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Thought regarding a tax system

Question below


  • Total voters
    16
I applaud you for coming up with something pretty reasonable. The only things I would change would be no deductions for having kids and I would let capital gains go back up from 15 to 20 percent.
 
I applaud you for coming up with something pretty reasonable. The only things I would change would be no deductions for having kids and I would let capital gains go back up from 15 to 20 percent.

Capital gains taxes are a rip off. If I sell a piece of equipment, I shouldn't have to pay taxes on the money, if I manage to make a profit.
 
Capital gains taxes are a rip off. If I sell a piece of equipment, I shouldn't have to pay taxes on the money, if I manage to make a profit.

Some people make their entire living by investing in things like stocks or foreign currencies, which is fine. If they have the expertise to do so, then great. They pay just 15% in taxes, which is a far lower rate than many people who earn far less. That's just not fair. The capital gains tax cut from 20 to 15 was originally supposed to be temporary. Just let it expire. Investors will still get to keep 80 percent of their profits, which is far more than they could in most countries.
 
Some people make their entire living by investing in things like stocks or foreign currencies, which is fine. If they have the expertise to do so, then great. They pay just 15% in taxes, which is a far lower rate than many people who earn far less. That's just not fair. The capital gains tax cut from 20 to 15 was originally supposed to be temporary. Just let it expire. Investors will still get to keep 80 percent of their profits, which is far more than they could in most countries.

Right, and that income shouldn't be defined as, "capital gains", since they are in the business to sell those things.

I'm in the trucking business. I'm not in the equipment sales business, but I do sell equipment, when it needs to be replaced, or it's no longer of use to me and I feel like I'm getting ass ****ed if I have to pay taxes on the money I make off those sales.
 
Even though it doesn't have a catchy name, like the "999 Plan", I like the concept. The baseline would be have to be determined by the whatever it would take for the plan to be revenue neutral.
 
Right, and that income shouldn't be defined as, "capital gains", since they are in the business to sell those things.

I'm in the trucking business. I'm not in the equipment sales business, but I do sell equipment, when it needs to be replaced, or it's no longer of use to me and I feel like I'm getting ass ****ed if I have to pay taxes on the money I make off those sales.

Are you making a profit off the equipment you sell? If you bought a piece of equipment for 10K and sold it for 10K or less, you're not making any profit on it and therefore shouldn't have to pay any tax on it. If you sell it for 12K, then you should only be taxed on the 2K in profit, not on the full 12K.
 
I have a problem with any gross tax no matter who it's levied on. Whatever the rate is will destroy any firm or business that has a lower net margin then the tax rate.

Okay, I don't own a business so I do have some questions....

On a small business, is the owner of that taxed on all the money the business makes on his personal income tax? Or is it taxed under some corporate or business tax? Or is it taxed only in regards to profit

I would likely say, with a business, the tax should be on profit, not necessarily total capital.
 
I applaud you for coming up with something pretty reasonable. The only things I would change would be no deductions for having kids and I would let capital gains go back up from 15 to 20 percent.

I'm honestly not sure about capital gains, but my off the cuff suggestion was to set it between Bracket 3 and 4, making it Baseline * 5.

Bracket 3 and 4 meet at $144,000 a year. I know capital gains is largely related to stock trading yes? I also know that significant work with the stock market happens at the upper reaches than the lower. However, if you place a tax on it too high it makes it entirely inaccessable and useful for the lower brackets. Thus the placement roughly in between.

That'd mean that if it was decided to set baseline at 3% it'd make Capital Gains 15%. If baseline was set to 5% Capital Gains would be 25%.

Like I said, I'm not as familiar with that and this was mostly focusd towards individual income tax, but that'd be my quick guess as to a possible way to intigrate it.
 
I have never understood why capital gains isn't just simple income.
Because capital gains carries a lot more risks. Capital gains taxes, means less investment because if you do not get losses you will get less returns on your investment.
 
Are you making a profit off the equipment you sell? If you bought a piece of equipment for 10K and sold it for 10K or less, you're not making any profit on it and therefore shouldn't have to pay any tax on it. If you sell it for 12K, then you should only be taxed on the 2K in profit, not on the full 12K.

I don't think I should have to. I feel like that's a rip off.
 
Okay, I don't own a business so I do have some questions....

On a small business, is the owner of that taxed on all the money the business makes on his personal income tax? Or is it taxed under some corporate or business tax? Or is it taxed only in regards to profit

I would likely say, with a business, the tax should be on profit, not necessarily total capital.

Only in regards to profit. Say my business makes $100,000. I have $80,000 in deductions/loss/whatever; giving me a profit of $20,000. If I was taxed on my gross at the rate of 20%--which lower than some folks would like to see--there wouldn't be anything left over to re-invest into my business. I believe that the national average on corporate profit is in the 17% neighborhood.

It just won't work. It's why I cringe when people start talking about doing away with deductions.
 
Only in regards to profit. Say my business makes $100,000. I have $80,000 in deductions/loss/whatever; giving me a profit of $20,000. If I was taxed on my gross at the rate of 20%--which lower than some folks would like to see--there wouldn't be anything left over to re-invest into my business. I believe that the national average on corporate profit is in the 17% neighborhood.

It just won't work. It's why I cringe when people start talking about doing away with deductions.

That isn't the kind of deduction people are talking about. A sole proprietor's profits are equivalent to a worker's wages, and should be taxed as such. No one is suggesting taxing sole proprietors on their gross revenue; even if they wanted to, that would be logistically impossible because there are no clear accounting standards for how to even calculate gross revenue. (For example, if I sell you a pencil for $1 and you sell it back to me for $1, and we repeat that 1000 times, have we each made $1,000 of gross revenue?)

The kind of deductions that should be eliminated are most of the PERSONAL deductions/exclusions/credits...mortgage interest, employer-funded health insurance, medical expenses, college tuition, moving expenses, solar panels, eyeglasses, and most of the other random stuff that the government subsidizes through the tax code. It distorts markets, it makes completing taxes overly burdensome, and it's usually not even very effective at achieving the desired results. If it were up to me we would eliminate all deductions/credits with the exception of charitable contributions and the Earned Income Tax Credit. And possibly a child tax credit, although I'm on the fence about that one.
 
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Here is a tax code I thought of that is similarly structured as OP. Like Kandahar I like zero corporate tax, and I originally taxed capital gains like income but had an economist tell me he thought that it would have a negative effect on growth and the equity markets at the high end of my rates. I am not sure, I lowered them to a flat 20% for now, but I am open to change. I added a federal sales tax and I am open to having that removed if the revenue is high enough to cover total expense of government.

Scrap the current tax code entirely. Implement a progressive income tax on net income, no deductions, and a federal retail sales tax on goods and services. No corporate tax. No payroll SSI/Medicare/Unemployment taxes. No health care costs for business. No estate tax. No joint filings. No separate social security tax as social security will be part of regular budget and funded through regular taxes.

Net Income Tax Rates:
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.

Rates end up looking like the following:


$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%



20% capital gains tax



10% federal retail sales tax on goods and services with exemptions on medical, whole foods in grocery stores, and rent. In the roofer example given earlier in the thread where a roofer buys shingles at a store and then puts them on the house, would the homeowner pay sales tax twice on the shingles? No, the roofer would pay sales tax at the store, and then the homeowner would deduct the cost of the shingles and pay sales tax only on the labor. With businesses, the stuff they buy from vendors will have no sales tax, only the retail finished goods the public buys.


Adopt single payer health insurance covering solely catastrophic along with strict nutritional regulations on the food and beverage industry that transforms the American diet(I know politically impossible likely). The minor stuff in health care will go to a cash system with people paying out of own pocket or relying on charity. The elderly will get an expansion of benefits similar to what they receive now in Medicare.
 
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That isn't the kind of deduction people are talking about. A sole proprietor's profits are equivalent to a worker's wages, and should be taxed as such. No one is suggesting taxing sole proprietors on their gross revenue; even if they wanted to, that would be logistically impossible because there are no clear accounting standards for how to even calculate gross revenue. (For example, if I sell you a pencil for $1 and you sell it back to me for $1, and we repeat that 1000 times, have we each made $1,000 of gross revenue?)

The kind of deductions that should be eliminated are most of the PERSONAL deductions/exclusions/credits...mortgage interest, employer-funded health insurance, medical expenses, college tuition, moving expenses, solar panels, eyeglasses, and most of the other random stuff that the government subsidizes through the tax code. It distorts markets, it makes completing taxes overly burdensome, and it's usually not even very effective at achieving the desired results. If it were up to me we would eliminate all deductions/credits with the exception of charitable contributions and the Earned Income Tax Credit. And possibly a child tax credit, although I'm on the fence about that one.

For that to work, you would have to lower the tax rate dramatically, or you wind up with the same scenario I described above. Individuals are just like corporations i.e you can't take all their proft. Take all of a person's profit and you create a situation, where they're doing nothing but working to pay bills and pay taxes. You will kill the cash flow in the private sector and discourage people from trying to make more money.

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.
 
For that to work, you would have to lower the tax rate dramatically, or you wind up with the same scenario I described above. Individuals are just like corporations i.e you can't take all their proft. Take all of a person's profit and you create a situation, where they're doing nothing but working to pay bills and pay taxes. You will kill the cash flow in the private sector and discourage people from trying to make more money.

I would strongly support lowering overall tax rates, in exchange for eliminating most of the deductions (as long as the overall impact was revenue-neutral or revenue-positive). It would greatly simplify our tax code, make markets more efficient, and mean that most people would waste less time/money on filling out their taxes.

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.

I don't believe that it actually costs anyone $80,000 to live, except through their own life decisions. In my early 20s I lived just fine on $20,000. A bit of a spartan lifestyle, but you gotta do what you gotta do. If someone is earning $100,000 and they owe 28% in taxes, it sounds to me like that person needs to reduce their expenses to $72,000 or less.
 
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I would strongly support lowering overall tax rates, in exchange for eliminating most of the deductions (as long as the overall impact was revenue-neutral or revenue-positive). It would greatly simplify our tax code, make markets more efficient, and mean that most people would waste less time/money on filling out their taxes.

Therein lies the problem: alot of folks don't understand the difference between deductions and loopholes, nor how the system fundamentally operates. Sometimes I believe that the Left leaning folks on this forum that harp about raising taxes, abolishing all deductions and claim they make six-figures in annual income are talking out of their asses.



I don't believe that it actually costs anyone $80,000 to live, except through their own life decisions. In my early 20s I lived just fine on $20,000. A bit of a spartan lifestyle, but you gotta do what you gotta do. If someone is earning $100,000 and they owe 28% in taxes, it sounds to me like that person needs to reduce their expenses to $72,000 or less.

Probably more than just, "a bit". Alot more.

My point is, basically, anyone that would suggest a tax code that would force people to lower their standard of living, just so they could be able to afford to pay their taxes, will never get the chance to implement that plan, because he will never make it to elected office to get the chance.
 
Therein lies the problem: alot of folks don't understand the difference between deductions and loopholes, nor how the system fundamentally operates. Sometimes I believe that the Left leaning folks on this forum that harp about raising taxes, abolishing all deductions and claim they make six-figures in annual income are talking out of their asses.

Most loopholes are deductions (or credits or exclusions or something similar)...and most deductions can be loopholes if used cleverly. I forget who it was, but I read a columnist who describes the tax code like this: You do the minor housekeeping stuff every year, and regularly make modifications to it. But every 20 years or so, you need to completely overhaul it and essentially start from scratch, simply because a lot of pointless stuff finds its way into the tax code over time. It's now been 25 years since the last time the tax code was overhauled...I think it's overdue. We need to eliminate all or most of the deductions in exchange for lower overall rates. The average person shouldn't need to spend more than about 30 minutes doing their taxes.

Probably more than just, "a bit". Alot more.

Meh, I lived comfortably (although not luxuriously) on $20,000 back in the day. It was enough for me to have a cheap apartment in a safe neighborhood in a low-cost part of Ohio, three square meals a day, an old car, internet and two computers, health insurance through my employer, and the occasional cheap night out with friends. Granted, I wouldn't want to live that lifestyle forever (which is part of why I made the decision to go to b-school), but straight out of college I didn't really mind. Living on $20,000 is definitely possible. I can't imagine why it would "cost someone $80,000 to live" unless they had made some very extravagant lifestyle decisions of their own volition.

My point is, basically, anyone that would suggest a tax code that would force people to lower their standard of living, just so they could be able to afford to pay their taxes, will never get the chance to implement that plan, because he will never make it to elected office to get the chance.

I don't think that a modest tax increase would force upper-middle class to lower their standard of living very much. For example, the 28% on $100K isn't too far off from what I currently pay on my income, and I've never had a problem coming up with the money. But ultimately I think this is a moot point...the people who need to be paying more are the people who wouldn't be forced to lower their standard of living much at all, i.e. the very wealthy.
 
Here is a tax code I thought of that is similarly structured as OP. Like Kandahar I like zero corporate tax, and I originally taxed capital gains like income but had an economist tell me he thought that it would have a negative effect on growth and the equity markets at the high end of my rates. I am not sure, I lowered them to a flat 20% for now, but I am open to change. I added a federal sales tax and I am open to having that removed if the revenue is high enough to cover total expense of government.

Scrap the current tax code entirely. Implement a progressive income tax on net income, no deductions, and a federal retail sales tax on goods and services. No corporate tax. No payroll SSI/Medicare/Unemployment taxes. No health care costs for business. No estate tax. No joint filings. No separate social security tax as social security will be part of regular budget and funded through regular taxes.

Net Income Tax Rates:
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.

Rates end up looking like the following:


$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%



20% capital gains tax



10% federal retail sales tax on goods and services with exemptions on medical, whole foods in grocery stores, and rent. In the roofer example given earlier in the thread where a roofer buys shingles at a store and then puts them on the house, would the homeowner pay sales tax twice on the shingles? No, the roofer would pay sales tax at the store, and then the homeowner would deduct the cost of the shingles and pay sales tax only on the labor. With businesses, the stuff they buy from vendors will have no sales tax, only the retail finished goods the public buys.


Adopt single payer health insurance covering solely catastrophic along with strict nutritional regulations on the food and beverage industry that transforms the American diet(I know politically impossible likely). The minor stuff in health care will go to a cash system with people paying out of own pocket or relying on charity. The elderly will get an expansion of benefits similar to what they receive now in Medicare.
Although, I like any plan that tries to improve the system, I see some potential problems with your plan.

1. No corporate taxes? Corporate taxes give companies incentives to keep their profits low, and not cheat the workers. I would rather have a tax deduction for investment. Also, no corporate tax will give companies the opportunity to freeload on the American system and piss off the rest of the world.

2. I don't think it will bring in enough revenue. The income taxes are about the same as today effective tax rates. (the high income are not, but it doesn't matter) So it will bring in about 1 billion USD. Your sales tax will bring in about 600 billion USD, and the capital gains taxes will bring in about 100 billion. That won't be enough.
 
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Most loopholes are deductions (or credits or exclusions or something similar)...and most deductions can be loopholes if used cleverly. I forget who it was, but I read a columnist who describes the tax code like this: You do the minor housekeeping stuff every year, and regularly make modifications to it. But every 20 years or so, you need to completely overhaul it and essentially start from scratch, simply because a lot of pointless stuff finds its way into the tax code over time. It's now been 25 years since the last time the tax code was overhauled...I think it's overdue. We need to eliminate all or most of the deductions in exchange for lower overall rates. The average person shouldn't need to spend more than about 30 minutes doing their taxes.

No, loopholes are unintentional holes in the law and deductions are intentional provisions that allow people not t be taxed on certain expenses.



Meh, I lived comfortably (although not luxuriously) on $20,000 back in the day. It was enough for me to have a cheap apartment in a safe neighborhood in a low-cost part of Ohio, three square meals a day, an old car, internet and two computers, health insurance through my employer, and the occasional cheap night out with friends. Granted, I wouldn't want to live that lifestyle forever (which is part of why I made the decision to go to b-school), but straight out of college I didn't really mind. Living on $20,000 is definitely possible. I can't imagine why it would "cost someone $80,000 to live" unless they had made some very extravagant lifestyle decisions of their own volition.

Back in the day? You're only 20 something. Back in the day for you was 2005! :rofl

It doesn't matter what you you think it should cost to live. What matters, is that if a person wants a lifestyle that costs 80 grand a year to maintain, they have the right to have that lifestyle. This is still America, afterall.



I don't think that a modest tax increase would force upper-middle class to lower their standard of living very much. For example, the 28% on $100K isn't too far off from what I currently pay on my income, and I've never had a problem coming up with the money. But ultimately I think this is a moot point...the people who need to be paying more are the people who wouldn't be forced to lower their standard of living much at all, i.e. the very wealthy.

You pay $28,000+ a year in taxes?
 
Here is a tax code I thought of that is similarly structured as OP. expansion of benefits similar to what they receive now in Medicare.

Interesting but dislike it for a number of reasons...

1. There's people who have absolutely no stake in income taxes, giving them little disincentive to try and continue to raise taxes on others and increase the free stuff they can get from the government.

2. There's nothing keeping someone from attempting to just manipulate a single portion of the tax code to help/hurt one particular group of people. A rich person is no less important or more worthy of targeting by the government than a poor person and vise versa. I think a linked code where you either affect everyone or no one would be better

3. It adds a 10% tax on top of an income tax that is already increased for some of those brackets

4. It implements single payer health care as a part of a tax measure. Ridiculous in that regard and something I'd be against even on its own

5. It implements significant government regulation into our personal lives, going way above the current level of telling us what we can and can not eat.

Essentially your plan offers little for a conservative to like (the fact it lowers taxes for some people is a plus, the fact it simplifies the code by bringing less brackets is a plus) while giving a TON of things that would absolutely make it a non-start (Single payer health care, massive taxes on anything but whole foods, over the top government regulation of food, significant increased taxes on some pay levels, no taxes on some people).

Its a fine liberal plan...but its just that, a liberal plan, not a compromise one in the least.
 
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.

Sorry. I'm a conservative. I believe in living within your means. If you know that you're going to get hit with a 28% tax and you've placed yourself so irresponsibly that 80% of your income a year is tied up in costs that are unavoidable then you've made significant and continual irresponsible choices regarding your finances and your life. Its not other tax payers nor the governments fault, nor their job to automatically help your or fix the system for you.

You want to tie up 80% of your income in fees that absolutely can not be avoided you have to sleep in the bed that made it. The government shouldn't pat you on the head, say its okay, we'll essentially pay you for your schooling (By giving you a tax break). They shouldn't pat you on the head and go "You irresponsibly spent more money on a house than you could afford under the tax system, so we'll be nice to you and give you a deduction thus essentially giving you other peoples money who DIDN'T buy a giant house they couldn't afford and thus aren't getting as big of a deduction".

But, I understand, sometimes what someone WANTS is more important than principle.

A tax rate is someone is going to know somewhat in advance. Whether its a good one, or one they don't like, the fact is the RESPONSIBLE and adult thing to do is budget accordingly. And that means managing your finances in a correct way.

There is 0% chance that I will believe, in any way shape or form, that there's any person making 100k a year that is spending 80% of their income on absolute necessities. Anything over that is bonus, and they're absolutely entitled to that bonus, but at the same time they aren't entitled to the government and other tax payers subsidizing those bonuses through tax breaks.

Not to mention reducing deductions and simplifying the tax code reduces the load on the IRS, thus eliminating the need for some government positions and shrinking a branch of government. It would make the code easier to understand for people so they had a better grasp of how much of their money is truly being taken away from taxes and what the various numbers mean. But pushing for personal responsibility and reducing government size...how silly of me, thinking a very conservative person would like those things.
 
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It doesn't matter what you you think it should cost to live. What matters, is that if a person wants a lifestyle that costs 80 grand a year to maintain, they have the right to have that lifestyle. This is still America, afterall.

They do.

They don't have a right to have their house subsidized by my tax payer dollars

They don't have a right to their medical expenses being subsidized by my tax payer dollars

They don't have a right to their education being subsidized by my tax payer dollars

Hell, they don't even have a RIGHT to their charitable donations being subsidized by my tax payer dollars.

They have a right to spend their money. They have the PRIVLEDGE of deducting certain ways they spend that money from the amount of taxes they pay compared to someone else.

If you make 80K a year and I make 80K a year, we both have equal right to spend our money as we choose. However you for some reason think you have a right to more of your money if you spend it on education and a house while I spend it on a hummer and vacations. Seems you wish to give special treatment and government hand outs to people for doing what the government wants...that's not a "right", that's a government handout.
 
Sorry. I'm a conservative. I believe in living within your means. If you know that you're going to get hit with a 28% tax and you've placed yourself so irresponsibly that 80% of your income a year is tied up in costs that are unavoidable then you've made significant and continual irresponsible choices regarding your finances and your life. Its not other tax payers nor the governments fault, nor their job to automatically help your or fix the system for you.

You want to tie up 80% of your income in fees that absolutely can not be avoided you have to sleep in the bed that made it. The government shouldn't pat you on the head, say its okay, we'll essentially pay you for your schooling (By giving you a tax break). They shouldn't pat you on the head and go "You irresponsibly spent more money on a house than you could afford under the tax system, so we'll be nice to you and give you a deduction thus essentially giving you other peoples money who DIDN'T buy a giant house they couldn't afford and thus aren't getting as big of a deduction".

But, I understand, sometimes what someone WANTS is more important than principle.

A tax rate is someone is going to know somewhat in advance. Whether its a good one, or one they don't like, the fact is the RESPONSIBLE and adult thing to do is budget accordingly. And that means managing your finances in a correct way.[/quote]



I agree, but think those limits should be dictated by the tax code. I mean, a person that makes $100,000 a year and has to pay $28,000 in taxes is plum rediculus.

There is 0% chance that I will believe, in any way shape or form, that there's any person making 100k a year that is spending 80% of their income on absolute necessities. Anything over that is bonus, and they're absolutely entitled to that bonus, but at the same time they aren't entitled to the government and other tax payers subsidizing those bonuses through tax breaks.

I pay for six kids--that I can't claim on my taxes--a house note, buy gas for my truck, put tires on that truck, make repairs on that truck, plus all the other stuff that life requires that we have and you can bet it takes up every bit of 80% of my annual salary.
 
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