No, but like I said. Ive had enough. No need to reply anymore
I don't care if you reply or not, but what I've been pointing out is that it's really impossible to carve out a narrow definition of income, and only tax that, without introducing both enormous complexity and a dysfunctional tax system that will tax two identical transactions in substance entirely differently based only on the form.
If you only tax wages or labor, as I've pointed out, then tax planners will find all kinds of creative ways to convert "wages" or income from "labor" to
anything else that is tax free.
We have taxed "capital gains" at lower rates for most of recent history, and by some accounts about half the functional complexity in the tax system is related to defining "capital gains" because smart tax planners spend enormous effort (and charge huge fees - 7 figures or more in many cases) converting what is in reality ordinary income taxed at roughly 40% to capital gains taxed at roughly half that amount. So there are lots of rules in the code, regulations, Rev. Procs, Rev. Rulings, PLRs, and dozens or hundreds of court cases, many of them at the Supreme Court, that set the boundaries for what is and isn't "capital gains." And still the IRS is always behind creative lawyers and tax planners who find new loopholes, like Whack a Mole.
When the tax rate on dividends when down, of course every owner of a closely held corporation had a powerful incentive to not pay ANY salary to themselves, and get all their pay through "dividends." So the code and regs have a lot of rules to prevent "abuse" and require that if the owner provided services, was actively managing the corporation, it must pay out a reasonable salary. If the code exempts 'interest income' (as a lot of 'flat tax' proposals do) obviously insiders have a powerful incentive to move "loans" into their entities at very high interest rates - e.g. 40% annual interest rates. 80% annual rates. Why not? and extract earnings from their closely held businesses that way. And of course the code and regs will have to be amended to prevent abuse of that and only allow "reasonable" or "market" rates of interest, which are nothing but guesses.
It matters now because Trump's proposal is to tax "businesses" at 15%, but leave wages and labor income taxed at rates up to 30% or whatever the final rates end up. Well, my wife and I get consulting income paid to us personally. If the law passes, we'll, obviously, form an LLC probably and have the people paying us write a check to "JasperL, LLC" or "JasperL, Inc." and convert that income to "business income" that Trump wants to tax at 15%. Obviously, the law will have rules to prevent "abuse" of this GIGANTIC loophole, and little guys like us will mostly be out of luck after a while, but the big boys will likely successfully argue, e.g., that what was previously $5 million in "salary" is now $1 million in "salary" and $4 million in "business" income. It's moronic tax policy, unless the idea is to hand huge tax cuts to the wealthy who can arrange their affairs so that nearly all of their income is now preferentially taxed at rates that now apply to the working poor.
