Thought regarding a tax system

laska said:

1,000,000,000.........39.9%

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Capital gains rate of 0% on ipo's and whenever a company issues more shares on the equity market to raise capital. All other times the capital gains rate will be 20%.

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Why tax somebody who makes $1m/year in income twice as much if they make it by working? Why penalize working like that? I would think that if anything money you actually worked for should be taxed at a lower rate than money you're just skimming off the top of other people's work. At the very least, I think they should be taxed the same.

The 39.9% rate is for a billion not a million. I agree that capital gains should be taxed at higher rates than personal income from a theoretical point of view but the problem is that there is risk involved in investing and if you put the rates too high, you could have the unintentended consequence of making it much tougher for job creaters to find capital. At 20% the rates are higher than about 98% of personal income tax rates under my plan. I did raise the capital gains rates on trades between shareholders and shareholders and other things that do not directly raise capital for companies.

laska said:

OK about the dozenth time I've revised my tax plan. It is weird, I don't think I have ever even done my own taxes and I am waking up at 5am doing this. Zephlin I think you'll like these two little carrots. Decided against sales tax on services. Too much temptation for people to cheat. On capital gains decided to go 0% on ipo's and anytime a company releases shares to raise capital. All other times it will be 20%. Interesting comparison to 999 plan. Mine is more pro growth, and progressive. About the top 7% of the population make over $100,000 a year, almost half the national income, and under my plan they have a higher burden for government revenue compared to the 999 plan where the 93% who make less than $100,000 and have the other half of the national income are given the greater burden for revenue. Both plans are designed to greatly simplify tax code and be extreme pro growth and job creation.

Scrap current tax code. New net income tax: No deductions, no corporate tax, no payroll taxes, no SSI tax, no estate tax, no joint filings.
0% on income below $20,000, 10% on any additional income between $20,000-$100,000, 30% on any additional income between $100,000-$1,000,000, and 40% on any additional income above $1,000,000. So someone making 1.2 million would pay in federal taxes ($20,000 X 0)+(80,000x.10)+ (900,000 X .30) + (200,000 X .40)=$358,000.
What the rates will look like on net income:
$20,000 income...0%
30,000................3.3%
40,000................5%
50,000................6%
60,000................6.7%
70,000................7.1%
80,000................7.5%
90,000................7.8%
100,000...............8%
200,000...............19%
500,000...............26%
1,000,000.............28%
1,500,000.............32%
2,000,000.............34%
1,000,000,000.........39.9%

Capital gains rate of 0% on ipo's and whenever a company issues more shares on the equity market to raise capital. All other times the capital gains rate will be 20%.

10% federal retail sales tax on goods with exemptions on medical, whole foods in grocery stores, and rent.

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The biggest problem I see with this plan is that it simply won't generate nearly enough revenue. If the only taxes you'd have are a no-deductions income tax, and a flat sales tax, your top rate would have to be a lot higher than 40% to make it work.

laska said:

The 39.9% rate is for a billion not a million. I agree that capital gains should be taxed at higher rates than personal income from a theoretical point of view but the problem is that there is risk involved in investing and if you put the rates too high, you could have the unintentended consequence of making it much tougher for job creaters to find capital. At 20% the rates are higher than about 98% of personal income tax rates under my plan. I did raise the capital gains rates on trades between shareholders and shareholders and other things that do not directly raise capital for companies.

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Well, the risk factor is overblown IMO. With just some pretty simple planning you can carry over losses to future years. They let you carry them over one year outright, but you can carry them over as long as you want by just choosing not to sell off the stock you took the losses on until you have gains to offset. So, for example, if I lose $5m this year and make $3m next year and $3m the year after that, in reality I would only pay taxes on $1m. So, short of a scenario where I go totally bankrupt or the market permanently collapses or something, that isn't really a big factor in practice.

But, you're right that a higher capital gains tax means less investment capital. But a higher tax on wages means less consumer spending, so less actual revenues for the companies too. In the end a boom driven on investment capital that isn't backed up with actual revenues, is doomed to burst, where a boom built on actual revenues sticks. That's basically the Reaganomics argument you're making, but in my opinion it's a trick. It's only looking at half the equation. It's like saying "it is important that I have peanut butter on my pb&j sandwich, so I am going to spend all my money on peanut butter" without considering that you need jelly too. It isn't that it is wrong so much. You do need peanut butter/investment capital, but there are trade offs. You need to collect taxes from somewhere, and the other places are just as bad (or worse IMO). So it isn't an argument for why capital gains should be lower then income taxes, it's just an argument for why if we didn't need to collect taxes, it would be good to lower the capital gains rate.

I still don't understand why some want to punish others for making money. Seems like you'd want to punish people for not being productive. Produce or else! (only slightly sarcastic here)

If someone's already producing very well, you might say "Good job! Here's a reward aka some money back!"

When someone demonstrates that they are good with money and produce rewards for those around them, they should be given more money to work with so more money is made so more tax is collected. When someone demonstrates that they are bad with money and essentially a drain on society, they shouldn't be given any money - they should be encouraged to produce.

GreenvilleGrows said:

I still don't understand why some want to punish others for making money. Seems like you'd want to punish people for not being productive. Produce or else! (only slightly sarcastic here)

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We currently tax people who earn wages at higher tax rates than people who have income taxed at reduced capital gain taxes. Why do we want to punish people for working?

But the reason is more because on the high end of income liberals (well, at least myself) believe a lot of that income is not because someone is doing a great job, but because it's far easier to make money with money than it is to make money without money. Ignoring taxes, inflation, and choosing a low investment interest rate (5%) to make up for those assumptions, consider this scenario. You have no money, but you have a job and are able to save $10,000 a year. You invest at 5%. You'll have your first million dollars in the bank (well, investments) in 36.72 years. Your second million only takes an additional 12.43 years, about 1/3rd the time. Your third million only takes an additional 7.68 years. Your fourth million 5.57 years. You see, as your wealth goes up it's easier and easier to earn that million.

Is the person with 3 million a better producer? I guess you could say they are, they're able to fund more businesses, etc... than the person who is investing their initial $10,000 in this scenario. Are they working any harder? No, they don't have to be. The interesting question, what happens when they die?

Give that 4 million to their kid, assume no estate tax, and the kid can turn that 4 million into 5 in 4.38 years. What it took his parent to do in 37 years he has done in 4.

Why people want to have progressive taxes, estate taxes, that sort of thing is because it's not perceived as fair that it's so much easier to make money, when you already have money. We like to believe if we work hard and have awesome skills we can climb the financial ladder. But it's a very difficult ladder to climb when you are at a financial disadvantage to others. Because it can take you 37 years to do what someone with a head start can do in 4 years, equal skill, equally good with money, equal in everything other than a starting point. (The actual years/difference will depend upon where you put inflation, the investment interest rate, taxes, etc.)

mine would be to cut about as much as possible govt agencies through attrition, freeze spending, end our empire, transition out of welfare stuff.

Then my new tax code would be 0% on everything... 9% tax on groceries, 15% national sales tax on everything else. :3

GreenvilleGrows said:

I still don't understand why some want to punish others for making money. Seems like you'd want to punish people for not being productive. Produce or else! (only slightly sarcastic here)

If someone's already producing very well, you might say "Good job! Here's a reward aka some money back!"

When someone demonstrates that they are good with money and produce rewards for those around them, they should be given more money to work with so more money is made so more tax is collected. When someone demonstrates that they are bad with money and essentially a drain on society, they shouldn't be given any money - they should be encouraged to produce.

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That logic might make sense if we are at or near full employment, but with the official unemployment rate stuck at 9% (and the actual unemployment rate much higher), it isn't as important to encourage people to produce more. It's not like there are lots of jobs that are going unfilled while qualified people choose not to take them...it's an employer's market right now, and unfortunately there are far more job-seekers than jobs to be filled right now. As long as there are lots of people who want to find jobs but can't, there is no reason to penalize the unemployed/underemployed. Let's save that for economic climates when anyone who wants a job can find a job.

apdst said:

if a person makes $100,000 a year, it costs them $80,000 a year to live and you hit him with a 28% tax and you're going to send them into the hole.

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If it costs someone 80K a year to live on 100K of income, they are living far beyond their means.