View Poll Results: Best possible tax system (if we were starting from scratch)?

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  • Progressive income tax, with deductions, credits, incentives, etc.

    2 7.41%
  • Progressive income tax, with no deductions, credits, incentives, etc.

    5 18.52%
  • Flat national sales tax ("necessities" excluded)

    7 25.93%
  • Progressive national sales tax ("luxuries" taxed at a higher rate, but "necessities" still excluded)

    3 11.11%
  • Flat income tax, no deductions, credits, incentives, etc.

    6 22.22%
  • Value-Added tax, i.e.: tax hidden in cost of goods and services

    0 0%
  • Other

    4 14.81%
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Thread: Best possible tax system (if we were starting from scratch)?

  1. #11
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    Re: Best possible tax system (if we were starting from scratch)?

    Quote Originally Posted by CriticalThought View Post
    Replace all federal taxes on personal and corporate income with a broad national consumption tax on retail sales that is contingent upon income. In other words, the higher the amount of income you make the higher the percentage of consumption tax you pay. This could be tracked electronically. The percentages are based on a formula so there are no progressive stages of income as in our current system, but rather you pay an exact percentage based on your individual or family income. Those who are at the poverty line pay 0% and only pay a fraction of a percent more as they get above poverty, thereby not entirely demotivating them from seeking higher income or becoming reliant upon rebates. Those who are at the highest levels of income pay the highest consumption tax rate but it would still probably be lower than what they pay now and they could mitigate the cost simply by mitigating their consumption.

    This would also allow us to phase out hard currency entirely. It would make tracking money in and out of the system irrelevant so there would be no need for the IRS. If you are spending more than your employer reports paying you, then you are likely cheating the system. Transfers of money from one individual to another are tracked as changes in income, so wealthier people simply can't have poorer people go buy things for them at a lower tax rate. In essence, it takes the politics entirely out of the tax debate. If you are wealthier, you have to pay a higher rate, but given that consumption falls off, a progressive system is a necessity unless people wish to create a potential entitlement system of rebates. Furthermore, unlike the current system, the wealthier do have a choice in how much they are taxed because they can mitigate how much they consume.
    Unworkable. You'd also create a huge black market to avoid paying the higher tax rates on purchases.... When you look at the numbers you'll see that the overall tax rate would need to average over 20%, and that's if you tax all goods AND services.

    The value of all goods and services is our GDP which is currently ~$15 Trillion. The current government budget requires over $3 Trillion. That's 20%.

    Now... if low income people didn't pay any tax it stands to reason that the higher income people would need to pay something more than 20% tax. So if I'm a zero tax person I can go buy a widget with no tax on it then resell it to somebody for just 10% more than I paid for it, which would be less than he could buy it for legitimately. See..?

    On the other hand, it also stands to reason that someone making $250k/yr would buy more stuff than someone making only $40k, right? So a flat tax is more or less self-equalizing.

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    Re: Best possible tax system (if we were starting from scratch)?

    I'll go 7.

    A 2.5% flat tax on all goods and services, with exemptions for:

    1. Store Bought Food
    2. Medicine
    3. Rent

    No other consumption taxes on the federal level are allowed.

    Additionally, a progressive “income” tax system where “income” is any money gained in any fashion (meaning capital gains, income that is paid to you, tips, etc). The scale would look like this

    Bracket 1: 0 – [Base] = 0.2% * [Standard Tax Rate]
    Bracket 2: [Base] – [250% of Base] = 1% * [SRT]
    Bracket 3: [250% of Base – [500% of Base] = 2% * [SRT]
    Bracket 4: [500% of Base] – [1000% of Base] = 3% * [SRT]
    Bracket 5: [1000% of Base] and up = 4% * [SRT]

    [Base] would be decided by an agency which would look at what is the general average necessary monetary amount for someone to live in the US. This would be determined by looking at the following things in 3 random chosen large cities, small cities, and towns across the U.S. each year.

    - Money spent on transportation
    - Money spent on rent of applicable basic housing
    - Money spent on necessary household items (toilet paper, napkins, soap, etc)
    - Money spent on store bought foods
    - Money spent on Medical items
    - Money spent on bills (Basic Cellular, basic cable, basic broadband, electric/gas/water)

    The numbers that are found for those 9 locations are then averaged and you come up with your [Base]. A [Base] is determined for four categories:

    - Singe: The values above is found for a single person living on their own
    - Single +1: The values above is found for a two people living together. This could be a single person and a child, or this could be a Married couple filing jointly
    - Married +1: The values above is found for three people living together. This can be used by individuals who are married and filing jointly and have one child.
    - Married +2: The values above is found for four people living together. This can be used by individuals who are married and filing jointly and have two or more children.

    So in this tax system you can claim dependents. However, a single parent can only claim a max of one dependent for tax purposes and a married couple can only claim a max of two dependents for tax purposes.

    Finally, each bracket is static. The range of the bracket cannot change, only the [base] number can. Additionally, the % of each bracket cannot be changed individual. What can be changed however is the “Standard Tax Rate”. The SRT is the tax rate number that congress has the power to set, and it affects every bracket. Set the SRT to 5% and each bracket changes (1 = 1%, 2 = 5%, 3 = 10%, 4 = 15%, 5 = 20%). This allows Congress the ability, at times of need (Say war time), to increase taxes to bring in more tax revenue but disallows them the ability to make targeted tax hits against singular classes of people. SRT is “maxed” at 20%. The brackets work just like they do now, with the money you earn within that bracket being taxed at its rate.

    The only exemption allowed would be Charitable Donations, and you’d be allowed to write off up to 20% of your income off into charitable donations. There is no capital gains tax, that would work into the income tax now. There is no corporate tax, that’s built into the consumption tax and the way the income tax now takes any money an individual gains.

    The basic consumption tax means everyone has at least that basic amount of skin in the game. The connected tax brackets makes sure that you can’t target just a single class of people in an attempt to rally votes or scapegoat someone. The SRT adjustment allows the ability to increase taxes in times when it’s absolutely necessary, but it’s connection to the lower tax brackets makes it a difficult thing to keep high permanently. It’s progressive in nature, recognizing that the more you make the less impact on your “survival” the tax money takes away. At the same time, to get it to the point where its significantly affecting the higher tax brackets lifestyle you’d raise rates to the point where it’d make lower tax brackets significantly be affected in terms of their life style as well. It would simplify the tax code IMMENSELY, reduce the need for the size and scope of the IRS, and in general take the wedge issue of taxes out of the front lines of the political debate.

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    Re: Best possible tax system (if we were starting from scratch)?

    Quote Originally Posted by radcen View Post
    Best possible tax system (if we were starting from scratch)?The question is intended as an intellectual discussion, as it is impossible to have a purely clean slate, but... if the country were to just plop down from the sky and begin today, and we had to set-up a tax system from scratch... with absolutely no pre-determined bias or anything... what would be the best tax system for the overall common good of society?1) Progressive income tax, with deductions, credits, incentives, etc.2) Progressive income tax, with no deductions, credits, incentives, etc.3) Flat national sales tax ("necessities" excluded)4) Progressive national sales tax ("luxuries" taxed at a higher rate, but "necessities" still excluded)5) Flat income tax, no deductions, credits, incentives, etc.6) Value-Added tax, i.e.: tax hidden in cost of goods and services7) OtherYour reasons can be social, or economic, or a combination of both.Note #1: "Necessities" defined as basic food staples, etc.Note #2: I purposely am not including "no tax system at all" as an option. While there is some irrelevancy in the form of "starting from scratch" involved to facilitate discussion regarding the topic, I am not willing to entertain the fantasy that no tax system would be even remotely viable.
    The best possible tax system is no taxes at all, the government to go get a job and make investments. But that aint gona happen.A broad flat tax of 20-25% across the board, without regard to income or class, no brackets, no exemptions or incentives of any kind. No other tax or tax-like fee of any kind what-so-ever.
    Last edited by Jerry; 03-26-12 at 11:43 AM.

  4. #14
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    Re: Best possible tax system (if we were starting from scratch)?

    I'm going to go with other, because it's not really income or spending that needs taxation. Earning and spending money strengthens the economy. It's wealth that needs taxation. Stagnant money that is doing nothing. It is, of course, entirely reasonable to save some money. That's not what I'm talking about. I'm talking about the millions and millions that wealthy people and big companies are just sitting on. Apple is sitting on close to $100 billion, doing nothing with it. It's not building better products. It's not paying anyone's salaries. That is the money that should be going towards the public sphere. It was all created by people working hard, and buying and selling goods. That money should be taxed substantially and be spent on protecting the country, educating children, improving public health and transportation, and law enforcement. No money should be stagnant. It should all be working for something. And no, just generating more money for an already wealthy person is not a legitimate use.

    And I'm including things like capital gains in wealth. At least some of it. Investing in a startup and reaping benefits when it succeeds is perfectly legitimate. Someone took a risk, and deserves a reward for it. But safe bets, where it's just money earning more money, that does nothing. And that money never comes out in a vacuum. The best example I can give is Romney and Bain Capital. They make huge amounts of money by artificially driving up stock prices, largely by firing workers. All the money that those employees need to live on suddenly goes into the hands of a few owners, and to the owners of Bain. They have not produced anything to improve the country. They have just taken their wealth, and used it as a battering ram to take other peoples' livelihoods. That money is money that is not working. It is not moving trade. It is not funding innovation. It is not educating anyone or helping anyone live. That money should be substantially taxed, too.

    Earning money from working is good. Spending money on goods and services is good. Using money to fund companies that make goods and provide services is good. Using money to fund innovation is good. Hoarding money is bad. Using money just to make more money, often at the expensive of those without much money, is bad. Tax the bad things, not the good things. Tax the money that isn't doing anything to strengthen the economy, and then use it to strengthen the economy.
    Liberté. Égalité. Fraternité.

  5. #15
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    Re: Best possible tax system (if we were starting from scratch)?

    Quote Originally Posted by radcen View Post
    3) Flat national sales tax ("necessities" excluded)
    This is what we should have.This ensures that everyone is actually paying their fair share while at the same time ensuring that those who buy less pay less in taxes and those who buy more pay more in taxes.The only downside I could see to this is that tax preparers would be out of business.
    "A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murder is less to fear"

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  6. #16
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    Re: Best possible tax system (if we were starting from scratch)?

    This is a very interesting poll. Made me from a POV on taxes I never used. Nice list of choices too.

    I come up with your #s 1, 3, possibly 4, 6. In addition fuel taxes and others. The reason to have many is mostly fairness, but there are many more reasons. Skipping ahead, my biggest problem with taxes is keeping them functioning as they are ostensibly intended. Most taxes have special interests distorting their function and we have so many types of taxes that citizens can’t be up on what is happening to them as they ‘mature’ over time. An example is property taxes. We know in detail the property taxes on several groups of homes in the US. They should be funding services suck a fire dep., local police, road maintenance, etc.; but, what is paid compared to the services provided varies too much. In addition, valuations of properties in one community are not in alignment with reality so we suspect they are significantly modified by influence.

  7. #17
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    Re: Best possible tax system (if we were starting from scratch)?

    Flat tax, no deductions. possible national sales tax included also flat depending on rates of income tax

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