Flat Tax Anyone?

[Skull Pilot]

AGAIN, the "flat tax" you propose is actually a scheme to raise the lower-end tax rates and lower the upper-end tax rates. And you still haven't discussed how you define taxable income, which is the biggest problem with the current tax code.

I define taxable income as ALL income regardless of the source.

When you refer to "source," that tells me that you see revenue as defined income. That's not correct, though, because the total revenue of, say, a lawn care company is reduced by "expenses" as defined by the existing tax code. That's the issue, Porkchop--what can be included as "expenses" that reduces taxable income?

Income as I use it means net profit.

When people ask me how much I made last year I don't ever give my gross sales I always give my net profit.

 

[Skull Pilot]

The average household makes about $40k a year. Their effective rate would be 10%. Someone making $100k would pay 16%. I don't think that's excessive.

Just make the rate 10%. Period

Why should part of anyone's income be exempt from income tax?

Because the marginal rate of income spent on necessities is higher for each fewer dollar earned.

I don't subscribe to the marginal utility school of thought.

Income is income if we are going to tax it then tax it all.

 

[boedicca]

A conservative might say 10%. A liberal might say 30%. But that's not what concerns me here. Choose whatever number you want. My point was to say we should have a flat tax after some income threshold.

I agree with the caveat that all other federal fees, entitlement taxes, and excise taxes are eliminated...as well as tax on corporations (which is just double taxation and enables cronyism in order to get credits and special breaks).

I would include all forms of income, including corporate profits, dividends, capital gains, etc.

Then you're keeping open the IRS intimidation factory.

 

[Toro]

I agree with the caveat that all other federal fees, entitlement taxes, and excise taxes are eliminated...as well as tax on corporations (which is just double taxation and enables cronyism in order to get credits and special breaks).

I would include all forms of income, including corporate profits, dividends, capital gains, etc.

Then you're keeping open the IRS intimidation factory.

Just the opposite. You still would need the IRS regardless, and by not discriminating against different forms of income, there would be less reason to investigate those trying to say one form of income is another.

 

[boedicca]

I would include all forms of income, including corporate profits, dividends, capital gains, etc.

Then you're keeping open the IRS intimidation factory.

Just the opposite. You still would need the IRS regardless, and by not discriminating against different forms of income, there would be less reason to investigate those trying to say one form of income is another.

You'd still have the audit abuse of documenting assets. It's not the government's business to monitor our savings and dig into our lifestyle in a witch hunt for hidden sources of income.

Another alternative, which I favor because it actually encourages saving and investing, is an end user consumption tax (not a value added tax which is another regulatory moral hazard). A few items could be excluded (food - all, not certain items, non-alcoholic beverages), but leave a small flat tax on all other consumption.

 

[jwoodie]

Although I am neither for nor against a "flat tax" per se ( it is simply another way to compute graduated tax rates), I am concerned about the growing number of people who pay no income taxes at all and the lack of governmental fiscal responsibility that entails. To put it succinctly, I think everyone needs to have a little skin in the game.

Don't worry, jwoodie. EVERYONE pays taxes, and quite a lot of them. You might be truly surprised at how large of a percentage of their income that low-wage workers have to pay in total taxation. Payroll taxes, for example, are often higher than income taxes. Income taxes, for most people, are the least of taxation problems.

As an employer, I am fully aware of all income-related taxes. It is correct that many employees pay more FICA taxes than FIT taxes, especially when EITC and other credits are considered. I also think that eliminating the cap on SS contributions would have been more equitable than raising the top income tax rate.

However, I see a growing number of people who feel that federal debt, deficits and taxes are somebody else's problems. Without some restraint, our government will spend us into bankruptcy.

 

[RKMBrown]

I would include all forms of income, including corporate profits, dividends, capital gains, etc.

Then you're keeping open the IRS intimidation factory.

Just the opposite. You still would need the IRS regardless, and by not discriminating against different forms of income, there would be less reason to investigate those trying to say one form of income is another.

Wrong... with a sales/use tax the states would collect and we no longer need the IRS. With a sales/use tax we move away from our punishing income tax that increases the cost of American goods in labor rate comparisons with foreign competition. With a sales/use tax we encourage people to work harder and save more, vs the current system of encouraging people to work less and spending more on foreign goods.

 

[Freemason9]

Then you're keeping open the IRS intimidation factory.

Just the opposite. You still would need the IRS regardless, and by not discriminating against different forms of income, there would be less reason to investigate those trying to say one form of income is another.

Wrong... with a sales/use tax the states would collect and we no longer need the IRS. With a sales/use tax we move away from our punishing income tax that increases the cost of American goods in labor rate comparisons with foreign competition. With a sales/use tax we encourage people to work harder and save more, vs the current system of encouraging people to work less and spending more on foreign goods.

How so? Wouldn't a "sales/use" tax effectively just transfer taxation from the wealthiest to everyone else?

 

[Toro]

Just the opposite. You still would need the IRS regardless, and by not discriminating against different forms of income, there would be less reason to investigate those trying to say one form of income is another.

Wrong... with a sales/use tax the states would collect and we no longer need the IRS. With a sales/use tax we move away from our punishing income tax that increases the cost of American goods in labor rate comparisons with foreign competition. With a sales/use tax we encourage people to work harder and save more, vs the current system of encouraging people to work less and spending more on foreign goods.

How so? Wouldn't a "sales/use" tax effectively just transfer taxation from the wealthiest to everyone else?

Yes. The marginal propensity to consume is lower for those with more money. That's the argument against a consumer tax. It tends to be more regressive.

 

[Politico]

No.........

 

[Toro]

Then you're keeping open the IRS intimidation factory.

Just the opposite. You still would need the IRS regardless, and by not discriminating against different forms of income, there would be less reason to investigate those trying to say one form of income is another.

Wrong... with a sales/use tax the states would collect and we no longer need the IRS. With a sales/use tax we move away from our punishing income tax that increases the cost of American goods in labor rate comparisons with foreign competition. With a sales/use tax we encourage people to work harder and save more, vs the current system of encouraging people to work less and spending more on foreign goods.

Given that Americans pay amongst the lowest rates of income tax in the developed world, a lower income tax wouldn't make our wages more competitive.

 

[OohPooPahDoo]

With another exciting tax season nearly behind me it's time to drag out my solution to the time and expense required to pay the gov't their "fair" share of my earnings.
I understand the corporate side of my misery is unavoidable but we can do away with all the razzmatazz, including the attornies and accountants (necessary to keep me out of tax prison) as well as the time and stress connected to the personal filing.
We can do this in a way that is fair to all if we try and the only losers would be the aforementioned attornies and accountants and some IRS types.
A $30,000 standard deduction for all would protect those least able to pay taxes and all other deductions would be eliminated. Even the big dogs could do their own tax filing in under 15 minutes.
All we really need to agree on would be the uniform percentage all would pay on earned income above $30,000.
Waddaya say, kids?

No thanks. When I had no kids, no mortgage - the burden was shifted more onto me than others in my income group with kids, and a mortgage. In fact I made 30k and less and paid net taxes. Now that I have a kid you want to shift the burden from people without kids onto me. I'd rather not get the shit end of that deal both times around! I'm sure old folks who paid out the ass on income taxes when they were in their peak money earning years might not like having the burden shifted onto them, either.

ROFL... can you name me a retired person that does not collect income? lol 401k's, pensions, SS,... these pay out to retired people as INCOME.

The income of retired people is usually much less than what they made during their working years. Do you think that's funny?

ROFL

Further, the retired folks today did not pay even half what we have to pay for SS/Medicare. Not even half. No offense to the supposed best generation, but they PUNTED THEIR DEBT TO US.

They paid higher income tax rates you whiny little brat. They also took care of their elders through SS and Medicare taxes and now its our job to do the same. It cost more to take care of old people today than it did 50 years ago. And you want to blame that on Grandpa. You ought to be ashamed.

 

[SAYIT]

Because the marginal rate of income spent on necessities is higher for each fewer dollar earned.

Why should the government collect 20% of incomes (or even 16%)? As we see in such high relief these days, our government is too big and does to much. Give it less money and descope its activities (especially in the areas of arbitrary bureaucratic regulation which nullifies the rule of law).

A conservative might say 10%. A liberal might say 30%. But that's not what concerns me here. Choose whatever number you want. My point was to say we should have a flat tax after some income threshold.

I'm pretty certain that's exactly what I said.

 

[SAYIT]

Although I am neither for nor against a "flat tax" per se ( it is simply another way to compute graduated tax rates), I am concerned about the growing number of people who pay no income taxes at all and the lack of governmental fiscal responsibility that entails. To put it succinctly, I think everyone needs to have a little skin in the game.

Don't worry, jwoodie. EVERYONE pays taxes, and quite a lot of them. You might be truly surprised at how large of a percentage of their income that low-wage workers have to pay in total taxation. Payroll taxes, for example, are often higher than income taxes. Income taxes, for most people, are the least of taxation problems.

As an employer, I am fully aware of all income-related taxes. It is correct that many employees pay more FICA taxes than FIT taxes, especially when EITC and other credits are considered. I also think that eliminating the cap on SS contributions would have been more equitable than raising the top income tax rate.

However, I see a growing number of people who feel that federal debt, deficits and taxes are somebody else's problems. Without some restraint, our government will spend us into bankruptcy.

Ya know, I suggested the Standard Deduction to lighten the load on those at the bottom of the income tree but you make a good point. If you pay nothing your vote can (and will?) be bought by pols willing to spend on their behalf.

 

[SAYIT]

Wrong... with a sales/use tax the states would collect and we no longer need the IRS. With a sales/use tax we move away from our punishing income tax that increases the cost of American goods in labor rate comparisons with foreign competition. With a sales/use tax we encourage people to work harder and save more, vs the current system of encouraging people to work less and spending more on foreign goods.

How so? Wouldn't a "sales/use" tax effectively just transfer taxation from the wealthiest to everyone else?

Yes. The marginal propensity to consume is lower for those with more money. That's the argument against a consumer tax. It tends to be more regressive.

That point becomes moot if necessities are not taxed.

 

[RKMBrown]

No thanks. When I had no kids, no mortgage - the burden was shifted more onto me than others in my income group with kids, and a mortgage. In fact I made 30k and less and paid net taxes. Now that I have a kid you want to shift the burden from people without kids onto me. I'd rather not get the shit end of that deal both times around! I'm sure old folks who paid out the ass on income taxes when they were in their peak money earning years might not like having the burden shifted onto them, either.

ROFL... can you name me a retired person that does not collect income? lol 401k's, pensions, SS,... these pay out to retired people as INCOME.

The income of retired people is usually much less than what they made during their working years. Do you think that's funny?

ROFL

Further, the retired folks today did not pay even half what we have to pay for SS/Medicare. Not even half. No offense to the supposed best generation, but they PUNTED THEIR DEBT TO US.

They paid higher income tax rates you whiny little brat. They also took care of their elders through SS and Medicare taxes and now its our job to do the same. It cost more to take care of old people today than it did 50 years ago. And you want to blame that on Grandpa. You ought to be ashamed.

It's only less if they saved an insufficient amount. Further it's only less if they decide to stop working even part time in retirement. Still further it's only less if they decide to take less out of their savings each year. The part that was funny, was your indication that retired people don't pay income tax. That you missed the humor of your post is not without it's own humor. Here's your shovel.

No they did not pay "higher" income tax rates, they had more deductions you fool. Further my point on the higher rates was for SS and Medicare. Federal income tax is not SS AND MEDICARE. The taxes for SS were 2% in 1955, 3.6% in 1965, 5.85% in 1975, 7.05% in 1985, and are 7.65% today. This does not even cover the corporate matching that has to be done so really it's double that. So yes generations of the past paid MUCH LESS FOR SS THAN CURRENT GENERATIONS.

 

[Rshermr]

ROFL... can you name me a retired person that does not collect income? lol 401k's, pensions, SS,... these pay out to retired people as INCOME.

The income of retired people is usually much less than what they made during their working years. Do you think that's funny?

ROFL

Further, the retired folks today did not pay even half what we have to pay for SS/Medicare. Not even half. No offense to the supposed best generation, but they PUNTED THEIR DEBT TO US.

They paid higher income tax rates you whiny little brat. They also took care of their elders through SS and Medicare taxes and now its our job to do the same. It cost more to take care of old people today than it did 50 years ago. And you want to blame that on Grandpa. You ought to be ashamed.

It's only less if they saved an insufficient amount. Further it's only less if they decide to stop working even part time in retirement. Still further it's only less if they decide to take less out of their savings each year. The part that was funny, was your indication that retired people don't pay income tax. That you missed the humor of your post is not without it's own humor. Here's your shovel.

No they did not pay "higher" income tax rates, they had more deductions you fool. Further my point on the higher rates was for SS and Medicare. Federal income tax is not SS AND MEDICARE. The taxes for SS were 2% in 1955, 3.6% in 1965, 5.85% in 1975, 7.05% in 1985, and are 7.65% today. This does not even cover the corporate matching that has to be done so really it's double that. So yes generations of the past paid MUCH LESS FOR SS THAN CURRENT GENERATIONS.

Well, then. That settles it. All of us on SS are wealthy. Damn. I feel so much better.
Was there a point in there????

 

[OohPooPahDoo]

It's only less if they saved an insufficient amount.

Junior, almost everyone has a lower income in retirement than in their peak working years. That's a fact. I'm sorry you find it unsettling. I'm not sure how that means its an "insufficient amount", if you pay off your mortgage that's a huge bill right there you don't need to pay in retirement. You also don't need to save for retirement when retired. That plus the house note is a huge chunk of the amount of income most people make.

Further it's only less if they decide to stop working even part time in retirement. Still further it's only less if they decide to take less out of their savings each year.

So its less ONLY if A and ONLY if B - yeah that makes logical sense.

Taking money out of your savings account doesn't always qualify as income BTW. There's quite a few old folks with massive stockpiles of cash equivalents they've already paid the taxes on.

Further my point on the higher rates was for SS and Medicare. Federal income tax is not SS AND MEDICARE. The taxes for SS were 2% in 1955, 3.6% in 1965, 5.85% in 1975, 7.05% in 1985, and are 7.65% today. This does not even cover the corporate matching that has to be done so really it's double that. So yes generations of the past paid MUCH LESS FOR SS THAN CURRENT GENERATIONS.

Health care cost more now. I fail to see why that means you hate Grandpa

 

[oldfart]

As an employer, I am fully aware of all income-related taxes. It is correct that many employees pay more FICA taxes than FIT taxes, especially when EITC and other credits are considered. I also think that eliminating the cap on SS contributions would have been more equitable than raising the top income tax rate.

Social Security benefits first became taxable in 1986 under Reagan's plan to overhaul Social Security. The Treasury was made responsible for determining home much income tax collected was attributable to Social Security income and remitting that amount to the Social Security Trust Funds. This creates some little understood policy issues.

1. Social Security (FICA and SECA) taxes don't reduce the deficit, they add to the solvency of the Trust Funds.

2. Because the threshhold amounts for Social Security benefits are not indexed ($32,000 for married joint, $ 0 for married separate, $25,000 for all others) inflation has caused "bracket creep" and a provision originally applying to maybe 3% of the elderly now applies to a majority.

3. A large part of the IRS accounts classified as "not currently collectible" consist of SE tax for low wage workers who are considered "independent contractors". A backup withholding requirement on all personal service income would end this game, which primarily benefits the employers. Such a measure would come very close to making Social Security solvent forever.

4. As a matter of policy, the IRS is less lenient on the trust fund penalty and employment taxes compared to income taxes. If you end up in collections, you find this out real fast.

5. Social Security benefit calculations are highly progressive. First an earnings history is used to compute a Primary Insured Amount (PIA), using a formula that has two inflections ("bend points"):

For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2012, or who dies in 2012 before becoming eligible for benefits, his/her PIA will be the sum of:
(a) 90 percent of the first $767 of his/her average indexed monthly earnings, plus
(b) 32 percent of his/her average indexed monthly earnings over $767 and through $4,624, plus
(c) 15 percent of his/her average indexed monthly earnings over $4,624.

As a result of this raising the wage base brings in far more revenue to the trust funds than it raises future benefit payouts. Note that these inflection points are adjusted annually by the same factor as used to index benefits for increases in the cost of living. Thus tinkering with the CPI will not alter the revenue/benefit relationship.

Finally, IMHO it would be possible to remove any upper limit on the wage base, index the base amount for determining taxability of Social Security benefits, institute backup withholding on all personal service income, fold the unemployment tax into Social Security, and lower the contribution rates.

 

[dblack]

A flat tax sound reasonable. But the progressive rate isn't the biggest problem with our tax code. The biggest problem is that the state uses loopholes (incentives, credits, exemptions, deductions, rebates, "penalties", etc, etc..) as back-door legislation to manipulate society.