Democrats & Liberals Archives

A New Tax Proposal

I have a federal tax proposal radically different from any you have heard before. We do not tax income. We do not tax sales. We do not need a big IRS. We do not need accountants wasting their knowledge on taxes.

The basic idea is to annually tax corporations on their GROSS INCOME. Maybe we could make incorporating a federal action and not a state action, and call the annual payment a fee. Those corporations with high gross incomes will pay a higher tax or fee.

To those who claim that corporations will transfer the cost of their taxes to the consumer, I agree they will. Thus all of us consumers woud be supporting our government indirectly and without fuss.

By making corporations with high gross income pay more, we discourage concentration. By taxing the gross and not the net we do not help the corporation that is losing money as we do now. New struggling businesses, however, will be exempt from tax altogether until they reach a certain gross income level, $10,000,000 let's say.

Can you imagine all the trouble and confusion we will do away with? No dreaded April 15. No complicated forms to fill out. No accountaints to pay. No IRS audits to worry about since it's easy for the government to find the gross income of corporations.

This approach is fair. There would be no way for any corporation to use "deductions" to reduce its taxes - as some do, bringing their current income taxes down to zero.

This is a radical proposal. But I believe it will work well.

Posted by Paul Siegel at May 12, 2008 4:38 PM
Comments
Comment #252690

It would work!
All that is really needed is for the judiciary to consider the corporation a man made tool and not a person. Otherwise the corporation will be howling “Discrimination”.
The ol’ grey corporation just ain’t what it used to be, ain’t what it used to be…

Posted by: Weary Willie at May 12, 2008 4:57 PM
Comment #252693

Paul, I commend thinking outside the box.

But, hidden taxation is anathema to our American founding principles and Constitution. You might want to try thinking outside the box in another direction.

One major consequence of your plan is that it would result in huge pressures toward monopolies. Only one or a few corporations would survive able to withstand the taxation profitably. Not all that different from what we have now with the oil, medical, and media oligopolies growing not only in wealth, but political power as well.

Nice try. No cigar. The way forward is freeing business from taxation in conjunction with removing their corporate safe harbor provisions in which no one is responsible for the actions of the corporation. We need to remove taxation of businesses while at the same time holding their executive officers and owners legally responsible for their business’ actions and effects upon consumers.

Freeing business to compete and prosper while at the same time holding them responsible just products and services is competitive advantage both the consumers and our businesses need in this global economic paradigm.

Posted by: David R. Remer at May 12, 2008 5:12 PM
Comment #252694

That task is the only one consistent with the principle of self-rule on which this country was founded and the only one appropriate for a sovereign people in a democratic society: We must define the corporation, instructing it in what it can and cannot do for the common good. The bars to our cage lie in our own minds that have become colonized by the sheer dominance of huge corporations over our lives and our communities. These corporations increasingly determine not only who will do what kind of work and what we eat and wear but what we think as well. One result of the corporate domination of our culture is the TINA phenomenon: There Is No Alternative.


“What if…,” asks Jane Anne Morris of Democracy Unlimited in Wisconsin, who may be the only corporate anthropologist at large in North America:

**corporations were required to have a clear purpose, to be fulfilled but not exceeded.

**corporations’ licenses to do business were revocable by the state legislature if they exceeded or did not fulfill their chartered purpose(s).

**the act of incorporation did not relieve corporate management or stockholders/owners of responsibility or liability for corporate acts.

**as a matter of course, corporation officers, directors, or agents could be held criminally liable for violating the law.

**corporation charters were granted for a specific period of time, like 20 or 30 years (instead of being granted “in perpetuity” as is now the practice.)

**corporations were prohibited from owning stock in other corporations in order to prevent them from extending their power inappropriately.

**corporations’ real estate holdings were limited to what was necessary to carry out their specific purpose(s).

**corporations were prohibited from making any political contributions, direct or indirect.” (Rachel’s Environment and Health Weekly, #488, April 4, 1996)
Quoted from http://dieoff.org/page62.htm

Posted by: Weary Willie at May 12, 2008 5:27 PM
Comment #252695

We should start out with a federal tax on all those incorporated in the Cayman Islands and other tax dodges, but still doing business here.

Posted by: ohrealy at May 12, 2008 5:53 PM
Comment #252701

Thanks for the great laugh Paul. Liberals and their hilarious schemes are coming out of the shadows where they have languished for decades. With the prospect of a demo Pres and congress they finally feel free to come out into the light. Sure do hope you can get the Obamawan to buy into this idea.

Posted by: Jim M at May 12, 2008 7:42 PM
Comment #252703

Paul
I think if we did what you are proposing I think IMO we see the migration of all our jobs out of this country. I think the fair way to go about taxation would be a flat rate for everyone. What ever percentage agreed upon that’s what everyone pays no deductions no refunds.

Posted by: KAP at May 12, 2008 8:31 PM
Comment #252704

Impliment; The ” FAIR-TAX ” End ” The ( I.R.S. )

” End ” big GOVERNMENT period !

CASE CLOSED.

Posted by: j.i.m. at May 12, 2008 8:34 PM
Comment #252705

Bad idea.

All corporate taxes are passed on to consumers as hidden sales taxes, and all sales taxes are regressive.

Here’s a more simple, and better idea.

The current tax system is regressive, and one of these 10 abuses causing these 17+ economic conditions that have never been worse and/or since the 1930s and 1940s.

Don’t fall for the un FairTax.org’s 30% Sales Tax. It is worse and more regressive than the current tax system: One-Simple-Idea.com/FairTaxFraud1.htm

Posted by: d.a.n at May 12, 2008 9:12 PM
Comment #252707

Paul,

That would cripple many, many small corporations, and perhaps most importantly, it would stifle economic growth, and result in depression era unemployment rates.

What does need to happen is some actual restoration of fairness in the tax code …….. something like what d.a.n. has proposed in the past, but I’d start taxation of income at 150% of the poverty level which would give a hell of a break to most middle class families, and it should be somewhat progressive beyond ————- oh, let’s say $150,000.00, but never, ever to the point it was when Reagan took office! (about 72% I believe)—-(note: it had been as high as 92% during and just following WWII).

But there is something very, very wrong when an intelligent man like Warren Buffet says his secretary paid a higher percentage of her income in taxes than he did. Some like to point out that investors take a hell of a risk …….. well, yeah! So do coal miners, high steel workers, and anyone that commutes to work in anything smaller than a Humvee!

Now, I don’t think corporations should get off with no taxation, but I think there needs to be a great deal of freedom for expansion, creating new jobs, etc. Along with that there needs to be responsibilty ……….. why are taxpayers paying the tab to clean up past corporate blunders; ie: contamination of a watershed, etc?

One of the recent Oklahoma tornado sites was also a federal clean up site! Yeah, some damn mining made it uninhabitable! How did that happen? Someone got rich and now all taxpayers are paying to clean up afterwards, that’s obscene!

Sheesh, My fingers already hurt ………….. can’t get into the obscenity of insurance companies!

Posted by: KansasDem at May 12, 2008 9:29 PM
Comment #252708

Paul:

There is one fundamental flaw in your tax plan. When you lump taxes into one place you create an atmosphere where fraud is rewarded. The payback for cheating is huge.

By contrast when you spread taxes over many different parts of the economy, and reduce the tax rate, you decrease the tendency to cheat.

If taxes are a dollar, there isn’t much motive, however if taxes are a thosand dollars there is a great motive.

I favor with use of our technogy multiplying the ways that we tax, and reducting the rates of tax we pay. For instance you can add transaction fees on buying/selling securites, or a home. These can be very small and yet add much revenue. It reduces fraud, because there isn’t much reason to avoid small taxes.

Your system will create weird types of business organizations whose sole purpose is to avoid taxes. We had many of these same things when tax rates were high. It’s not good economics.

Posted by: Craig Holmes at May 12, 2008 9:45 PM
Comment #252711

If you tax gross income, you take away virtually ALL investment, R&D and other good things, not to mention you get firms to use the cheapest inputs.

I invest in timber. When we make a harvest, we might make GROSS income of %500,000, but the inputs and investments that made that possible are problaby around %450,000. If we were taxed on gross inocme, we would have no business. We would be paying taxes on our expenses and would be better off producing nothing.

If you tax their net income, after expenses, you still have the old system.

The U.S already has the highest corporate taxes of ANY developed country … well second highest. We are not giving corporations any breaks compared to other countries. Even places like Sweden, Denmark and Ireland have lower corporate tax rates. There has been a big shift in the last 25 years. We are the laggards.

Posted by: Jack at May 12, 2008 11:32 PM
Comment #252715

Craig Holmes said: “I favor with use of our technogy multiplying the ways that we tax,”

That is just another form of hidden taxation. Anathema to American ideals and counter-productive, as hidden taxes have less accountability for how they are spent as government revenue.

D.a.n is right, a single flat income tax applied equally and fully to all Americans and aliens working in America or drawing income from within American enterprises. One source of revenue, from which all federal spending must come from.

It is the only system capable of producing the across the board fairness and transparency necessary for tax payers to begin holding government responsible for spending.

And let’s be clear, under a flat income tax, tax payers would be far more capable of watchdogging corporate subsidies and holding politicians accountable for what in too many cases amounts to bribery of government officials for special consideration in legislation to the detriment of the public’s and voter’s interests. Under the flat income tax, corporations and business pay no taxes. Therefore, they have no right or entitlement to ask for special consideration from government politicians.

And as someone else proposed, with the Flat Income Tax which removes all business taxation, must come an end to corporate campaign contributions or any corporate participation in the election process. A large number of the corruptive problems our current system experiences will be resolved by these two reforms.

Posted by: David R. Remer at May 13, 2008 1:33 AM
Comment #252730

This has got to be the greatest idea ever posted on the blue site! In one fell swoop, it would totally eliminate most business activity in the U.S. Who in their right mind would ever want to do business in a country that wants to tax GROSS income? If we were so misguided as to adopt such a plan, within 5 years every major corporation would no longer be based in the U.S. They would all flee to more business friendly places. Prices would go up, our GDP would plummet,unemployment would skyrocket, there would little or no investments in stock, in other words, we could become the next 3rd world country and beg our more affluent neighbors for help.

I can see how this idea would appeal to the more radical liberals. They tend to have a hatred for corporations and “rich” people anyway. Anything that would do away with both would be fine with them.

I do agree that there needs to be some changes in our present system. Removing personhood from corporate entities would be a start, as would barring corporate and union political contributions. Corporate officials are already subject to criminal proceedings if they violate the law, or allow the corporation ro do so. There does need to be greater oversight.

I have come to the conclusion, after a lot of thought and study, that the FAIR TAX proposal is probably the best. It seems to be the most fair to the individual. Depending on how it was set up, it could encourage saving and investing.

At least, it’s worth a try.

Posted by: Old Grouch at May 13, 2008 7:32 AM
Comment #252745

David:

I couldn’t disagee with you more. What you are doing is creating a huge target for tax evasion. Also, diversification is a huge concept that is so very important in finance. You and Dan are going exactly in the opposite direction and putting all your eggs in one basket.

If one large “simple” tax system were created, look for a shadow economy of bartering to come about the likes of which has not been seen in this country since prohibition.

I believe corruption will increase under your proposal not decrease.

The way to decrease corruption is to reduce the motivation. That requires spreading out the tax burden on multiple sourses.

Another problem with your proposal other than increased corruption is a decrease in income. What you tax decreases. So now, I will ask for my income to come to me in the form of company stock. Deferred of course.

I will also look for investments that “hide” income like those old limited partnerships.

It will create weird investment vehicles whose purpose is not to make money, but to avoid the “simple” tax.

It is just a very very very bad idea to put all our revenue eggs into one basket.

Can you and Dan point to an major world economy that is using a single revenue sourse that is doing well?

Posted by: Craig Holmes at May 13, 2008 1:46 PM
Comment #252759
Craig Holmes wrote:I couldn’t disagee with you more. What you are doing is creating a huge target for tax evasion. Also, diversification is a huge concept that is so very important in finance. You and d.a.n are going exactly in the opposite direction and putting all your eggs in one basket.
Craig,
  • (01)NOT taxing corporations is only one thing no longer taxed, so the tax diversity argument is very weak;
  • (02) and we already have no shortage of different things that are already taxed;
  • (03) corporate taxes is a form of double taxation (especially C type corporations);
  • (04) profits from any corporation belong to no individual until those profits are taken in the form of compensation, at which time they would be taxed once;
  • (05) corporate taxes are simply passed onto consumers as hidden sales taxes, and ALL sales taxes are regressive (such as the un-FairTax.org’s 30% Sales Tax);
  • (06) corporate taxes make our businesses less competitive in a global economy;
  • (07) corporate taxes discourage research, development, and improvements since retained earnings would be taxed from up to 35%;
  • (08) corporate taxes discourage maintaining capital to weather hard times, since retained earnings would be taxed up to 35%;
  • (09) corporate taxes costs billions per year in record keeping;
  • (10) corporate taxes simply add another layer of complexity; there are already too many layers of hidden taxes and complexity;
  • (11) ever changing and complex corporate tax laws are bad for business; especially retroactive taxes;
  • (12) many states and local governments already tax corporations too; no wonder corporations want to leave the U.S.
  • (13) lower corporate taxes in Ireland is why many companies moved operations to Ireland.
  • (14) eliminating taxation on corporations should be accompanied by a simplified and fairer flat 17% income tax on all types of income including (i.e. inheritance, gifts, payroll, wages, prizes, lotteries, gambling, etc.) except benefits derived from taxes (such as Social Security, Medicare, and welfare benefits);
Craig Holmes wrote:I believe corruption will increase under your proposal not decrease.
False.

Complexity (by design) increases opportunities for abuse.
A more simple and fair 17% income tax on all types of income would be more simple (i.e. less complex), and therefore, more difficult to abuse.
And in case you haven’t already noticed, corporations have many ways to avoid paying corporate income taxes.

Craig Holmes wrote:Can you and d.a.n point to an major world economy that is using a single revenue sourse that is doing well?
No.

However, removing only corporate taxes from the list below still leaves us with a long, long list of other taxes:
(01) Accounts Receivable Tax
(02) Building Permit Tax
(03) CDL license Tax
(04) Cigarette Tax
(05) Corporate Income Tax
(06) Dog License Tax
(07) Federal Income Tax
(08) Federal Unemployment Tax (FUTA)
(09) Fishing License Tax
(10) Food License Tax,
(12) Fuel permit tax
(12) Gasoline Tax(42 cents per gallon)
(13) Hunting License Tax
(14) Inheritance Tax
(15) Interest expense
(16) Inventory tax
(17) IRS Interest Charges
(18) IRS Penalties (tax on top of tax)
(19) Liquor Tax
(20) Luxury Taxes
(21) Marriage License Tax
(22) Medicare Tax
(23) Property Tax
(24) Real Estate Tax
(25) Service charge taxes
(26) Social Security Tax
(27) Road usage taxes
(28) Sales Tax
(29) Recreational Vehicle Tax
(30) School Tax
(31) State Income Tax State
(32) Unemployment Tax (SUTA)
(33) Telephone federal excise tax
(34) Telephone federal universal service fee tax
(35) Telephone federal, state and local surcharge taxes
(36) Telephone minimum usage surcharge tax
(37) Telephone recurring and non-recurring charges tax
(38) Telephone state and local tax
(39) Telephone usage charge tax
(40) Utility Taxes
(41) Vehicle License Registration Tax
(42) Vehicle Sales Tax
(43) Watercraft registration Tax
(44) Well Permit Tax
(45) Workers Compensation Tax

So, that’s a fairly lame arguement.
Also, Ireland, which still has a corporate tax (but of only 12.5%; (versus up to 35% in the U.S.), has seen many businesses move there.
The high (up to 35% corporate income taxes) are motivating corporations to leave the U.S. (and the jobs go with them).

Corporate taxes did not always exist, and things were just fine before they existed.
The arugment “no one else does it that way” is not very convincing; especially with regard to taxation.
Taxation in the U.S. is far too complex, and there are too many different kinds of taxes.
It’s actually quite ridiculous.
Eliminating one single tax and making the federal income tax a flat 17% would be an improvement.
Also, most people polled believe a flat income tax on all types of income is the most fair system of taxation.
Clearly, the current system is not fair, as evidenced by Warren Buffet paying only 17.7% in federal income taxes on $46 Million while his secretary paid 30% in federal taxes on $60K.

Posted by: d.a.n at May 13, 2008 5:20 PM
Comment #252761

Dan:

D.a.n is right, a single flat income tax applied equally and fully to all Americans and aliens working in America or drawing income from within American enterprises. One source of revenue, from which all federal spending must come from.

This is a quote from David above.

Putting all our revenue eggs in one basket is a terrible idea.


Posted by: Craig Holmes at May 13, 2008 5:37 PM
Comment #252766

Dan:

Multiple tax sourses does not need to be complex. Sales taxes are not “complex”.

Most of your arguments above are not even relevant to the concept of multiple revenue streams for federal government. If you adjust revenue in a revenue neutral way, by adding new revenue sources, you decrease tax rates on the other sources of revenue.

By adding new revenue streams to the federal government you get the revenue to off set corporate taxes and thus lower them.

Here is how the anti corruption thing works. When taxes are low, there is really very little to gain by avoiding taxes. Why go against the federal government when taxes are low? It is high taxes that increase corruption. The fewer the revenue sources you have the higher the tax rates on the remaining sources and the higher the motivation to cheat.

I think you are confusing complication within a revenue source, (As in the federal income tax code), for complication by adding more revenue streams (sources). Taxation can be simpler, and have more sourses of revenue.

For instance if you were to add more places to tax, your Simple idea may only need a 5% tax rate. Nothing else in your concept would need to change. It would just reduce the dependency on that revenue source.

Posted by: Craig Holmes at May 13, 2008 6:39 PM
Comment #252767

Maybe our perspective is wrong. I get the impression when a new idea to reform our tax system is presented, the current situation dominates the discussion. It seems the only tax system considered is the tax system that will support our government’s status quo spending.

If we were to change the way our government spends our money, perhaps our method of taxation will change with it.
For better or worse. But not death do we part.
Like in a constitutional amendment.

Posted by: Weary Willie at May 13, 2008 6:48 PM
Comment #252769

An Income tax, whatever the amount, doesn’t include the black market, barter system. It segregates people who play by the rules and doesn’t include the one who does not.

A sales tax will include everyone, fortunate or not.
The fortunate will pay the majority of the taxes because they spend more money, because the have more money! The not will not.

A national sales tax doesn’t have to be 30%!
It could be 1 or 2 or 5. It depends on what our government demands of us. It depends on what we demand of our government.
I don’t ask or expect a lot of anything. I’ve been ripped off, threatened, assaulted, battered, taken advantage of, slandered, mis-interpreted to the worse extent.
I don’t see alot of reason to pay for this government. I’m taking care of myself, regardless of what the government thinks it’s doing.

I shouldn’t have to pay for someone else’s security when mine is being threatened.

If I’m buyin’ I’m complyin’!

That’s the way it should be.

The frackin’ 16th amendment is renowned for it’s brevity. It erased much more than it replaced.

Posted by: Weary Willie at May 13, 2008 7:26 PM
Comment #252771
Craig Holmes wrote: d.a.n: Multiple tax sourses does not need to be complex. Sales taxes are not “complex”.
Sales taxes are regrssive. Therefore, there is that one huge complexity (by design) that too many people do not understand.
Craig Holmes wrote: Most of your arguments above are not even relevant to the concept of multiple revenue streams for federal government.
False. I listed 45 different sources above, and removing one double-taxing, regressive, complex layer (i.e. corporate income taxes) would be an improvement, because the PROs out-weigh the CONs.
Craig Holmes wrote: If you adjust revenue in a revenue neutral way, by adding new revenue sources, you decrease tax rates on the other sources of revenue.
Removing one double-taxing, regressive, complex layer (i.e. corporate taxes), and making the federal income tax more fair and less regressive (e.g. a flat 17%) would be an improvement for the numerous reasons given above in Comment # 252759.

Your argument is very weak, since we do not lack in the least for sources of taxable streams.
The problem is that some streams are being taxed more than once, but in the end, are cleverly shifted (by design) to the middle class.
That is exactly what a corporate income tax does, since the consumers ulitimately pay those corporate income taxes.
The current tax system is unfair and regressive (by design), along with these other 10+ abuses.

Craig Holmes wrote: By adding new revenue streams to the federal government you get the revenue to off set corporate taxes and thus lower them.
Add all the revenue streams you want. People still have incomes, and they should be taxed more fairly. Corporate income taxes are simply passed on to consumers as hidden sales taxes, which are regressive (as all sales taxes are regressive).
Craig Holmes wrote: Here is how the anti corruption thing works. When taxes are low, there is really very little to gain by avoiding taxes. Why go against the federal government when taxes are low? It is high taxes that increase corruption. The fewer the revenue sources you have the higher the tax rates on the remaining sources and the higher the motivation to cheat.
Corporate income taxes are double taxation, and regressive to boot. Removing one regressive type of tax, and adjusting the personal income tax to tax all types of taxes equally will make taxation more fair, which will reduce the motivation to cheat.
Craig Holmes wrote: I think you are confusing complication within a revenue source, (As in the federal income tax code), for complication by adding more revenue streams (sources).
False.

There’s no confusion. Fairer and less regressive taxation via the elimination of a corporate income tax, and a flat 17% income tax on all types of income trumps the loss of one tax source (i.e. corporate income tax) from the list of 45 tax sources listed above. Especially when corporate income taxes are regressive, double taxation, and driving corporations out of the nation. People aren’t likely to move out of the U.S. as are transnational corporations. The negatives of corporate income taxes far outweigh the positives of eliminating the corporate income tax, and taxing all types of personal income more fairly. A huge problem with the current system is that some types of income (i.e. those types of income that benefit the wealthy the most (by design), such as capital gains, interest, and dividends) are taxed at a much lower percentage than wages. Gross wages are first hit with 15.3% for Social Security and Medicare. Then the gross wages are hit again with an income tax. All types of income should be (at the very least) taxed at an equal rate. But that is not what we have today. The wealthy are taxed less on capital gains, interest, and dividends than the average Americans income tax rate, and the capital gains, interest, and dividends are also not subject to 15.3% taxation for Social Security and Medicare. If 17.7% on $46 Million is OK with Warren Buffet, then 17% on all types of income should be OK for everyone else.

Craig Holmes wrote: Taxation can be simpler, and have more sourses of revenue.
More sources is not necessarily more simple; especially when it results in double, triple, and quadruple taxation, regressive taxation, and hidden taxes that are shifted to the unwitting middle class (as usual).
Craig Holmes wrote: For instance if you were to add more places to tax, your Simple idea may only need a 5% tax rate. Nothing else in your concept would need to change. It would just reduce the dependency on that revenue source.
We have too many different types of taxes already, and many of them are sales taxes, which are regressive (as are all sales taxes).

The PROs far out-weigh the CONs for converting to this fairer and simpler 17% income tax system.
By the way, in case you didn’t notice, a flat 17% income tax on income (above the poverty level only) is less than the 17.7% that Warren Buffet paid on his $46 Million in year 2006.
The reason that would work is because a lot of tax evasion would be reduced with all the tax loop holes and tax shelters eliminated.
Warren Buffet agrees that something is terribly wrong when his total federal taxes on $46 Million is only 17.7%, but his secretary paid 30% in total federal taxes on $60K.
I think most would agree.
Lastly, corporations don’t pay as much income tax as you think, because they either spend it, or distribute it as salaries and bonuses, rather than pay an higher (up to 35%) tax rate on it.

Posted by: d.a.n at May 13, 2008 7:41 PM
Comment #252772

Weary Willie, Many dispute whether the 16th Amendment was ever actually ratified by 3/4 of the states. If not, an income tax is unconstitutional.

At any rate, none of this may matter much in a few decades, when the current $53.2 Trillion in nation-wide debt doubles.

Congress can’t stop spending like a bunch of drunken sailors.

HHMMmmm … come to think of it, that is probably a slam to drunken sailors.

Posted by: d.a.n at May 13, 2008 7:47 PM
Comment #252773

Dan:

As I said above, having only one source of revenue for all federal expenses is not wise.

Posted by: Craig Holmes at May 13, 2008 7:50 PM
Comment #252774

It is because drunken’ sailors earned every dollar they spend.

Posted by: Weary Willie at May 13, 2008 8:23 PM
Comment #252775

Tence, I have to think “tence”

Therefore, I edit:

It is a slam dunk to sailors, because they have earned every dollar they spend.

Posted by: Weary Willie at May 13, 2008 8:28 PM
Comment #252777

Paul,

Corporations would still find loopholes. They would transfer offshore even more than they do now, so you would have to tax their gross U.S. business. That would just effectively be a value added or national sales tax both of which are regressive. It would transfer tax burden to the poor and working class. That is why Repubs like those tax schemes.

Posted by: Ray Guest at May 13, 2008 8:59 PM
Comment #252779

Ray Guest:

Exactly. Anytime you put all your revenue hopes in one area, or highly concentrate revenue from one source, that is exactly what happens.

The only way to limit your concern is to keep taxes low across the board, and to have multiple sources. That way we don’t get disruption of economics.

Posted by: Craig Holmes at May 13, 2008 9:13 PM
Comment #252788

Craig,

Give up, like I have, on trying to talk to d.a.n. about the Fairtax. He still calls the program regressive even though I’ve tried to show him the economists studies and research detailing how it is not. Instead he compares his flat tax plan with a straight up sales tax plan and then acts like it is the same as the Fairtax plan. When I point him to the independant research from places like Harvard and the like, he simply refuses to debate the facts. I don’t know if it is because he doesn’t want to accept that he might be wrong or has a personal issue against it, but it takes a lot of work to keep a mind so closed that it won’t even listen to the facts presented…

David, on the other hand, rejects it for other reasons. He sees it as a Republican plot to screw the middle class and eliminate Social Security (which is not touched by the system, by law).

Trust me, I’ve exhausted myself in the past banging my head against very hard walls… It’s just not worth it to go over it ad naseum.

Posted by: Rhinehold at May 13, 2008 11:41 PM
Comment #252791

Rhinehold:

Does David/Dan really believe all revenue should come from one source?

What happens if income drops? Actually one would predict that income would drop if we put all of the burden on income tax instead of Corporate taxes etc etc.

Isn’t diversification a well understood basic idea? Doesn’t “don’t put all your eggs in one basket” have a pretty universal application? Isn’t that well understood?

Posted by: Craig Holmes at May 13, 2008 11:53 PM
Comment #252794

I’ve shown data to them detailing how during all slowdowns the income tax revenue drops while the sales tax revenues remain flat, but I’m told that it doesn’t matter.

They both even admit that hidden taxation is bad for the middle class and poor, but neither one wants to eliminate them.

*shrug*

I guess they’ll have to answer that. And I’m sure that they will, now that it has been mentioned.

Posted by: Rhinehold at May 14, 2008 12:09 AM
Comment #252799

Rhinehold:

I just picture a “shadow economy” developing where people start taking income “under the table” to avoid taxation.

The same thing happens now where I live. We have sales tax here in Washington State (no Income tax) and in Oregon there is the opposite. Business folk have one spouse (with high income) a resident of one state, and the other (with low income) a resident of the other.

Then of course they do the opposite for major purchaces. The buy the big car and have in licensed in the state with no sales tax.

It would seem smarter for both states to have Income tax and sales tax only moderate the rates. That would take away the incentive to cheat. Tax Revenues in both states would go up.

And it would save on gas from Washingtonians crossing the boarder to buy goods sales tax free.

Posted by: Craig Holmes at May 14, 2008 1:50 AM
Comment #252804

There will never be a flat, no exception tax. There are too many reasons not to. The trick would be in how you define income. That’s the exception. Most small corporations pay their CEO’s small nominal salaries. Their monies come from stock and profit sharing. Lobbyist, Social engineering, and economic incentive enter into these kinds of definitions. No democracy could pass it.

Keep dreaming. It won’t happen… ever. Not without a facist dictator. Somehow, that seems like it might be worse than the cure.

Posted by: googlumpus at May 14, 2008 4:46 AM
Comment #252821
Craig Holmes wrote: d.a.n: As I said above, having only one source of revenue for all federal expenses is not wise.
I disagree. Double, triple, and quadruple taxation isn’t good either. Double taxation results from taxing corporations, which are merely passed along to consumers as hidden sales taxes, and all sales taxes are regressive. The prevention of hidden and regressive taxes should have higher priority than the number of sources.

Also, an important issue you are overlooking is that the tax rate 17% is actually lower for many Americans.
If Warren Buffet thinks 17.7% is OK, why would he (or anyone else) complain or work hard to evade a rate of 17% (slightly less).
The reason 17% could work (with a 5.6% reduction in federal spending), is because it taxes everyone the same percentage, instead of only fleecing the largest number of people in the shrinking middle income group.

The tax system that is the most fair will be the tax system with the most compliance.
Most Americans polled want a flat income tax.
Not a sales tax.
Not the current tax system, which is regressive and full of tax loop holes that mostly benefit the wealthy, and mostly hammer the middle-income group (the largest group).

Rhinehold wrote: Craig, Give up, like I have, on trying to talk to d.a.n. about the Fairtax. He still calls the program regressive even though I’ve tried to show him the economists studies and research detailing how it is not.
Rhinehold, Craig does not support the FairTax.org’s 30% Sales Tax (23% inclusive sales tax).

Also, none of your so called proof proves that the FairTax.org’s tax plan would not be regressive.
I’ve looked at the research, from BOTH sides of the argument, and the majority of the proof shows several problems in the FairTax.org’s tax plan.
It is quite easy to demonstrate (see below) how the FairTax.org’s tax plan will be regressive (using their own data).

The FairTax.org plan doesn’t have enough support in Congress (only about 91 of 535 in Congress; almost all Republicans), because enough voters and politicians understand that it is impossible to prove that it will not be regressive, despite the prebate.
The frustration in defending the FairTax.org tax plan is the inability to prove that a massive national sales tax will not be regressive.
It is not enough to say the FairTax.org tax plan won’t be regressive.
Proof is required that the FairTax.org tax plan won’t be regressive.
That requires that FairTax.org proponents prove that the wealthy will spend as much (or more), as a percentage of their income, as do the majority of Americans.
If you can prove that, I will gladly admit you are right and I am wrong.
But that is extremely unlikely when the FairTax.org’s tax plan would not tax interest income, dividends, and capital gains.

Rhinehold wrote: Instead he compares his flat tax plan with a straight up sales tax plan and then acts like it is the same as the Fairtax plan.
False again.

It’s not nice to tell lies about other people’s position, but quite typical when frustrated with the weakness and inability to prove and defend their own argument.
I never said the FairTax.org’s plan was only a flat sales tax, which is obvious due to the prebate.
If I have mischaracterized the FairTax.org’s tax plan in any way, please feel free to prove why (please provide specific; not merely more empty rhetoric).

The FairTax.org’s prebate only makes the bottom portion (at the lower-income levels) of the tax curve progressive.
After the prebate is gone, it becomes a regressive tax again, as do all sales taxes.
Thus, the prebate causes the tax curve to be regressive as income grows larger.
Using the data from FairTax.org’s own web-site …

_____________ FairTax (for example, for 1 single person) ______________
POPL = Percent of Poverty Level ($10,400) for a single person
Eff.Tax = Effective Tax

POPL _ Spending __ FairTax___Prebate __NetTax___ Eff.Tax
061% ___ $6,415 ___ $1,925 __ $2,392 __ ($ 467) __ -7.3%
123% __ $12,830 ___ $3,849 __ $2,392 __ $1,457 __ 11.4%
246% __ $25,660 ___ $7,698 __ $2,392 ___ $5,306 __ 20.7%
370% __ $38,490 __ $11,547 __ $2,392 ___ $9,155 __ 23.8%
493% __ $51,320 __ $15,396 __ $2,392 __ $13,004 __ 25.3%
550% __ $76,980 __ $23,094 __ $2,392 __ $20,702 __ 26.9%
987% __ $102,640 _ $30,792 __ $2,392 __ $28,400 __ 27.7%

Now, let’s include the Income and IncomeTaxRate columns (what the FairTax.org 30% Sales Tax proponents do not want you to see)

POPL _ Spending __ FairTax___Prebate __NetTax___ Eff.Tax _ Income __IncomeTaxRate
061% ___ $6,415 ___ $1,925 __ $2,392 __ ($ 467) __ -7.3% _ $8,000 __ -240.7%
123% __ $12,830 ___ $3,849 __ $2,392 __ $1,457 __ 11.4% _ $15,000 ____ 9.7%
246% __ $25,660 ___ $7,698 __ $2,392 ___ $5,306 __ 20.7% _ $27,000 ___ 19.7%
370% __ $38,490 __ $11,547 __ $2,392 ___ $9,155 __ 23.8% _ $40,000 ___ 22.9%
493% __ $51,320 __ $15,396 __ $2,392 __ $13,004 __ 25.3% _ $53,000 ___ 24.5%
550% __ $76,980 __ $23,094 __ $2,392 __ $20,702 __ 26.9% _ $200,000 __ 10.6%
987% __ $102,640 _ $30,792 __ $2,392 __ $28,400 __ 27.7% _ $500,000 ___ 5.7%

Notice the falling income tax percentages for the wealthy?

_____ FairTax.org’s 30% Sales Tax (23% inclusive) with prebate (for single person):
30% |———————————————————————————————-
27% |———————————————————————————————-
24% |————x———————————————————————————
21% |———x—-x——————————————————————————
18% |——————x—————————————————————————
15% |——x————-x————————————————————————
12% |—-x——————-x——————————————————————-
09% |—-x——————————-x——————————————————-
06% |—x—————————————————————x————————-
03% |—x—————————————————————————————-x
00% |xxx——————————————————————————————
__$0K $30K 50K 100K __ 200K __ 300K __ 400K __ 500K __ … $GROSS INCOME

So please explain why that scenario above would not happen?

The FairTax.org plan above would probably be more regressive than the current tax system, which is regressive as clearly proven by the Warren Buffet (and his secretary) example (below):
_________Current REGRESSIVE Federal Tax System:________________
35% |——————————o————————————————————
33% |———————-o—————o—————————————————
30% |——————o—————————o——————————————= (30% total
27% |—————-o————————————-o———————————- federal tax for
24% |—————o————————————————o————————- secretay making $60K)
21% |————-o————————————————————-o————-
18% |————o————————————————————————-o-= (17.7% Warren
15% |———-o——————————————————————————- Buffet’s total
12% |———o——————————————————————————— federal taxes on
09% |——-o———————————————————————————- $46 Million)
06% |——o————————————————————————————
03% |—-o————————————————————————————-
00% |ooo—————————————————————————————
____$0__30K__60K__90K_120K_150K_180K_210K_240K … … $GROSS INCOME …

Rhinehold wrote: When I point him to the independant research from places like Harvard and the like, he simply refuses to debate the facts.
False.

Again, telling lies about other people and their position isn’t nice.
The so called proof you speak of still fails to prove the FairTax.org’s tax plan is not regressive.
I’ve read and studied the independent research links you, others, and FairTax.org have provided, and what is obvious is that it is deceptive, and still fails to prove one important thing:

    That the FairTax.org’s 30% Sales Tax (23% inclusive tax) with a pre-bate will not be regressive as shown in the FairTax.org tax curve above.

Rhinehold wrote: I don’t know if it is because he doesn’t want to accept that he might be wrong or has a personal issue against it, but it takes a lot of work to keep a mind so closed that it won’t even listen to the facts presented…
You are simply proving the weakness and lameness of your own argument by now making it a personal attack on me.

Why don’t you simply prove your case with your own facts and calculations rather than resorting to personal critiques?

Rhinehold wrote: David, on the other hand, rejects it for other reasons. He sees it as a Republican plot to screw the middle class and eliminate Social Security (which is not touched by the system, by law).
David R. Remer’s suspicion is quite valid, since 86 of the 91 Congress persons pushing for the FairTax.org tax plan are Republicans.

So I would strongly agree with David R. Remer on that point. It is fairly obvious, since 95% of the FairTax.org supports are Republicans.
Or are you saying that little detail of 95% does not matter?

Rhinehold wrote: Trust me, I’ve exhausted myself in the past banging my head against very hard walls… It’s just not worth it to go over it ad naseum.
Your frusrtation is not my fault, but actually rooted in your inability to prove that the FairTax.org’s tax plan will NOT be regressive.

When you and others can prove your case, your arguments may have some credibility.
And trying to cloud the issue with personal critiques on me refusing to agree with you is also not helping your credibility.
This is not that complicated.
Instead of telling everyone how hard you tried to convince others of seeing it your way, why not simply prove to all of us that the:

    FairTax.org’s tax plan will NOT be regressive.

That should not be too difficult.
All we’re asking for is some proof, please.

googlumpus wrote: There will never be a flat, no exception tax. There are too many reasons not to. The trick would be in how you define income.
Well, never say never.

Good point about “how you define income”.

There is a BILL 1040 (introduced last year, Feb-2007), called the Freedom Flat [Income] Tax Act.
Unfortunately, it still tries to omit some types of income (primarily the types of income that mostly benefit the wealthy).

At any rate, the voters have the government that they elect, and deserve.

Posted by: d.a.n at May 14, 2008 10:32 AM
Comment #252822
Also, none of your so called proof proves that the FairTax.org’s tax plan would not be regressive.

The last time we discussed it, and trust me it was the last time, I offered three links to documents that explained precisely what you are asking for now. Your response was that since one of my links was to a study that was reprinted on the AFT website, none of them were worth reading. That was your statement. That was when I realized that it didn’t matter study I showed you, you were dead set against it with your mind made up so why bother. You even stated http://www.watchblog.com/thirdparty/archives/005441.html#236070 “I will fight to no ends to undermine it, because it is dishonest and REGRESSIVE.” That’s the true statement of someone willing to listen or accept they might be wrong, no doubt.

BTW, the progressivity comes from other factors than the prebate. Again, as I stated before, you pick and choose what you want to hear about the plan an ddebate that, not the actual plan itself. And no, I am done attempting to discuss it with you since you refuse to accept the facts I give you as presented, so there is no point in my mind.

BTW, we aren’t supposed to want to support the Fairtax plan because it only has 91 supporters… How many supporters does your flat tax plan have again?

Posted by: Rhinehold at May 14, 2008 10:51 AM
Comment #252828
Rhinehold wrote: The last time we discussed it, and trust me it was the last time, I offered three links to documents that explained precisely what you are asking for now. Your response was that since one of my links was to a study that was reprinted on the AFT website, none of them were worth reading. That was your statement.
False again.

I read them. They are not worth re-reading.
There are also other independent sites supporting the FairTax.org’s plan.
There are also just as many that do not support the FairTax.org’s plan.

Rhinehold wrote: That was when I realized that it didn’t matter study I showed you, you were dead set against it with your mind made up so why bother.
False again.

When someone shows the simple proof that the FairTax.org’s 30% Sales Tax (23% inclusive)/With Rebate Tax System will not be regressive, then I will admit my mistake.
I’ve studied it at great length, and done the math myself.
That is what convinced me it was a fraud.
A prebate still does not eliminate the regressiveness inherent in all sales taxes.

Rhinehold wrote: You even stated (www.watchblog.com/thirdparty/archives/005441.html#236070) d.a.n wrote: “I will fight to no ends to undermine it, because it is dishonest and REGRESSIVE.”
True. I did write that and stand behind 100%, until the proof is provided that the FairTax.org’s Tax Plan will not be regressive.

Again, a prebate still does not eliminate the regressiveness inherent in all sales taxes.
That is your burden.
Simply provide the proof that the FairTax.org’s Tax Plan will not be regressive.
Do they math yourself.
Don’t take someone else’s word for it.
Simply take the table of numbers above (which came from the FairTax.org’s own web-site), and demonstrate how the FairTax.org’s Tax Plan will NOT be regressive.
It’s that simple.

Rhinehold wrote: That’s the true statement of someone willing to listen or accept they might be wrong, no doubt.
Just because other people don’t agree with you does not mean they are unwilling to listen.

I’m listening and waiting for credible proof.
Simply saying something and proving it are two different things.
I’ve provided very simple and credible proof that easily demonstrates how the FairTax.org’s Tax Plan will be regressive.
If it isn’t, you should be able to easily disprove it.
That would be far more convincing than telling people they are simply wrong and closed-minded merely because they disagree with you.

Rhinehold wrote: BTW, the progressivity comes from other factors than the prebate.
I understand all of that, and I clearly see that the FairTax.org’s Tax Plan does remove some hidden taxes. That is why I am opposed to corporate income taxes. They are merely passed on to consumers as hidden sales taxes, and all sales taxes are regressive (even with a prebate that merely makes the curve progressive at the lower-income levels).

I willing to debate the issue at length, but I need to see facts and proof, and that is missing thus far.
In fact, what I have seen at the FairTax.org web-site is some clever deceptions to the tax system is progressive, when it is not across all income levels.

Rhinehold wrote: Again, as I stated before, you pick and choose what you want to hear about the plan an debate that, not the actual plan itself.
Nonsense.

I’m willing to debate it at length.
Simply provide the proof that the FairTax.org’s Tax Plan is NOT regressive (especially as income increases above the $200K levels).
Your frustration is in the inability to prove that.

Rhinehold wrote: And no, I am done attempting to discuss it with you since you refuse to accept the facts I give you as presented, so there is no point in my mind.
Fine.

That simply lends to the belief that your argument is weak.

Blame it all on me and others that refuse to agree with you, but the real frustration is not us, but your own inability to prove that the FairTax.org’s Tax Plan is NOT regressive (especially as income increases above the $200K levels).

Again, simply take the tables below (which came from the FairTax.org’s very own web-site), and prove how the FairTax.org’s Tax Plan will not be regressive (relative to gross income).

_____________ FairTax (for example, for 1 single person) ______________
POPL = Percent of Poverty Level ($10,400) for a single person.
Eff.Tax = Effective Tax = (100 * NetTax/Spending)

POPL _ Spending __ FairTax___Prebate __NetTax___ Eff.Tax
061% ___ $6,415 ___ $1,925 __ $2,392 __ ($ 467) __ -7.3%
123% __ $12,830 ___ $3,849 __ $2,392 __ $1,457 __ 11.4%
246% __ $25,660 ___ $7,698 __ $2,392 ___ $5,306 __ 20.7%
370% __ $38,490 __ $11,547 __ $2,392 ___ $9,155 __ 23.8%
493% __ $51,320 __ $15,396 __ $2,392 __ $13,004 __ 25.3%
550% __ $76,980 __ $23,094 __ $2,392 __ $20,702 __ 26.9%
987% __ $102,640 _ $30,792 __ $2,392 __ $28,400 __ 27.7%

_____ FairTax.org’s 30% Sales Tax (23% inclusive) with prebate (for single person):
30% |———————————————————————————————x
28% |—————————————————-x—————x————————
26% |———————————-x———————————————————-
24% |————————-x——————————————————————-
22% |———————————————————————————————-
20% |————-x——————————————————————————-
18% |———-x———————————————————————————-
16% |———x————————————————————————————
14% |——-x————————————————————————————-
12% |——x—————————————————————————————
10% |—-x—————————————————————————————-
08% |—-x—————————————————————————————-
06% |—-x—————————————————————————————-
04% |—x——————————————————————————————
02% |—x——————————————————————————————
00% |xxx—————————————————————————————-
__$0K $10K $20K $30K $40K $50K $60K $70K $80K $90K 100K … $SPENDING

This is part of the FairTax.org fraud.
Notice the tax curve above is relative to money SPENT (not gross income).
The curve above that is often refer to as being progressive is not relative to gross income.
There is no proof anywhere that can prove that taxes relative to income will be progressive.

That is the problem with the FairTax.org’s Tax Plan.
No amount of fast talking and gobbledygook can change it.

And what is very interesting about this entire situation is the attempt to prove (or imply) that taxes will be progressive relative to gross income.
If the goal is to prove that taxes will be progressive relative to income, then why tax spending? ! ?
Perhaps the supporters of the FairTax.org tax plan should simply admit there is no way to prove taxes will be progressive relative to gross income.
If that is your position, then I agree completely.

Now, let’s include the two cleverly omitted gross Income and IncomeTaxRate columns below (what the FairTax.org 30% Sales Tax proponents do NOT want you to see)

POPL _ Spending __ FairTax___Prebate __NetTax___ Eff.Tax _ Income __IncomeTaxRate
061% ___ $6,415 ___ $1,925 __ $2,392 __ ($ 467) __ -7.3% _ $8,000 __ -240.7%
123% __ $12,830 ___ $3,849 __ $2,392 __ $1,457 __ 11.4% _ $15,000 ____ 9.7%
246% __ $25,660 ___ $7,698 __ $2,392 ___ $5,306 __ 20.7% _ $27,000 ___ 19.7%
370% __ $38,490 __ $11,547 __ $2,392 ___ $9,155 __ 23.8% _ $40,000 ___ 22.9%
493% __ $51,320 __ $15,396 __ $2,392 __ $13,004 __ 25.3% _ $53,000 ___ 24.5%
550% __ $76,980 __ $23,094 __ $2,392 __ $20,702 __ 26.9% _ $200,000 __ 10.6%
987% __ $102,640 _ $30,792 __ $2,392 __ $28,400 __ 27.7% _ $500,000 ___ 5.7%

Notice the falling income tax percentages for the wealthy?
How do you explain that away?
Are you saying that can’t happen?
That way I see it, that is what will most likely happen.
Especially when there is no taxation on any income such as interest, capital gains, and dividends.
There is no doubt who will absolutely love this tax system. Cha-Ching!

_____ FairTax.org’s 30% Sales Tax (23% inclusive) with prebate (for single person):
30% |———————————————————————————————-
27% |———————————————————————————————-
24% |————x———————————————————————————
21% |———x—-x——————————————————————————
18% |——————x—————————————————————————
15% |——x————-x————————————————————————
12% |—-x——————-x——————————————————————-
09% |—-x——————————-x——————————————————-
06% |—x—————————————————————x————————-
03% |—x—————————————————————————————-x
00% |xxx——————————————————————————————
__$0K $30K 50K 100K __ 200K __ 300K __ 400K __ 500K __ … $GROSS INCOME

Rhinehold wrote: BTW, we aren’t supposed to want to support the Fairtax plan because it only has 91 supporters…
Only 91 Congress persons (95% of those being Republicans) support the FairTax.org’s Tax Plan.

91 of 535 in Congress is only 17%. Not very good.

Rhinehold wrote: How many supporters does your flat tax plan have again?
Most Americans polled prefer the flat income tax:
    Majority Support Tax Reform With fundamental tax reform a centerpiece of the President’s domestic agenda—including a possible flat income tax or national retail sales tax—the survey asked respondents about their preferred method of collecting taxes. When asked to choose between a national sales tax, a flat-rate income tax with no deductions or the current income tax system, 37 percent of adults chose a flat tax, while 19 percent favored a national sales tax and 19 percent favored the status quo. When asked if they favored replacing part of the income tax with a nationwide sales tax, just 34 percent favored it while 36 percent were opposed 1. When asked about a flat tax where everyone pays the same percentage of income over some minimum level, 54 percent favored the plan, while 21 percent opposed it.

However, just because Do-Nothing Congress refuses to reform the tax system proves nothing.
Congress does not lack for good ideas and solutions.
Congress is where good ideas go to die.
Regressive taxation is just one of many abuses perpetuated by do-nothing Congress.

At any rate, the voters have the government that they elect, and deserve.

Posted by: d.a.n at May 14, 2008 11:40 AM
Comment #252837

d.a.n. Nice dance there in avoiding Rinehold’s question about how many congressional supporters the flat tax has. Citing a poll really doesn’t mean anything compared to actual congressional support.

With 91 senators and congresspersons on board it’s at least a start. Frankly, I really don’t expect any significant changes in our method of funding national government in my lifetime. It’s unfortunate that the vast majority of Americans who pay payroll taxes just don’t want to expend the time or energy to take a look at the alternatives.

And, with many Americans getting a refund of taxes they overpaid to begin with, they don’t realize how much our current method of collecting revenue is hurting the entire economy.

Posted by: Jim M at May 14, 2008 2:52 PM
Comment #252838

Dan:

1. Above you mention a 5.6% in spending. How are you counting 5.6%?

2. Your comments about double taxation are pretty simple to fix. All one needs to do is adjust the tax code to eliminate this situation.

3. Diversification of tax revenue sources is extremely important. Payroll taxes, Income taxes, Estate Taxes, Corporate taxes, Capital gains taxes, federal gift taxes, etc. ect. lower the standard deviation of revenue income and create a far more stable revenue stream.

Find another way of addressing your valid concerns over regression.

Putting all your revenue eggs in one basket would be utter nonsense, as it would put the world’s greatest economy at risk should income fall.

That however does not mean that the tax code shouldn’t be flatter and simpler. It’s just that you take the idea to an extreme that is dangerously over simplified.

Basically, not going to happen. It’s not a credible proposal.


Posted by: Craig Holmes at May 14, 2008 3:21 PM
Comment #252843
Jim M. wrote: d.a.n. Nice dance there in avoiding Rinehold’s question about how many congressional supporters the flat tax has. Citing a poll really doesn’t mean anything compared to actual congressional support.
Nonsense.

No need to dance.
91 Congress persons (only 17% of Congress) versus 54% of Americans polled that want a flat income tax is relevant.
The poll represents what most Americans want; not what do-nothing Congress wants.
Congress and its wealthy puppeteers like the current regressive tax system just the way they have perverted it.

Jim M. wrote: With 91 senators and congresspersons on board it’s at least a start. Frankly, I really don’t expect any significant changes in our method of funding national government in my lifetime. It’s unfortunate that the vast majority of Americans who pay payroll taxes just don’t want to expend the time or energy to take a look at the alternatives.
Most Americans polled (in numerous polls) feel like a flat income tax would be the most fair method.
Jim M. wrote: And, with many Americans getting a refund of taxes they overpaid to begin with, they don’t realize how much our current method of collecting revenue is hurting the entire economy.
It is easier to collect taxes from a few million sources of income tax (per year) than hundreds of billions of sources of sales taxes.

And that is only one of many PROs and CONs between a flat income tax (only on income above the poverty level) and a flat sales tax (with a prebate).
Also, I still see that no one has provided any proof that taxing spending will not be regressive relative to income.

Craig Holmes wrote: d.a.n: 1. Above you mention a 5.6% in spending. How are you counting 5.6% ?
5.6% of the $2.7 Trillion in total federal revenues is about $151 Billion. $2.8 Trillion is about 19% of the $13.9 Trillion GDP. However, a flat income tax rate of 17%, could only bring in at most 17% of the GDP, producing a $337 Billion shortfall. Therefore, some spending cuts are required. $151 Billion of that $337 Billion could be obtained through spending cuts, and the remaining $186 Billion of the $337 Billion could be obtained by leaving Iraq. Actually, leaving Iraq would probably save more than $186 Billion annually, since some estimates of the cost of our troops in Iraq in the past 5 years has averaged more than $186 Billion per year.
Craig Holmes wrote: 2. Your comments about double taxation are pretty simple to fix. All one needs to do is adjust the tax code to eliminate this situation.
I agree. Simply don’t double tax, because that simply results in what is essentially a regressive (and hidden) sales tax.
Craig Holmes wrote: 3. Diversification of tax revenue sources is extremely important. Payroll taxes, Income taxes, Estate Taxes, Corporate taxes, Capital gains taxes, federal gift taxes, etc. ect. lower the standard deviation of revenue income and create a far more stable revenue stream.
Eliminating one type of tax (i.e. corporate taxes) should have higher priority than the number of different types of taxes, since the corporate tax is simply passed on to consumers as a regressive and hidden sales tax. And corporate taxes are driving businesses out of the country to places (like Ireland) where corporate income taxes are much lower.

Besides, the difference in tax revenues is easily recovered by taxing all types of income more equally and more fairly. Currently, wages are taxed more than capital gains, interest, and dividends. That’s not fair to groups that get most of their income from wages.

Craig Holmes wrote: Find another way of addressing your valid concerns over regression.
I have. Simplify the tax system by eliminating all tax loop holes, and tax all types of income (excluding benefits not derived from taxes, such as Social Security and Medicare) an equal 17%.
Craig Holmes wrote: Putting all your revenue eggs in one basket would be utter nonsense, as it would put the world’s greatest economy at risk should income fall.
Ohhhh my. Such doomsday rhetoric. What an interesting turn of events?

All corporate taxes only amount to about 9% of all federal revenues (2% of GDP).
That can easily be made up in ways that don’t deviously shift the tax burden onto the middle-income group as hidden and regressive taxes.
As you already know, few corporations pay a lot of corporate income taxes anyway. However, the corporate income tax as high as 35% has many negative impacts. It certainly is not inviting to corporations to come to the U.S.

Craig Holmes wrote: That however does not mean that the tax code shouldn’t be flatter and simpler. It’s just that you take the idea to an extreme that is dangerously over simplified.
Not true. There are several good reasons for not taxing corporations:
  • (01) NOT taxing corporations is only one thing no longer taxed, so the tax diversity argument is very weak; besides, the difference is made up in fair taxation on all types of income;
  • (02) and we already have no shortage of different things (One-Simple-Idea.com/Taxes1.htm) that are already taxed;
  • (03) corporate taxes is a form of double taxation (especially C type corporations);
  • (04) profits from any corporation belong to no individual until those profits are taken in the form of compensation, at which time they would be taxed once;
  • (05) corporate taxes are simply passed onto consumers as hidden sales taxes, and ALL sales taxes are regressive;
  • (06) corporate taxes make our businesses less competitive in a global economy;
  • (07) corporate taxes discourage research, development, and improvements since retained earnings would be taxed from up to 35%;
  • (08) corporate taxes discourage maintaining capital to weather hard times, since retained earnings would be taxed up to 35%;
  • (09) corporate taxes costs billions per year in record keeping;
  • (10) corporate taxes simply add another layer of complexity; there are already too many layers of hidden taxes and complexity;
  • (11) ever changing and complex corporate tax laws are bad for business; especially retroactive taxes;
  • (12) many states and local governments already tax corporations too; no wonder corporations want to leave the U.S.
  • (13) lower corporate taxes in Ireland is why many companies moved operations to Ireland.
  • (14) eliminating taxation on corporations should be accompanied by a simplified and fairer (One-Simple-Idea.com/TaxSystemReform.htm) flat 17% income tax on all types of income including (i.e. inheritance, gifts, payroll, wages, prizes, lotteries, gambling, etc.) except benefits derived from taxes (such as Social Security, Medicare, and welfare benefits); currently, the U.S. has the 4th highest corporate income tax percentages in the 30-nation Organization for Economic Cooperation and Development (OECD);
  • (15) Corporate tax revenues are diminished significantly by aggressive tax avoidance strategies, including the sheltering of corporate profits overseas.
  • (16) Corporate taxes are only about 2% of total GDP.
  • (17) The elimination or lowering of corporate income taxes may actually result in increased federal tax revenues if more business moves to the U.S.
Craig Holmes wrote: Basically, not going to happen. It’s not a credible proposal.
Indeed, it may never happen.

In fact, it would be surprising if the do-nothing Congress were to ever pass any common-sense, no-brainer reforms.
But the doomsday fear-mongering about not taxing Corporations is unjustified.
In year 2000, total corporate tax revenues were $207 Billion.
In year 2003, total corporate tax revenues were $132 Billion.
In year 2007, total corporate tax revenues were $132 Billion.

Corporate Income Tax Receipts as a Percentage of Total Federal Receipts and GDP, by Decade
Average Percentage of GDP Corporate Taxes As:
__________ Percentage ___ Share
__________ of Federal ____ of
YEARS: ___ Revenues _____ GDP
1950-1959: 27.5% _______ 4.8%
1960-1969: 21.3% _______ 3.8%
1970-1979: 15.0% _______ 2.7%
1980-1989: 9.3% ________ 1.7%
1990-1999: 10.5% _______ 2.0%
2000-2002: 9.6% ________ 1.7%
2003-2009: 9.6% ________ 1.7% (estimated projections)

Therefore, we’re not talking about a big portion of the GDP anyway (only 1.7%).
Leaving Iraq alone would easily make up for the difference, but the difference would also be made up by a less regressive taxation of all personal income.

Posted by: d.a.n at May 14, 2008 5:45 PM
Comment #252846

googlumpus said: “There will never be a flat, no exception tax. There are too many reasons not to.”

Was a time there were too many reasons women or Blacks would never have the vote. Was a time, just 4 years ago, when pundits said Republicans were unbeatable. Was a time pragmatists said JFK was a fool calling for putting men on the moon in 10 years.

In America, nearly everything is potentially fluid. One exception though, in America, where there is a will, there is a way.

Posted by: David R. Remer at May 14, 2008 6:00 PM
Comment #252859

David:

There was also a time when we used the pony express to deliver mail. The world has changed hasn’t it?

The flat tax is to simplistic for a world global power for taxation.

I do think the tax code can be flatter and simpler however.

The flat tax does for our tax system what the gold standard would do for our banking system. You are basically taking power from Congress and the President to use creativity to stimulate the economy.

Posted by: Craig Holmes at May 14, 2008 9:08 PM
Comment #252866
Craig Holmes wrote: The flat tax is too simplistic for a world global power for taxation.
It’s not too simple.

The tax curve (based on gross income) is actually progressive, but approaches a flat 17% as income increases.
Only income above the poverty level (e.g. $12K for a single person) is taxable.
Those features are more than a mere flat tax, and makes it better than a simple flat income tax.
When you look at the tax curve for the gross income, it is a progressive tax curve:
17% |———————————————————————————————-x
16% |———————————————————————x————————-
15% |————————————-x———————————————————
14% |—————————-x——————————————————————
13% |———————x————————————————————————-
12% |—————-x——————————————————————————
11% |————-x———————————————————————————
10% |————x———————————————————————————-
09% |———-x————————————————————————————
08% |———x————————————————————————————-
07% |———x————————————————————————————-
06% |——-x—————————————————————————————
05% |——x—————————————————————————————-
04% |——x—————————————————————————————-
03% |—-x——————————————————————————————
02% |—x——————————————————————————————-
01% |-x———————————————————————————————
00% |xx————————————————————————————————-
__$0K $20K $40K $60K $80K 100K 120K 140K 160K 180K 200K …$1Million… GROSS INCOME

Corporate taxes would be eliminated, since they are simply passed on as regressive and hidden taxes, and cause businesses to move out of the country.
The myriad of tax loop-holes and abuses would be eliminated.
The rate (if necessary) could be changed.
The N multiplier can be modified if necessary (but never less than 1.0).
Also, the contant toying with the tax code is destabilizing.

This 17% Income Tax System is much more than a simple flat income tax, where:

  • [01] only personal types of income are taxed (e.g. wages, interest, dividends, inheritance, capital gains when liquidated, etc.); corporations pay NO income tax; such taxes are simply passed on to consumers;

  • [02] it is the ONE and ONLY federal tax that may apply to each tax payer;

  • [03] there is NO tax on income less than  N times the established poverty level; there is tax ONLY on income that exceeds  N times the established poverty level;

  • [04] N is a multiplier determined by the government, that could be higher, but never less than 1.0 ; the poverty level for 1 person, married couple, family of 1, 2, … , TOTAL dependents will be determined by a government agency, and is recalculated annually; 

  • [05] starting 01-January of each year, no one starts paying any income tax until their annual income exceeds N times the established poverty level, and only on income above N times the established poverty level; the total income to date will be maintained by the government (since some people may have multiple sources of income); employers determine tax to be paid (if any) based on the total income to date; this greatly simplifies (if not eliminates) the annual income tax return;

  • [06] all income is taxed at the same tax percentage, including: inheritance, gifts, payroll, wages, prizes, lotteries, gambling, etc.; i.e. all money that exchanges ownership, that is not derived from taxes (such as Social Security and Medicare benefits);

  • [07] there is NO tax on Social Security, Medicare, or welfare benefits, since those are benefits funded from taxes; taxes on funds derived from taxes makes no sense;

  • [08] there are NO tax loop-holes, tax deductions, or upper-level income caps (i.e. such as the current regressive caps for Social Security taxes);

  • [09] the purpose of the tax system and the welfare system should not overlap; it causes unnecessary complication which could lead to abuses of both systems; charities, deductions, and subsidies merely serve to make the system ripe for abuse;

The benefits of a Flat Income Tax Percentage which make it more fair is the:

  • elimination of the graduated tax scale that forces the wealthy to pay higher percentages based on income;

  • and the elimination of the tax loop-holes and deductions, which makes the tax system very complicated, and allows everyone (but the lower income groups) to reduce or avoid paying taxes, and allows too much tax evasion; over-complication leads to abuse;

  • there are no high sales tax imposed on exported products;

  • still allows for accounting for Social Security and Medicare; if necessary, those percentages can still appear on pay-roll statements; for example: 8% for Social Security, and 1% for Medicare; and the remaining 8% for federal income tax; tax payers would still file a 1040 tax return annually, but it would be to merely resolve any over-payment or tax due, which should be minor, since totals are tracked by computer; tax payers would still (as now) receive a periodic Social Security and Medicare statement showing their contributions;

  • everyone pays the same percentage (except the poor, who pay little or nothing); what could be more fair and require the least changes to the current tax system ?

  • NOTE: The 17% flat tax rate was arrived at by dividing the total current federal tax revenues (about $2 trillion in 2004) by the U.S. GDP (about $11 trillion in 2004), and subtracting 1% (i.e. 18% - 1% = 17%). The federal government should be able to reduce spending by 5.6% which accounts for that 1% reduction for the 17% Flat Income Tax Percentage.

Craig Holmes wrote: I do think the tax code can be flatter and simpler however.
Yes, and that is exactly what this 17% Income Tax System does.

Yes, but only on income above the poverty level. It doesn’t make much sense to force people onto welfare by taxing people below with income below the poverty level.

Craig Holmes wrote: The flat tax does for our tax system what the gold standard would do for our banking system.
Nonsense. That position is so extreme as to be laughable.
Craig Holmes wrote: You are basically taking power from Congress and the President to use creativity to stimulate the economy.
That creativity is the problem.

Look at the tax code now, consisting of millions of lines of text that no one fully understands.
We don’t need any more of that kind of creativity.
These arguments:

  • (1) for numerous tax sources (when corporate taxes are only 1 type of tax, and corporate taxes are only 9.6% of all federal tax revenues, and only 2% of GDP),

  • (2) appear to be both for and against simplification,

  • (3) appear to be both for and against a flatter tax rate,

  • (4) and weak analogies to the gold standard (I do not advocate a gold standard)

  • (5) and the advocation for creative taxation which produced the nightmare tax code we have today
… are not very convincing.
Perhaps you could elaborate as to exactly why it would be bad? Something more than merely 1 less tax source and being too simple?

What is really crazy to me is replacing all income taxes with corporate income taxes, when about 90% ($2.4 Trillion) of all federal tax revenues come from personal income taxes, and only 9.6% (about $260 Billion) of all federal tax revenues come from corporations.

While we are dreaming and theorizing about different tax systems, here’s an idea that sounds crazy, but could theoretically work:

    The ZERO TAX SYSTEM

Here’s how the ZERO TAX SYSTEM would work:

  • (01) No federal income taxes;

  • (02) no federal corporate taxes;

  • (03) no Social Security or Medicare taxes;

  • (04) no federal taxes of any kind;

  • (05) the federal government controls the monetary system; it creates the money it needs, interest free; it controls the money-supply;

  • (06) the federal government prohibits usury (interest) by the government and member banks (under-cutting any private banks who lend with interest). If a lot of interest is bad (i.e. usury is immoral), how can a little interest be good? If inflation is bad, how is a little inflation good? Why would people borrow from a bank (with interest) when they can borrow from the government, interest free? Thus, there would be little (if any) usury. Usury, predatory lending, and other manifestations of unchecked greed and the other numerous negative side effects would be greatly reduced;

  • (07) this creates a stable money supply with the flexibility for small fluctuations. If inflation is too high, some money in circulation can be removed. If there is deflation, or the population increases, the government can create and spend some money. If the government is doing a bad job of controlling the money supply, the voters know exactly who to hold accountable at election time. Currently, the Federal Reserve is a quasi-government controlled / privately owned bank, and the voters have little (if any) control over it;

  • (08) Credit reporting agencies would be used and regulated to limit or prevent bad loans to people with bad credit ratings;

  • (09) If properly managed, without profit and usury as a motive, the U.S. currency would become superior to any other world currency;

  • (10) Inflation and/or deflation (if any) affects everyone the same percentage. Inflation/deflation would become more visible and provide more incentive to target zero inflation and/or deflation;

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Comment #378356


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