we are now. Everyone wants one, and will go on and on about how important it is (and spend endlessly on PAC's to get it.) That's the danger of using taxes as social equalizers, and one reason that a flat tax (or even a progressive tax without loopholes) is attractive.

[Jib 0]

Maybe, it would get the low income people to think twice about buying $300 sneakers instead of food.

--------------------------------------------------
the depth of his depravity sickens me.
-- Jerry Falwell, People v. Larry Flynt