Tax Levels

[AndyZ]

I want to dedicate this thread to various methods of taxation, the consequences of such taxes, and considering if there might be a better way.

Currently, we have a Progressive Income Tax.  This means that the big chunk of taxation is upon your income.  Billionaires, the highest tier of individual wealth, aren't really making income, and are free to ignore this.  Therefore, if you really believe that taxing the rich is the best way, income is an obviously foolish way to go about it.

Another thing of note is diminishing returns.  If you're selling widgets for $10 and make $100,000, you can't simply raise the price of widgets to $20 to make $200,000.  You cannot simply raise any sort of taxes whatsoever in order to raise revenue for the government.

You've probably seen a good example of this in the 2008 primaries where Obama was asked about how, when you raise the capital gains tax, the government takes in less money.

Now, I'm fully aware that we have to do something.  Our Debt to GDP ration has exceeded 100%.  We're 15 trillion in debt, and I'm not sure that we could raise that much money even if we just took everyone with more a million dollars and outright stole it from them.  (I'm not endorsing that; I'm simply hypothetically curious if it would even pay for all the spending.)  I want to know how raising taxes could possibly get us out of this, or if it's outright impossible without cutting services.

[Hemingway]

I'm too tired to go into this in any depth right now, but there's one thing I'd like to mention. As far as I know, the US does not have any sort of significant tax on financial transactions. It is, of course, more complicated than just implementing something like that. It would be unpopular. Mainly, I suspect, with those making more money than they could ever need. Just a hunch. In principle, though, it seems like a sound idea, and not just for the purpose of raising tax money.

It's just a thought.

It's quite difficult for me to say anything about US taxes, considering I'm not familiar with the intricacies of the system ( or with the average and the not-so-average citizens' ability and will to pay ), and how different the levels and the system are from where I live.

[BCdan]

I personally like the idea of the reverse income tax as a replacement for all (or most) welfare.  I like it especially because you don't have to worry about "hustling backwards", which anyone on welfare might be familiar with.  My only reservations towards it are more directed at the specific example in the video and not the concept as a whole (primarily that someone with medical issues and the inability to work is not going to live off 10k a year).

Negative Income Tax

[RubySlippers]

On the reverse income tax I like the idea I ,in fact, earn under the $10k a year so I could stop working altogether and the government will give me as a citizen $10k sounds like a great thing.

Seriously if your used to living very modestly that is a fortune around here I could eat at an all-u-can-eat buffet for $300 a month every day, get a place to sleep such as a small room for $300 a month and that would leave the rest for other things I would be comfortable. In other areas it might not be enough but one would just need to move someplace less expensive to solve some issues in fact some areas that would be an economic boost.

[AndyZ]

I'm too tired to go into this in any depth right now, but there's one thing I'd like to mention. As far as I know, the US does not have any sort of significant tax on financial transactions. It is, of course, more complicated than just implementing something like that. It would be unpopular. Mainly, I suspect, with those making more money than they could ever need. Just a hunch. In principle, though, it seems like a sound idea, and not just for the purpose of raising tax money.

It's just a thought.

It's quite difficult for me to say anything about US taxes, considering I'm not familiar with the intricacies of the system ( or with the average and the not-so-average citizens' ability and will to pay ), and how different the levels and the system are from where I live.

Do you mean this: https://en.wikipedia.org/wiki/Financial_transaction_tax ?

I think something like this would slow down businesses to a crawl when no one wants to spend any money or do anything unless absolutely necessary.

Furthermore, it'd chase lots of money out of the U.S. into a place where they don't have such a tax.  Now, arguably this is happening already, but it's best to discourage it and keep taxes manageable enough that people don't want to cheat the system.

I personally like the idea of the reverse income tax as a replacement for all (or most) welfare.  I like it especially because you don't have to worry about "hustling backwards", which anyone on welfare might be familiar with.  My only reservations towards it are more directed at the specific example in the video and not the concept as a whole (primarily that someone with medical issues and the inability to work is not going to live off 10k a year).

Negative Income Tax

My only concern with this is that you'll always have people who will just abuse the system, accept the $10,000 per year and live on that, and the system won't be able to accept the sudden, massive drain.

Think about all the reforms that Clinton put into welfare so that people couldn't just ride it from birth to death.  I think you have something here, but human nature being what it is, the hands sticking out will soon outweigh the hands putting in.  However, with a little work, I think you have something here.

On the reverse income tax I like the idea I ,in fact, earn under the $10k a year so I could stop working altogether and the government will give me as a citizen $10k sounds like a great thing.

Seriously if your used to living very modestly that is a fortune around here I could eat at an all-u-can-eat buffet for $300 a month every day, get a place to sleep such as a small room for $300 a month and that would leave the rest for other things I would be comfortable. In other areas it might not be enough but one would just need to move someplace less expensive to solve some issues in fact some areas that would be an economic boost.

Ruby, I remember you telling us before that you play the system.  Would you be willing to work with us and tell us how you'd work each method put down like you are now?

[RubySlippers]

I don't play the system I ignore the regular economy and work in the underground economy which globally is employing half of the people on the planet hardly insignificant or small.

That said I would note in Florida most people are in the underground economy and do so either because they are here illegally OR they can't work unless they do so (that is my case) its either work for less off the books or I won't be working. And with the IRS rules and all declaring this income is ,for me, not possible since I live like most Undergrounders like they did in 1900 if one didn't bank. You ask the IRS to trust you when you pay and see how far it takes you. In some states taxation is an issue. And in some cases one cannot follow the law in New York there are 3100 street food vendor licenses and that hasn't changed in over four decades so most food vendors work in my economy add to that health regulations for food prep that can't be applied to home kitchens.

For me the system would determine entry and ideally that would an easy tax system say each year five pages and an assumption your reporting is accurate, not crazy. Why would I lie and under report income if that applies to social security and medicare later on I would be getting less in retirement if anything I might lie and pay in more a little bit to be honest.

Under the above model for the $10k tax credit I would either take it an not work, most likely since I hate working even what I do a month. Or I might work less, report it and all and be happy with a few thousand more a year for maybe a trip and some frills. Or I would work for cash and not report the income and claim destitution and take the $10k keeping all the money from working. Like I said I could get by on $10k a year.

Now lets look at the VAT in nations that have that the underground economy tends to be bigger but in some areas, usually it amounts to if you get a receipt or not which places cash transactions off the bools and credit/debit ones on the books. And if you make cash only you still likely won't report it sidewalk performers are a great example they only get cash so will report what they like and keep the rest. This is most prevalent in nations with strong safety nets and high tax rates to pay for them. If you make 20k euros a year you might report 12k to be taxed then keep the rest in cash.

If you have a national sales tax then I would see my market exploiding why buy jeans here for more when you can order them from abroad in bulk and sell them for no tax added, making the goods cheaper than the stores. In fact most undergrounders in this area already do this with cigarettes in some states bringing them in and selling them for far less with no taxes at a tidy profit. Picture that if everything added 15% say.

So taxes paid on all fronts in my economy would depend on various factors risk of exposure to the government, need to work, ease of compliance, trust by the IRS and would I be better off in more ways than not. Since I favor a low stress lifestyle and work as little as I can get away with how I deal with a system would depend on that core goal. Less stress makes me happier and if I'm happier and have more free time to bum around its good to me. Others though want more than I do or have other goals.

[AndyZ]

I don't play the system I ignore the regular economy and work in the underground economy which globally is employing half of the people on the planet hardly insignificant or small.

I apologize if my statement came off as insulting.  Allow me to rephrase.

I realize that you work on the underground economy.  This is part of the major issue with what most Progressives attempt to do, where they have everyone tied into the system in order to allow for means testing in order to redistribute wealth.  Such a system by its very nature requires everyone to be involved directly in the process in order to have the system determine their benefits and requirements.

I don't consider it an immoral act so long as you aren't trying to claim benefits without putting in your own fair share.  For example, if you wanted to benefit from Romneycare/Obamacare without buying health insurance, that would be wrong in my eyes, but if you wanted to not have to buy health insurance, that would not be wrong, so long as you agree that the current system in place has to go so that you don't have to buy health insurance.

You've stated many times before that you're very interested in these types of issues, so since you know how people can take advantage, I was hoping you could point out how loopholes can be closed.

That said I would note in Florida most people are in the underground economy and do so either because they are here illegally OR they can't work unless they do so (that is my case) its either work for less off the books or I won't be working. And with the IRS rules and all declaring this income is ,for me, not possible since I live like most Undergrounders like they did in 1900 if one didn't bank. You ask the IRS to trust you when you pay and see how far it takes you. In some states taxation is an issue. And in some cases one cannot follow the law in New York there are 3100 street food vendor licenses and that hasn't changed in over four decades so most food vendors work in my economy add to that health regulations for food prep that can't be applied to home kitchens.

I agree.  The current system of regulations is an absolute nightmare.  There are people trying to send food and clothes over to the people who just had the hurricanes hit, and the government steps in to stop them when they decide that the food or clothing isn't clean enough for their standards.

I would love to see a large number of these federal regulations torn away, but that's more a discussion for another thread.  I can start one up if you like.

For me the system would determine entry and ideally that would an easy tax system say each year five pages and an assumption your reporting is accurate, not crazy. Why would I lie and under report income if that applies to social security and medicare later on I would be getting less in retirement if anything I might lie and pay in more a little bit to be honest.

Given the choice, I would very happily choose to remove myself from Social Security and Medicare, even just ignoring the payments I've already made.  However, the government doesn't give me a choice.

Under the above model for the $10k tax credit I would either take it an not work, most likely since I hate working even what I do a month. Or I might work less, report it and all and be happy with a few thousand more a year for maybe a trip and some frills. Or I would work for cash and not report the income and claim destitution and take the $10k keeping all the money from working. Like I said I could get by on $10k a year.

This is the problem that I see with the reverse income tax.  Many people would be willing to do absolutely no work and get by on $10, a year.  This would require everyone else who is working to handle the debt created by those people.

The typical metaphor for this situation would be four horses pulling a cart.  The four horses are pulling, but one of them breaks its leg and has to be carried in the cart.  Then you have three horses pulling even more weight than before.  Two of them decide that they don't want to have to pull anymore either, collapse and are carried, and soon you have only one horse trying to pull the entire load.  There reaches a point where only the rich cannot handle the sheer amount of debt that the poor can rack up, and since our national debt is higher than our GDP, I'd say we're well past that.

Bill Clinton put in a number of welfare reforms in order to handle this problem, to get people working rather than simply doing absolutely nothing and accepting their handouts.

Now lets look at the VAT in nations that have that the underground economy tends to be bigger but in some areas, usually it amounts to if you get a receipt or not which places cash transactions off the bools and credit/debit ones on the books. And if you make cash only you still likely won't report it sidewalk performers are a great example they only get cash so will report what they like and keep the rest. This is most prevalent in nations with strong safety nets and high tax rates to pay for them. If you make 20k euros a year you might report 12k to be taxed then keep the rest in cash.

If you have a national sales tax then I would see my market exploiding why buy jeans here for more when you can order them from abroad in bulk and sell them for no tax added, making the goods cheaper than the stores. In fact most undergrounders in this area already do this with cigarettes in some states bringing them in and selling them for far less with no taxes at a tidy profit. Picture that if everything added 15% say.

So taxes paid on all fronts in my economy would depend on various factors risk of exposure to the government, need to work, ease of compliance, trust by the IRS and would I be better off in more ways than not. Since I favor a low stress lifestyle and work as little as I can get away with how I deal with a system would depend on that core goal. Less stress makes me happier and if I'm happier and have more free time to bum around its good to me. Others though want more than I do or have other goals.

BCDan, how do you keep people from avoiding the tax in this way?

[Zakharra]

Ruby, you said this:

I don't play the system

Then say several paragraphs later:

Under the above model for the $10k tax credit I would either take it an not work, most likely since I hate working even what I do a month. Or I might work less, report it and all and be happy with a few thousand more a year for maybe a trip and some frills. Or I would work for cash and not report the income and claim destitution and take the $10k keeping all the money from working. Like I said I could get by on $10k a year.

Isn't that playing the system?

[RubySlippers]

I just noted my options as requested by the earlier poster, and it would depend on the laws and my risk of exposure. Right now I work 10 hours average a week and get by nicely for me but I don't care about alot of things that need money. So I have the option of not filing taxes and keep my existing money that would be oddly most likely since now the IRS has no clue I exist. I could just file at zero income and take the $10k and not work at all. Or combine the two in the bolded part of the text. All would be options.

Right now I also don't access any government programs I could qualify for since to do so I need to prove income and I would toss up red flags all over.

I would say most likely out of the three I would do what I do now work, make money and not file taxes given the other issues like being now on the grid to the IRS and once on the grid getting off is harder. I would not get the $10k or whatever but the tradeoff would in my view not be a good one. And with all the system interconnectedness once you known here or there your less hidden right now the big benefit is since I don't attach to any government programs and avoid banking I'm as close to a ghost as one can get in the system and be on it in the corners and nooks.

So the reverse income tax would not bother Undergrounders like me, but those on welfare or who don't care would file and just take the checks and it would work out for working poor like Walmart workers for example who have more modest incomes. But it would be abused just not likely from me.

[OldSchoolGamer]

Some thoughts I have:

1) We need to greatly simplify the tax code (corporate and personal).  Income needs to be income needs to be income.  If I get skinned 40% on a lucky slot pull in Las Vegas, a day trader who lucked out and bought low and sold high should likewise fork out 40%.  Gambling is gambling.  No more tax loopholes for corporations.  No more mortgage income tax credit.  No deductions for hedge fund managers or corporate jets.  You make income, you pay tax.  If we did that, I'm betting we could probably lower marginal rates significantly.

The only credits I would maintain or establish would be the per-child credit, and an exemption of the first $5000 of interest and investment income for individuals on top of the existing base exemption of income.  I would also maintain the option for tax-deferred retirement accounts--indeed, I would probably lift all ceilings on how much money workers could contribute.

I would also establish a 5% national sales tax for all goods and services except unprepared food, medicine, and rent.  This would broaden the tax base.

We also need to decide, for once and for all, what Social Security is.  Social Security kind of straddles the murky line between transfer payment scheme and forced savings account.  That line is redrawn by politicians based on the expediencies of the moment, and that needs to stop.  I would opt to declare it a transfer scheme.  Note that doesn't mean Social Security is bad; one can make a very cogent argument for some kind of reasonable transfer payment scheme from workers to the elderly.  Moreover, we can then eliminate the (rather regressive) Social Security payroll tax scheme and fold it into the (much more progressive) general income tax and the new sales tax.  We can then more rigorously means-test Social Security and make sure that it flows to the poor elderly and not the well-heeled who don't need it.

If my system seems skewed to reward savings and punish consumption, that's kind of the point.  The current system doesn't sufficiently encourage thrift.  Case in point: health savings accounts.  When I used to work 9 to 5, I saw that option and it looked groovy...until I read the fine print that said that any unspent money in the fund at the end of the year would be forfeit.  Forfeited to who, and why?  Talk about a disincentive to save!  I would rewrite the law to say that retirement accounts could be borrowed from at zero interest to cover health care costs.

[BCdan]

My only concern with this is that you'll always have people who will just abuse the system, accept the $10,000 per year and live on that, and the system won't be able to accept the sudden, massive drain.

Think about all the reforms that Clinton put into welfare so that people couldn't just ride it from birth to death.  I think you have something here, but human nature being what it is, the hands sticking out will soon outweigh the hands putting in.  However, with a little work, I think you have something here.

I am honestly not too concerned because this system doesn't have the 'hustling backwards" effect that makes the current welfare system so crappy.  In the current system, if you get a job, you lose your benefits and often those benefits are stripped away faster than the new job can replace those benefits with income.  This encourages people to stay locked within the welfare system. 

Whereas with the negative income tax, there is no reason not to work.  Sure you could live a VERY spartan existence on 10k a year, but that would be pretty rough and more of an exception and not the rule.  Or so I would hope, I personally can't imagine living on that little especially seeing as I want to live in a major city and live a middle class life. 

BCDan, how do you keep people from avoiding the tax in this way?

Usually property taxes are the most reliable, hardest to cheat system of taxation, but I am not sure how that would work with a negative income tax.  To get 10k for each citizen, that would need 3.1 trillion in income to break even on such a system.  That's unless we just aren't going to include children under 14 whick cuts it down to about 2.7 trillion.

[Vekseid]

I want to dedicate this thread to various methods of taxation, the consequences of such taxes, and considering if there might be a better way.

Currently, we have a Progressive Income Tax.

The key word there being 'Income'. Much of the rest of our tax policy is regressive.

  This means that the big chunk of taxation is upon your income.

For a certain range of incomes. Poorer people pay more in sales and property taxes (I paid 13% of my income in sales tax for a time). Richer people pay more in capital gains. But capital gains is flat.

Billionaires, the highest tier of individual wealth, aren't really making income, and are free to ignore this.  Therefore, if you really believe that taxing the rich is the best way, income is an obviously foolish way to go about it.

Billionaires don't make income? That's news to me.

Any cash wealth they have decreases at the rate of inflation. Any income they earn is taxed accordingly. For raw stocks, the corporation's income is taxed. They have more buffers against a loss of wealth - but that's one of those privileges that obscene wealth buys.

Another thing of note is diminishing returns.  If you're selling widgets for $10 and make $100,000, you can't simply raise the price of widgets to $20 to make $200,000.  You cannot simply raise any sort of taxes whatsoever in order to raise revenue for the government.

If it costs $9 to make a widget, that means you're selling 100,000 widgets. If you sell 20,000 at $20, you are in fact now making $220,000.

Taxes are a completely separate ballgame. There are liars and people who believe them that spread lies like:

You've probably seen a good example of this in the 2008 primaries where Obama was asked about how, when you raise the capital gains tax, the government takes in less money.

Now, I'm fully aware that we have to do something.  Our Debt to GDP ration has exceeded 100%.  We're 15 trillion in debt, and I'm not sure that we could raise that much money even if we just took everyone with more a million dollars and outright stole it from them.  (I'm not endorsing that; I'm simply hypothetically curious if it would even pay for all the spending.)  I want to know how raising taxes could possibly get us out of this, or if it's outright impossible without cutting services.

Tax policy needs to be structured such that it encourages GDP growth.

That is, you structure your taxes (all of them, sales tax included) such that the people whose money moves within the economy the fastest gets taxed the least. If someone is essentially living month to month, then taxing them directly impacts GDP growth. On the other hand, if someone has a rainy day fund, taxing them won't impact the economy as much, and so you can start taxing them a bit. You still want to let people collect savings! Savings are an insurance against downturns in an economy. It's just a statement that, at whatever income bracket you see meaningful savings start, you can begin taxation without heavily impacting the economy.

Awhile ago I did some math regarding the 'inflection point' of where a person's savings started to actually be a drain on the economy, it was around $80k a year or so.

Likewise, you tax people whose money tends to sit and rot or otherwise move out of the country the most. This encourages internal reinvestment, because if you make $10 million a year, you can avoid the onerous taxes by reinvesting 90% of it locally. This means that, either that $9 million goes straight to taxes, which means about ~$13 million added to GDP, or that $9 million goes straight to employing local workers, which means about ~$24 million added to GDP. Now, said person making $10 million a year, doing that on his own, won't see much benefit from that. But add up everyone else making $10 million a year doing the same thing (or having the same result), and suddenly, the economy is booming again. Even the government adding $13 million to GDP is better than nothing at all, however, if the rich guy just sticks it under his mattress, or in a bank that refuses to invest it (as is the case now).

Note that, there's some four trillion sitting in banks at this point. They certainly want to see this money invested, but they want a stronger economy in order to see the confidence in doing so. You've probably seen me bitch, repeatedly, about Obama playing politics with the economy, and it's largely centered around this concept - he argued for rather little in the amount of economic recovery packages so that it would take awhile before the economy started getting its gears going again. At first I thought it was just incompetence, but a part of me thinks it's intentional.

This is how the economy worked during the postwar boom. There was no external market to export to (a common lie is that the postwar boom was export driven - look up the exports from that period). There was no external labor force to import from. The top tax bracket was 90+%, and the economy was booming.

Our current taxation policy is not at all like this, especially at the state and local levels. The poor get hit pretty hard, between sales/use/VAT taxes, fines and fees, and property taxes. These are all taken away from the local economy. Because they spend the money they earn faster, getting $1 trillion of revenue from them hurts the economy more than getting that same $1 trillion from large corporate and high-earner taxes, who sit on their money rather than invest it.

[Callie Del Noire]

I find it interesting that so many republicans (that I've talked to personally) act like this is something that Ronnie Reagan would sign off on. The tax breaks for the rich.  He didn't spare them. He did a lot of taxing to fix the things he worked on. But everyone forgets that now.

[AndyZ]

I'll post more later, but being called a liar requires a response.

Obama's Capital Gains Tax "Fairness"

Here's a video of 2008 primaries where Obama was asked about how, when you raise the capital gains tax, the government takes in less money.  Stop calling me a liar.

[Vekseid]

Here's a video of 2008 primaries where Obama was asked about how, when you raise the capital gains tax, the government takes in less money.  Stop calling me a liar.

No, the lie is that when you raise capital gains, the government makes less money. It doesn't matter who says it.

[RubySlippers]

Now play nice. I'm going though to post an example of the problem lets say you give people the $10,000 in some places that would be a big boost in an income, here is an example.

http://en.wikipedia.org/wiki/Rio_Bravo,_Texas

I can point out also counties where people are destitute and rural where this would be a huge boost in income if you have two adults with two adult children filing seperately thats $40k coming into a home, suddenly it makes living on that alot easier. Heck in some places $40k could buy a nice basic house and with that money a family could afford a home, car and live pretty well if they wanted to.

Lets use this example the average working income in that area using dated numbers is $15k for a man and $12k for a woman, many are on government support. So your talking this could have a positive benefit allowing more income into a community but in some ways it would also be abusive if one gets creative. Noting if you have people filing in a household eighteen or older, who opt not to work and take the money. You may not be able to get by on that but if its allowing them not to work and drudge away and your already living in a cheap to live place you could see an issue with the plan.

[AndyZ]

1) We need to greatly simplify the tax code (corporate and personal).  Income needs to be income needs to be income.  If I get skinned 40% on a lucky slot pull in Las Vegas, a day trader who lucked out and bought low and sold high should likewise fork out 40%.  Gambling is gambling.  No more tax loopholes for corporations.  No more mortgage income tax credit.  No deductions for hedge fund managers or corporate jets.  You make income, you pay tax.  If we did that, I'm betting we could probably lower marginal rates significantly.

The only credits I would maintain or establish would be the per-child credit, and an exemption of the first $5000 of interest and investment income for individuals on top of the existing base exemption of income.  I would also maintain the option for tax-deferred retirement accounts--indeed, I would probably lift all ceilings on how much money workers could contribute.

I would also establish a 5% national sales tax for all goods and services except unprepared food, medicine, and rent.  This would broaden the tax base.

I'm not fully convinced that income taxes are the best way to go, but I could agree with this on principle.  One idea I've been playing with is changing the income tax into a sales tax, and just taxing some things lower and some things higher.  However, this would require heavy tweaking and I have no real idea how to do that.  It's just a theory of mine that I'd love to see someone war game.

We also need to decide, for once and for all, what Social Security is.  Social Security kind of straddles the murky line between transfer payment scheme and forced savings account.  That line is redrawn by politicians based on the expediencies of the moment, and that needs to stop.  I would opt to declare it a transfer scheme.  Note that doesn't mean Social Security is bad; one can make a very cogent argument for some kind of reasonable transfer payment scheme from workers to the elderly.  Moreover, we can then eliminate the (rather regressive) Social Security payroll tax scheme and fold it into the (much more progressive) general income tax and the new sales tax.  We can then more rigorously means-test Social Security and make sure that it flows to the poor elderly and not the well-heeled who don't need it.

Social Security is a flat 6% of income, right?  That means that people who make more have to pay more into it.  I'm not sure if I agree with the means-testing concept that people who have been paying into it all their lives don't actually get it, even if they don't need it.  However, this is one of the things where I think people will have to agree to disagree.

If my system seems skewed to reward savings and punish consumption, that's kind of the point.  The current system doesn't sufficiently encourage thrift.

I posit that if you encourage means-testing, then you are likewise rewarding consumption and punishing thrift.

Case in point: health savings accounts.  When I used to work 9 to 5, I saw that option and it looked groovy...until I read the fine print that said that any unspent money in the fund at the end of the year would be forfeit.  Forfeited to who, and why?  Talk about a disincentive to save!  I would rewrite the law to say that retirement accounts could be borrowed from at zero interest to cover health care costs.

Yeah, these kinds of problems definitely need to go.  There's many of them.

I am honestly not too concerned because this system doesn't have the 'hustling backwards" effect that makes the current welfare system so crappy.  In the current system, if you get a job, you lose your benefits and often those benefits are stripped away faster than the new job can replace those benefits with income.  This encourages people to stay locked within the welfare system. 

Whereas with the negative income tax, there is no reason not to work.  Sure you could live a VERY spartan existence on 10k a year, but that would be pretty rough and more of an exception and not the rule.  Or so I would hope, I personally can't imagine living on that little especially seeing as I want to live in a major city and live a middle class life. 

True, although I'd expect that three or four people could get together, share an apartment or house and be able to split $30,000 or $40,000 fairly nicely.  I realize that "two can live as cheaply as one" isn't fully accurate, but there's some degree of truth.

Usually property taxes are the most reliable, hardest to cheat system of taxation, but I am not sure how that would work with a negative income tax.  To get 10k for each citizen, that would need 3.1 trillion in income to break even on such a system.  That's unless we just aren't going to include children under 14 whick cuts it down to about 2.7 trillion.

I don't see how you could include children unless you allow children to work, which is a maddening can of worms.  Most likely, the children would get some sort of compromise account that's less than $10,000 and more than zero.  Ideally, I'd think one could figure out how much two live as cheaply as, factor that in for the cost of a child and deal with that.

It's possible to argue that the parents should pay for the children, and I don't even know how I'd lean or debate in such a matter, though.

The key word there being 'Income'. Much of the rest of our tax policy is regressive.

For a certain range of incomes. Poorer people pay more in sales and property taxes (I paid 13% of my income in sales tax for a time). Richer people pay more in capital gains. But capital gains is flat.

Billionaires don't make income? That's news to me.

Any cash wealth they have decreases at the rate of inflation. Any income they earn is taxed accordingly. For raw stocks, the corporation's income is taxed. They have more buffers against a loss of wealth - but that's one of those privileges that obscene wealth buys.

Perhaps I should have clarified that my entire point for this section was that simply raising the income tax will not soak the rich.  You hear a lot about how Warren Buffett pays less in a percentage of his total net earnings than his secretary, but most people simply argue to raise income tax as a result.  Even the suggestion of a Buffett tax is just to add a further income bracket to millionaires, and if most of Buffett's money is actually coming from capital gains, it wouldn't affect him.

This part was more just trying to get people to say more about actual methods and less about simply raising taxes.

If it costs $9 to make a widget, that means you're selling 100,000 widgets. If you sell 20,000 at $20, you are in fact now making $220,000.

However, if you raise the price to $20, you won't sell as many.  Supply and demand.

By the same token, if you raise taxes to 50%, then you won't have the rich investing money unless they think they can get at least a 51% investment on their money.

The same trick works in the stock market in that if I think I can get a 9% earnings on my money, but 10% of my earnings would go to my broker in fees, I won't make the attempt.  I'd just lose money on the deal.

Tax policy needs to be structured such that it encourages GDP growth.

That is, you structure your taxes (all of them, sales tax included) such that the people whose money moves within the economy the fastest gets taxed the least. If someone is essentially living month to month, then taxing them directly impacts GDP growth. On the other hand, if someone has a rainy day fund, taxing them won't impact the economy as much, and so you can start taxing them a bit. You still want to let people collect savings! Savings are an insurance against downturns in an economy. It's just a statement that, at whatever income bracket you see meaningful savings start, you can begin taxation without heavily impacting the economy.

I think I understand the theory here but would need to see it in action.

Awhile ago I did some math regarding the 'inflection point' of where a person's savings started to actually be a drain on the economy, it was around $80k a year or so.

Please explain this one to me.  It seems like that if the money is in a bank and is therefore being loaned out by that bank, it wouldn't provide much of a drain.  Instead, it would make sure that the money is going out to people who need loans, whether for houses, starting businesses or whatever, and encourage growth.

Likewise, you tax people whose money tends to sit and rot or otherwise move out of the country the most.  This encourages internal reinvestment, because if you make $10 million a year, you can avoid the onerous taxes by reinvesting 90% of it locally. This means that, either that $9 million goes straight to taxes, which means about ~$13 million added to GDP, or that $9 million goes straight to employing local workers, which means about ~$24 million added to GDP. Now, said person making $10 million a year, doing that on his own, won't see much benefit from that. But add up everyone else making $10 million a year doing the same thing (or having the same result), and suddenly, the economy is booming again. Even the government adding $13 million to GDP is better than nothing at all, however, if the rich guy just sticks it under his mattress, or in a bank that refuses to invest it (as is the case now).

Seems to me as though a simple and obvious solution would be tairiffs.  If we put a tax on imported goods, would this solve the issue?

Note that, there's some four trillion sitting in banks at this point. They certainly want to see this money invested, but they want a stronger economy in order to see the confidence in doing so. You've probably seen me bitch, repeatedly, about Obama playing politics with the economy, and it's largely centered around this concept - he argued for rather little in the amount of economic recovery packages so that it would take awhile before the economy started getting its gears going again. At first I thought it was just incompetence, but a part of me thinks it's intentional.

I don't know whether Obama is incompetent or doing this intentionally either, but I honestly don't believe that it'll improve until he's gone.  However, I don't want this debate to get sidetracked, so I politely request we don't bring in current government officials unless very necessary.

No, the lie is that when you raise capital gains, the government makes less money. It doesn't matter who says it.

That probably came off as crude from me, and I apologize if so.

Here's a chart that I've found comparing national gains taxes to the actualizations (meaning the money that they actually take in).  It seems to show that when you raise the rate, the revenue drops as a result, and vice versa.

If this chart is innacurate, please give me an accurate one.

Now play nice. I'm going though to post an example of the problem lets say you give people the $10,000 in some places that would be a big boost in an income, here is an example.

http://en.wikipedia.org/wiki/Rio_Bravo,_Texas

I can point out also counties where people are destitute and rural where this would be a huge boost in income if you have two adults with two adult children filing seperately thats $40k coming into a home, suddenly it makes living on that alot easier. Heck in some places $40k could buy a nice basic house and with that money a family could afford a home, car and live pretty well if they wanted to.

Lets use this example the average working income in that area using dated numbers is $15k for a man and $12k for a woman, many are on government support. So your talking this could have a positive benefit allowing more income into a community but in some ways it would also be abusive if one gets creative. Noting if you have people filing in a household eighteen or older, who opt not to work and take the money. You may not be able to get by on that but if its allowing them not to work and drudge away and your already living in a cheap to live place you could see an issue with the plan.

I think I get what you're saying.  Different places have different levels of the living standard, so it makes little sense to have the same amount of $10,000 no matter where in the U.S. you live, right?

[Edit: I had one too many Quote tag.  Fixed.]

[SilentScreams]

The tax code is broken. It's well over a million pages of text at this point. An entire floor of the law library I use is nothing but the tax code. The rules are rigged against anyone who makes less then a hundred million a year. This nonsense about someone who makes 250k or 500k being forced to pay "their fair share" is just that, nonsense. All that laws and regulations which target that demographic do is encourage mediocrity. Who wants to be average? Not I, that's for sure.

Alright, taxes. A flat tax should be introduced. Every person pays ten percent of the yearly income, no exceptions. All corporations pay 25% of their yearly profits, no exceptions.  The tax is administered at the state level only. The states collect all the money from their citizens and those corporations who legal residence is within the state. The Federal Government comes along afterwards and take 30% of the money the state collected from each state. That's it. No more, no less.

This would also encourage states to raise their educational standards as, if they want more money, they have to have citizens that make more.

[AndyZ]

The tax code is broken. It's well over a million pages of text at this point. An entire floor of the law library I use is nothing but the tax code. The rules are rigged against anyone who makes less then a hundred million a year. This nonsense about someone who makes 250k or 500k being forced to pay "their fair share" is just that, nonsense. All that laws and regulations which target that demographic do is encourage mediocrity. Who wants to be average? Not I, that's for sure.

Absolutely no argument from me.  I think that the tax code as written is a weapon.  FDR used it against his detractors and many other presidents have since.  It's how they caught Capone, as we all know, which means that it's what they'll use against you to find something wrong with you when they can't legally prove you're doing something.

So much of the crap in there is just to give special favors.  It absolutely has to be hacked down to some basic rules.

Alright, taxes. A flat tax should be introduced. Every person pays ten percent of the yearly income, no exceptions. All corporations pay 25% of their yearly profits, no exceptions.  The tax is administered at the state level only. The states collect all the money from their citizens and those corporations who legal residence is within the state. The Federal Government comes along afterwards and take 30% of the money the state collected from each state. That's it. No more, no less.

This would also encourage states to raise their educational standards as, if they want more money, they have to have citizens that make more.

Definitely sounds interesting, but I'm curious how you arrived at these particular numbers.  I'd also love to know how it would play out, but short of a Star Trek simulation, I'm not sure we can determine that without putting it into practice.

This is something that was brought to my attention recently.  I have no idea if it's accurate or not, but what it implies is that since we never receive more than 20% of GDP from taxes, it makes more sense to leave taxes at around 20%, which will bring in more money for the government, leaves more money for the people to spend, and therefore helps everyone.

It's worth noting that the red line is a percentage of the total GDP being taken in.  The significant jump during the 40s does not imply a contradiction to my earlier statements about lowering taxes to raise money, because it's not checking the total revenue being brought in against itself, but against each year's GDP.

[Edit]

Also wanted to add: if this chart is inaccurate, please give me an accurate one.

[RubySlippers]

I was noting in my cost of living to the $10k in response to you can't live on that arguement. I will just note the simple fact is in some parts of the country if one relocated that is alot of money to live on if you have say two parents and two adult children getting that it may double or triple the lower end household income. To many then sitting on your butt just taking the money is an option that would be very appealing.

True in NYC its not much but in parts of Alabama that is easily an annual income for some people. If one opts to live homeless that is alot of money assuming you eat on a budget that would easily meet all ones needs and some wants.

As for the tax rate I do know one thing the higher they are and the more complex the tax system the more pronounced the Underground Economy gets, I know from the estimates CA and NY have large underground economies. All states have it just it depends on taxes if they hurt and the regulations stiff it just promotes people working for cash.

[OldSchoolGamer]

As for the tax rate I do know one thing the higher they are and the more complex the tax system the more pronounced the Underground Economy gets, I know from the estimates CA and NY have large underground economies. All states have it just it depends on taxes if they hurt and the regulations stiff it just promotes people working for cash.

Hell, some towns up in redwood country in northwest California have cannabis cultivation as a primary means of production.

[AndyZ]

As for the tax rate I do know one thing the higher they are and the more complex the tax system the more pronounced the Underground Economy gets, I know from the estimates CA and NY have large underground economies. All states have it just it depends on taxes if they hurt and the regulations stiff it just promotes people working for cash.

This is inherent to the system.  When Prohibition started, people saw no reason for the laws and openly flaunted them.  Whenever the government oversteps its reach, it must either become tyrannical in order to force people to participate in such matters, or else stand and watch as they're unable to handle the influx of people breaking such rules.

It's ironic how the same people who don't want their bedrooms regulated have little issue with so many other things being regulated.