Is This Tax Reform Worth Consideration?

[Annie]

Left, Right Can Love Tax Plan: Laurence Kotlikoff, Andrew Weiss - Bloomberg

...We propose a tax reform -- and Lord knows we need one -- that recognizes this equivalence. Our plan taxes all retail sales at a 17.5 percent rate. But if you don’t want to pay the retail sales tax, you can pay, up front, a 15 percent tax on your wages and wealth. Every dollar of tax you pay up front gives you an electronic sales-tax credit, for use when shopping, which exempts $1 of consumption from the 17.5 percent retail sales tax. Unused credits grow with interest, so you aren’t penalized by waiting to spend. ...

Taxing consumption, either directly or indirectly, at a fixed rate is neither progressive nor regressive. It’s proportional. If you double someone’s economic resources, you double their future spending, and you double their consumption tax payments. This holds even if the resources are spent over time or bequeathed for others to spend.

Since consumption taxation is proportional, we’ve added a monthly payment by Uncle Sam to each household, which depends only on the number and ages of household members. This payment is large enough to ensure that households living at or below the poverty line pay no net tax.

Staying Progressive ...

Our overhaul has additional elements. We make the payroll tax that funds Social Security and Medicare much more progressive by removing the ceiling on taxable earnings, now at $106,800. The plan also would exempt employee contributions on the first $40,000 of earnings, index that $40,000 to real wage growth, and require payroll contributions on wages paid in the form of business ownership rights. We tax, at a 15 percent rate, the cumulative value, above $1 million, of all gifts and inheritances received, directly or via trusts.
Going Broke

The plan also would impose transition rules that tax pensions and retirement-account assets on which future taxes are due as well as unrealized capital gains on existing asset holdings.

Our country is saving nothing, investing nothing, growing more unequal, going broke and pulling apart. The current tax system makes these problems much worse. Our plan, called the Purple Tax Plan (The Purple Tax Plan | The Purple Tax Plan), provides a simple and transparent tax system with much better incentives to work and save, much greater revenue-generating capacity, and much greater equity. Best of all, both parties can call the plan their own. ...

 

[Mad Scientist]

Flat tax is fine with me. If you buy something, you pay the tax. If you buy nothing, you pay no tax. Unlike the current system where you pay tax up front and keep what's left only to pay more tax when you buy something. Flat taxes encourage saving as there is no taxes on what you put away. I don't profess to be a Flat Tax expert but it seems better than what we have now. Plus the Tax Code is greatly simplified: No tax breaks or loopholes only taxes paid on economic activity.

The problem I have with that would be is if it is included ON TOP of whatever tax rate we pay now. Which I'm sure is what the Bankers and Politicians want.

 

[editec]

I don't think it is.

I do think it is a great idea if you're planning to become a black marketeer, though.

 

[Annie]

Flat tax is fine with me. If you buy something, you pay the tax. If you buy nothing, you pay no tax. Unlike the current system where you pay tax up front and keep what's left only to pay more tax when you buy something. Flat taxes encourage saving as there is no taxes on what you put away. I don't profess to be a Flat Tax expert but it seems better than what we have now. Plus the Tax Code is greatly simplified: No tax breaks or loopholes only taxes paid on economic activity.

The problem I have with that would be is if it is included ON TOP of whatever tax rate we pay now. Which I'm sure is what the Bankers and Politicians want.

Just a VAT tax? Too regressive. The poor, especially the working poor need to spend about every cent of income-all would be taxed. The rich always have left over and that would be not be taxed.

 

[Mad Scientist]

Flat tax is fine with me. If you buy something, you pay the tax. If you buy nothing, you pay no tax. Unlike the current system where you pay tax up front and keep what's left only to pay more tax when you buy something. Flat taxes encourage saving as there is no taxes on what you put away. I don't profess to be a Flat Tax expert but it seems better than what we have now. Plus the Tax Code is greatly simplified: No tax breaks or loopholes only taxes paid on economic activity.

The problem I have with that would be is if it is included ON TOP of whatever tax rate we pay now. Which I'm sure is what the Bankers and Politicians want.

Just a VAT tax? Too regressive. The poor, especially the working poor need to spend about every cent of income-all would be taxed. The rich always have left over and that would be not be taxed.

But the poor wouldn't have an income tax so they could keep what they earn and have more to spend or save.

 

[JBeukema]

Flat tax is fine with me. If you buy something, you pay the tax. If you buy nothing, you pay no tax. Unlike the current system where you pay tax up front and keep what's left only to pay more tax when you buy something. Flat taxes encourage saving as there is no taxes on what you put away. I don't profess to be a Flat Tax expert but it seems better than what we have now. Plus the Tax Code is greatly simplified: No tax breaks or loopholes only taxes paid on economic activity.

The problem I have with that would be is if it is included ON TOP of whatever tax rate we pay now. Which I'm sure is what the Bankers and Politicians want.

Just a VAT tax? Too regressive. The poor, especially the working poor need to spend about every cent of income-all would be taxed. The rich always have left over and that would be not be taxed.

But the poor wouldn't have an income tax so they could keep what they earn and have more to spend or save.

Taxing it on the front end and taxing it on the back end have the same effect

All you would accomplish would be inflating their 'take-home-pay' so you could brag about it, while their purchasing power would remain the same at best.

 

[Foxfyre]

Left, Right Can Love Tax Plan: Laurence Kotlikoff, Andrew Weiss - Bloomberg

...We propose a tax reform -- and Lord knows we need one -- that recognizes this equivalence. Our plan taxes all retail sales at a 17.5 percent rate. But if you don’t want to pay the retail sales tax, you can pay, up front, a 15 percent tax on your wages and wealth. Every dollar of tax you pay up front gives you an electronic sales-tax credit, for use when shopping, which exempts $1 of consumption from the 17.5 percent retail sales tax. Unused credits grow with interest, so you aren’t penalized by waiting to spend. ...

Taxing consumption, either directly or indirectly, at a fixed rate is neither progressive nor regressive. It’s proportional. If you double someone’s economic resources, you double their future spending, and you double their consumption tax payments. This holds even if the resources are spent over time or bequeathed for others to spend.

Since consumption taxation is proportional, we’ve added a monthly payment by Uncle Sam to each household, which depends only on the number and ages of household members. This payment is large enough to ensure that households living at or below the poverty line pay no net tax.

Staying Progressive ...

Our overhaul has additional elements. We make the payroll tax that funds Social Security and Medicare much more progressive by removing the ceiling on taxable earnings, now at $106,800. The plan also would exempt employee contributions on the first $40,000 of earnings, index that $40,000 to real wage growth, and require payroll contributions on wages paid in the form of business ownership rights. We tax, at a 15 percent rate, the cumulative value, above $1 million, of all gifts and inheritances received, directly or via trusts.
Going Broke

The plan also would impose transition rules that tax pensions and retirement-account assets on which future taxes are due as well as unrealized capital gains on existing asset holdings.

Our country is saving nothing, investing nothing, growing more unequal, going broke and pulling apart. The current tax system makes these problems much worse. Our plan, called the Purple Tax Plan (The Purple Tax Plan | The Purple Tax Plan), provides a simple and transparent tax system with much better incentives to work and save, much greater revenue-generating capacity, and much greater equity. Best of all, both parties can call the plan their own. ...

Looks like a prescription for a more nightmarish tax code than what we already have with way too many ways to manipulate the system both by tax payers and by our fearless leaders.

I'm still pulling for an ultra simple across the board flat income tax on ALL income applicable to everybody, rich and poor, alike. The gazillionaire will pay millions in taxes on such a plan and the truly poor probably still pay nothing as they won't earni above a basic exemption everybody would get. And we can all file our tax return on a postcard.

 

[Trajan]

yes FF...I agree with that.
Hit me at a fat 23%, I'll live with that.