If You Could Design a Tax System From Scratch.....

If I was starting from scratch... flat rate applied to all forms of income beyond a standard deduction and a modest carbon tax.
 
I'd go with the Flat Tax idea discussed earlier today with Madeline, but I would make certain items non-taxable such as things that people need to survive... i.e. milk and bread, cereal, baby formula etc. and maybe graded tax rates increasing the tax rate on "luxury" items.

I honestly don't like the flat tax idea.

It would be better than what we have now, but I think a flat tax would lead to a hell of a lot more people cheating by not declaring income... even more than we have today.

The question I would like to know is if there is anyone that would like to keep the system we have here today in the U.S.?

Who here just loves what we have now and wouldn't change it if they could?

Immie

Immie, the flat tax I proposed as the ONLY federal tax is on income. There would be NO consideration given to people with low incomes apart from the exemption for income below the poverty line and a phase-in of rates at that level until $25,000 of income.

There would be NO federal sales tax, excise tax, sin tax or any other form of compulsory payment.

And BTW folks, "income" would include much more than just wages, etc. Life insurance proceeds. Gain from the sale of the family home. Workers' compensation and disability insurance proceeds. All the rules for avoiding or postponing taxable events would be repealed, INCLUDING the beloved rules regarding tax exempt or deferred pensions, 401(k) plans, IRAs, etc. If the accounting burden were not too high, I'd even tax a rise in the value of stocks which have not been sold. Losses, no deduction. Heads, the tax collector wins. Tails, you lose.

If the US spends at or about the same rate as present, most pundits put the applicable flat tax rate needed for this purpose at 14%. Five percent is pie-in-the-sky unless you like the idea of a US which has defaulted on its debt obligations.

 
First the Federal budget gets slashed. Only programs provided for in the Constitution are allowed.

All others are regulated to the states and local municipalities.

Then the Federal cost is divided equally among every legal person.

What programs are provided for in the constitution?

Do you mean we'd have no FCC, no SEC, no FAA, etc.? Does that really seem workable to you?

Yes. Let the market rule.
 
I've waited for everyone to have their say before I give MY opinion on the matter. I have thought long and hard and came up with a simple idea that should determine what should be taxed and what should not be taxed. It is this: Every tax should be a "sin" tax. That is, you tax what you don't want to see people do, and don't tax what you want them to do.

I know that is a generalization, but it is a good starting point. If you don't want dog crap on your lawn, then tax it one way or another. If you want people to work hard and save then don't tax those things, and so on down the list.

Why on earth would you want punish anyone for doing what you want them to do more of, and why wouldn't you want to tax everything that you want people doing less of?

Now, it is easy to take this system to extremes to try to discredit the idea itself, but please restrain yourself, along with all your cute, (NOT) answers and just honestly deal with the issue as I present it.

Getting into listing what I, and YOU, think should be taxed and what I, and YOU, think should not be taxed could be a long evening, clearly, but this is a start.
 
First the Federal budget gets slashed. Only programs provided for in the Constitution are allowed.

All others are regulated to the states and local municipalities.

Then the Federal cost is divided equally among every legal person.

What programs are provided for in the constitution?

Do you mean we'd have no FCC, no SEC, no FAA, etc.? Does that really seem workable to you?


Do we need the FCC for some reason? There is a reason "Congress shall make no law abridging the freedom of speech."
 
I've waited for everyone to have their say before I give MY opinion on the matter. I have thought long and hard and came up with a simple idea that should determine what should be taxed and what should not be taxed. It is this: Every tax should be a "sin" tax. That is, you tax what you don't want to see people do, and don't tax what you want them to do.

I know that is a generalization, but it is a good starting point. If you don't want dog crap on your lawn, then tax it one way or another. If you want people to work hard and save then don't tax those things, and so on down the list.

Why on earth would you want punish anyone for doing what you want them to do more of, and why wouldn't you want to tax everything that you want people doing less of?

Now, it is easy to take this system to extremes to try to discredit the idea itself, but please restrain yourself, along with all your cute, (NOT) answers and just honestly deal with the issue as I present it.

Getting into listing what I, and YOU, think should be taxed and what I, and YOU, think should not be taxed could be a long evening, clearly, but this is a start.
What you are proposing is using taxes to influence human behavior. This is exactly what congress does now. The difference is that congress reduces the tax burden for people who do good things such as giving to charities, owning a home, having kids *boy they screwed up on that one), etc.... Under your plan, you just tax people for doing the bad stuff. I think that the purpose of taxes should be one thing. collect money.

But following your idea, how do we raise 3 or 4 trillion a year taxing smokers, drinkers, gamblers, and dogs who poop on the lawn.
 
I would not have an income tax or any sales tax. Instead, I would put a 15% across the board tax on STUPIDITY. This way, I figure the politicians in DC could carry the tax burden for the entire United States.
 
First the Federal budget gets slashed. Only programs provided for in the Constitution are allowed.

All others are regulated to the states and local municipalities.

Then the Federal cost is divided equally among every legal person.

What programs are provided for in the constitution?

Do you mean we'd have no FCC, no SEC, no FAA, etc.? Does that really seem workable to you?


Do we need the FCC for some reason? There is a reason "Congress shall make no law abridging the freedom of speech."

Well, the FAA would have been easier to defend but okay, maybe not so much the FCC. Still, aren't there a limited number of air waves one can broadcast over? Doesn't someone need to monitor the fair use of them? (I'm picturing a big lottery here...okay, maybe it isn't necessary.)

Is there no federal agency you feel cannot be replicated by the states and/or safely eliminated? What about the FDA?

If you pass along federal duties to the states, aren't you just playing a shell game in which federal taxes go down, state taxes go up and we all pay the same?

 
What would it look like?

Let's assume for discussion sake the following:

GDP (Gross Domestic Product) is $200 Trillion.

Government needs $20 Trillion annually, and will have no non-tax revenues.

Excise and other taxes can be changed by Congress and do not affect foreign trade, etc.

Any form of taxation is legal.
It would be a flat tax with provisions for tax credits for some that are in a low income bracket. There would be no deductions or exemptions!!. This might seem harsh but government manipulation of the tax system to encourage home ownership, investing, retirement savings, charitable giving, having children, going to college, and a million and one other worthy actions have created a system that encourages tax fraud and is a nightmare to understand or administer.



I tend to agree with you a flat tax--where everyone shares in the financial well-being of this country would be fine with me. There is absolutely no reason that half this nation pays no federal income tax what-so-ever, simply because they have a several kids that they can deduct.

10% is what I would like to see on everyone.
 
I've waited for everyone to have their say before I give MY opinion on the matter. I have thought long and hard and came up with a simple idea that should determine what should be taxed and what should not be taxed. It is this: Every tax should be a "sin" tax. That is, you tax what you don't want to see people do, and don't tax what you want them to do.

I know that is a generalization, but it is a good starting point. If you don't want dog crap on your lawn, then tax it one way or another. If you want people to work hard and save then don't tax those things, and so on down the list.

Why on earth would you want punish anyone for doing what you want them to do more of, and why wouldn't you want to tax everything that you want people doing less of?

Now, it is easy to take this system to extremes to try to discredit the idea itself, but please restrain yourself, along with all your cute, (NOT) answers and just honestly deal with the issue as I present it.

Getting into listing what I, and YOU, think should be taxed and what I, and YOU, think should not be taxed could be a long evening, clearly, but this is a start.
What you are proposing is using taxes to influence human behavior. This is exactly what congress does now. The difference is that congress reduces the tax burden for people who do good things such as giving to charities, owning a home, having kids *boy they screwed up on that one), etc.... Under your plan, you just tax people for doing the bad stuff. I think that the purpose of taxes should be one thing. collect money.

But following your idea, how do we raise 3 or 4 trillion a year taxing smokers, drinkers, gamblers, and dogs who poop on the lawn.

Founder, what you are saying is that the PRIMARY purpose of a tax system should be to alter behavior. You and I are 180 degrees apart. I think the PRIMARY purpose (and to the extent possible, the ONLY purpose) of a tax system should be to fund government functions.

You have a variety of means available to you to alter behavior. You can criminalize it, regulate it, zone for it, etc.

But apart from taxing and imposing things-that-work-like-taxes such as fees, etc. government cannot be funded in any way other than through taxation.
 
I've waited for everyone to have their say before I give MY opinion on the matter. I have thought long and hard and came up with a simple idea that should determine what should be taxed and what should not be taxed. It is this: Every tax should be a "sin" tax. That is, you tax what you don't want to see people do, and don't tax what you want them to do.

I know that is a generalization, but it is a good starting point. If you don't want dog crap on your lawn, then tax it one way or another. If you want people to work hard and save then don't tax those things, and so on down the list.

Why on earth would you want punish anyone for doing what you want them to do more of, and why wouldn't you want to tax everything that you want people doing less of?

Now, it is easy to take this system to extremes to try to discredit the idea itself, but please restrain yourself, along with all your cute, (NOT) answers and just honestly deal with the issue as I present it.

Getting into listing what I, and YOU, think should be taxed and what I, and YOU, think should not be taxed could be a long evening, clearly, but this is a start.
What you are proposing is using taxes to influence human behavior. This is exactly what congress does now. The difference is that congress reduces the tax burden for people who do good things such as giving to charities, owning a home, having kids *boy they screwed up on that one), etc.... Under your plan, you just tax people for doing the bad stuff. I think that the purpose of taxes should be one thing. collect money.

But following your idea, how do we raise 3 or 4 trillion a year taxing smokers, drinkers, gamblers, and dogs who poop on the lawn.

Founder, what you are saying is that the PRIMARY purpose of a tax system should be to alter behavior. You and I are 180 degrees apart. I think the PRIMARY purpose (and to the extent possible, the ONLY purpose) of a tax system should be to fund government functions.

You have a variety of means available to you to alter behavior. You can criminalize it, regulate it, zone for it, etc.

But apart from taxing and imposing things-that-work-like-taxes such as fees, etc. government cannot be funded in any way other than through taxation.


Madeline--you do realise that the GDP is no where near 200 TRILLION dollars. It's more in the 11 to 12 trillion dollar range. That is why Bernake stated that continued federal government spending will equal 100% of the GDP within 10 years.
 
What you are proposing is using taxes to influence human behavior. This is exactly what congress does now. The difference is that congress reduces the tax burden for people who do good things such as giving to charities, owning a home, having kids *boy they screwed up on that one), etc.... Under your plan, you just tax people for doing the bad stuff. I think that the purpose of taxes should be one thing. collect money.

But following your idea, how do we raise 3 or 4 trillion a year taxing smokers, drinkers, gamblers, and dogs who poop on the lawn.

Founder, what you are saying is that the PRIMARY purpose of a tax system should be to alter behavior. You and I are 180 degrees apart. I think the PRIMARY purpose (and to the extent possible, the ONLY purpose) of a tax system should be to fund government functions.

You have a variety of means available to you to alter behavior. You can criminalize it, regulate it, zone for it, etc.

But apart from taxing and imposing things-that-work-like-taxes such as fees, etc. government cannot be funded in any way other than through taxation.


Madeline--you do realise that the GDP is no where near 200 TRILLION dollars. It's more in the 11 to 12 trillion dollar range. That is why Bernake stated that continued federal government spending will equal 100% of the GDP within 10 years.

Yes, sorry. I made up numbers for convenience's sake.
 
Founder, what you are saying is that the PRIMARY purpose of a tax system should be to alter behavior. You and I are 180 degrees apart. I think the PRIMARY purpose (and to the extent possible, the ONLY purpose) of a tax system should be to fund government functions.

You have a variety of means available to you to alter behavior. You can criminalize it, regulate it, zone for it, etc.

But apart from taxing and imposing things-that-work-like-taxes such as fees, etc. government cannot be funded in any way other than through taxation.


Madeline--you do realise that the GDP is no where near 200 TRILLION dollars. It's more in the 11 to 12 trillion dollar range. That is why Bernake stated that continued federal government spending will equal 100% of the GDP within 10 years.

Yes, sorry. I made up numbers for convenience's sake.

I just looked it up--2008 was 14.6 Trillion. It's alright--I understand your point. But what is scary--is the federal government is very close to matching that figure in spending.
 
I'd go with the Flat Tax idea discussed earlier today with Madeline, but I would make certain items non-taxable such as things that people need to survive... i.e. milk and bread, cereal, baby formula etc. and maybe graded tax rates increasing the tax rate on "luxury" items.

I honestly don't like the flat tax idea.

It would be better than what we have now, but I think a flat tax would lead to a hell of a lot more people cheating by not declaring income... even more than we have today.

The question I would like to know is if there is anyone that would like to keep the system we have here today in the U.S.?

Who here just loves what we have now and wouldn't change it if they could?

Immie

Immie, the flat tax I proposed as the ONLY federal tax is on income. There would be NO consideration given to people with low incomes apart from the exemption for income below the poverty line and a phase-in of rates at that level until $25,000 of income.

There would be NO federal sales tax, excise tax, sin tax or any other form of compulsory payment.

And BTW folks, "income" would include much more than just wages, etc. Life insurance proceeds. Gain from the sale of the family home. Workers' compensation and disability insurance proceeds. All the rules for avoiding or postponing taxable events would be repealed, INCLUDING the beloved rules regarding tax exempt or deferred pensions, 401(k) plans, IRAs, etc. If the accounting burden were not too high, I'd even tax a rise in the value of stocks which have not been sold. Losses, no deduction. Heads, the tax collector wins. Tails, you lose.

If the US spends at or about the same rate as present, most pundits put the applicable flat tax rate needed for this purpose at 14%. Five percent is pie-in-the-sky unless you like the idea of a US which has defaulted on its debt obligations.


I was rushing to get out of here when I typed that. I meant that I would go with the Fair Tax that we discussed earlier.

Immie
 
I'd go with the Flat Tax idea discussed earlier today with Madeline, but I would make certain items non-taxable such as things that people need to survive... i.e. milk and bread, cereal, baby formula etc. and maybe graded tax rates increasing the tax rate on "luxury" items.

I honestly don't like the flat tax idea.

It would be better than what we have now, but I think a flat tax would lead to a hell of a lot more people cheating by not declaring income... even more than we have today.

The question I would like to know is if there is anyone that would like to keep the system we have here today in the U.S.?

Who here just loves what we have now and wouldn't change it if they could?

Immie

Immie, the flat tax I proposed as the ONLY federal tax is on income. There would be NO consideration given to people with low incomes apart from the exemption for income below the poverty line and a phase-in of rates at that level until $25,000 of income.

There would be NO federal sales tax, excise tax, sin tax or any other form of compulsory payment.

And BTW folks, "income" would include much more than just wages, etc. Life insurance proceeds. Gain from the sale of the family home. Workers' compensation and disability insurance proceeds. All the rules for avoiding or postponing taxable events would be repealed, INCLUDING the beloved rules regarding tax exempt or deferred pensions, 401(k) plans, IRAs, etc. If the accounting burden were not too high, I'd even tax a rise in the value of stocks which have not been sold. Losses, no deduction. Heads, the tax collector wins. Tails, you lose.

If the US spends at or about the same rate as present, most pundits put the applicable flat tax rate needed for this purpose at 14%. Five percent is pie-in-the-sky unless you like the idea of a US which has defaulted on its debt obligations.


With the Flat Tax that you are talking about, you will have people working under the table so as not to have to pay any taxes at all. It happens now and it will be worse under a flat tax system.

Immie
 
I'd go with the Flat Tax idea discussed earlier today with Madeline, but I would make certain items non-taxable such as things that people need to survive... i.e. milk and bread, cereal, baby formula etc. and maybe graded tax rates increasing the tax rate on "luxury" items.

I honestly don't like the flat tax idea.

It would be better than what we have now, but I think a flat tax would lead to a hell of a lot more people cheating by not declaring income... even more than we have today.

The question I would like to know is if there is anyone that would like to keep the system we have here today in the U.S.?

Who here just loves what we have now and wouldn't change it if they could?

Immie

Immie, the flat tax I proposed as the ONLY federal tax is on income. There would be NO consideration given to people with low incomes apart from the exemption for income below the poverty line and a phase-in of rates at that level until $25,000 of income.

There would be NO federal sales tax, excise tax, sin tax or any other form of compulsory payment.

And BTW folks, "income" would include much more than just wages, etc. Life insurance proceeds. Gain from the sale of the family home. Workers' compensation and disability insurance proceeds. All the rules for avoiding or postponing taxable events would be repealed, INCLUDING the beloved rules regarding tax exempt or deferred pensions, 401(k) plans, IRAs, etc. If the accounting burden were not too high, I'd even tax a rise in the value of stocks which have not been sold. Losses, no deduction. Heads, the tax collector wins. Tails, you lose.

If the US spends at or about the same rate as present, most pundits put the applicable flat tax rate needed for this purpose at 14%. Five percent is pie-in-the-sky unless you like the idea of a US which has defaulted on its debt obligations.


With the Flat Tax that you are talking about, you will have people working under the table so as not to have to pay any taxes at all. It happens now and it will be worse under a flat tax system.

Immie

Enforcability will be an issue, I agree. When employers receive no deduction for the cost of labor the incentive to report/withhold will be eliminated and you are correct...a gray market economy will appear.

There are various ways to address this. One is, obviously, to permit a deduction for the cost of labor. But that opens the floodgates. If labor costs can be deducted, why not equipment? Ingredients?

The other major way to address this is through enforcement/prosecution. Increase third-party reporting requirements on banks, etc. Force taxpayers to be transparent about their consumption -- obviously, they're funding that somehow. I think few people will be willing to "go off the grid" and keep their money under their mattresses.

Remember, this is all about reaching Tax Nirvanha. In my Perfect Tax World, there is (almost) no IRS, nevermind 18 books of IRS regulations.

I know it isn't realistic Immie. For starters, there are too many perceived needs to modify behavior through taxation to rely only on a three question flat tax. But it's fun to talk about.

 
15 percent flat tax on all personal income , anyone that makes less then 25k a year exempt, with first 25k exempt also.

10 percent flat tax on all Business based on true profit.

No inheritance tax.

Any income to a person is income no matter how derived. Profit from bonds or interest from any source. Any profit from selling real property is income. Etc Etc.
 
15 percent flat tax on all personal income , anyone that makes less then 25k a year exempt, with first 25k exempt also.

10 percent flat tax on all Business based on true profit.

No inheritance tax.

Any income to a person is income no matter how derived. Profit from bonds or interest from any source. Any profit from selling real property is income. Etc Etc.

Why no inheritance tax RetiredGySgt?

How would you measure "true profit" without a system of business deductions?

Why wouldn't a bequest be income in the hands of the heir? Or would you include these funds?

Why would there be a lower tax rate for business vs. individuals?

Despite my questions it is nice to hear from another flat tax supporter. It gets a little lonely here among all these other folks........
 
Immie, the flat tax I proposed as the ONLY federal tax is on income. There would be NO consideration given to people with low incomes apart from the exemption for income below the poverty line and a phase-in of rates at that level until $25,000 of income.

There would be NO federal sales tax, excise tax, sin tax or any other form of compulsory payment.

And BTW folks, "income" would include much more than just wages, etc. Life insurance proceeds. Gain from the sale of the family home. Workers' compensation and disability insurance proceeds. All the rules for avoiding or postponing taxable events would be repealed, INCLUDING the beloved rules regarding tax exempt or deferred pensions, 401(k) plans, IRAs, etc. If the accounting burden were not too high, I'd even tax a rise in the value of stocks which have not been sold. Losses, no deduction. Heads, the tax collector wins. Tails, you lose.

If the US spends at or about the same rate as present, most pundits put the applicable flat tax rate needed for this purpose at 14%. Five percent is pie-in-the-sky unless you like the idea of a US which has defaulted on its debt obligations.


With the Flat Tax that you are talking about, you will have people working under the table so as not to have to pay any taxes at all. It happens now and it will be worse under a flat tax system.

Immie

Enforcability will be an issue, I agree. When employers receive no deduction for the cost of labor the incentive to report/withhold will be eliminated and you are correct...a gray market economy will appear.

There are various ways to address this. One is, obviously, to permit a deduction for the cost of labor. But that opens the floodgates. If labor costs can be deducted, why not equipment? Ingredients?

The other major way to address this is through enforcement/prosecution. Increase third-party reporting requirements on banks, etc. Force taxpayers to be transparent about their consumption -- obviously, they're funding that somehow. I think few people will be willing to "go off the grid" and keep their money under their mattresses.

Remember, this is all about reaching Tax Nirvanha. In my Perfect Tax World, there is (almost) no IRS, nevermind 18 books of IRS regulations.

I know it isn't realistic Immie. For starters, there are too many perceived needs to modify behavior through taxation to rely only on a three question flat tax. But it's fun to talk about.


And all of that would be the reason for the Fair Tax. Especially the elimination of the IRS as an enforcing agency... sayanora Tax Man!

Most companies already have to report sales taxes in their states so implementation would not be all that difficult. In fact, it would be a piece of cake.

Immie
 

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