When I get my pay slip and notice that tax has been deducted, I don't feel a single pang of anger or resentment. I don't feel cheated or thieved in any way, and I don't sit there thinking what could've been, had I not been deducted that fraction of a payslip.
Maybe I'm just crazy, because it seems to me that so many people do not feel this way. My perspective is probably because of my realisation that I wouldn't have been able to make this money had others not been taxed. Sure, it's a little more obvious a situation than most people due to my parents' poor finances, but it's a realisation nonetheless. I'm grateful. It's pretty nice.
When I get my pay slip and notice that tax has been deducted, I don't feel a single pang of anger or resentment. I don't feel cheated or thieved in any way, and I don't sit there thinking what could've been, had I not been deducted that fraction of a payslip.
Maybe I'm just crazy, because it seems to me that so many people do not feel this way. My perspective is probably because of my realisation that I wouldn't have been able to make this money had others not been taxed. Sure, it's a little more obvious a situation than most people due to my parents' poor finances, but it's a realisation nonetheless. I'm grateful. It's pretty nice.
I've never once felt a pang of anger over my taxation.
I've never considered anything but the number at the end of the check saying "paid to you" to be mine. Same way I don't consider my mother's wealth or possessions to be mine until they're in my hands. The inheritance taxes don't phase me a bit. It's not my money, what do I care about what happens to Theoretical Monies.
I've found this to be a happy way to not care about taxes beyond how obnoxiously complicated it is in april.
kildy on
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JacobkoshGamble a stamp.I can show you how to be a real man!Moderatormod
Inheritance in general shouldn't be taxed. My parents already paid taxes on the money that bought it, and they pay their property tax every year. Why should I get taxed for it again just because they died?
For one thing, the goods and services that your parents produced to earn that money are long since gone, so there is a limit to the time that that money can remain extant and not contribute to inflation. At the most fundamental macroeconomic level, taxes do not exist to "pay for things" - because the government can allocate resources to itself as it sees fit - but to curb inflation.
Jacobkosh on
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JacobkoshGamble a stamp.I can show you how to be a real man!Moderatormod
Which makes sense because economic theories still tend to ignore the status which being an effective CEO or what have you garners in their social circles which behavioral economics is starting to try and take into account as there is no such thing as a rational human being.
What's sad is that Thorstein Veblen was taking these things into account a hundred years ago, and we're just now getting around to realizing this.
What if a rich guy just gets a poor guy to buy all his shit for him at the low, poor tax rates?
The tax rate is the same for everyone. It is made more progressive by granting a credit, and also by adding a progressive income tax or capital gains tax if the Dems insist on it.
"Man, this new tax code is going to be so simple WE CAN GET RID OF THE IRS!!!!!"
Yeaaaaaah no.
There is no magical X% tax rate you can apply to the entire economy that will be simple, enforceable, and functional. You need to cover what counts as consumption, what doesn't, when can you get double-taxed, when can't you, who collects the tax, who doesn't, what enforcement mechanisms ensure the taxes are properly collected, who issues the magical progressive debit cards to all the poor folks, who verifies their addresses, who verifies their identities, who searches for fraud, who handles disputes on the cards, etc. etc. etc.
If someone wants to argue the merits of a consumption tax on some other level they are welcome to, "it magically simplifies everything NO MORE IRS WE SAVE BILLIONS!" is a load of total horseshit.
And yet all of these problems are somehow magically solved by most states and municipalities in this country that thrive on ever-popular consumption taxes.
A debit card with $X per month would be more complicated that the current 1040 process?
Enforcement would be harder than it is now?
The black market in retail would somehow be more devastating than the black market in labor?
I don't understand the entire "disincentivizing working" argument. Are there really people out there who don't want to make more money just because they'll have to pay slightly higher taxes on each additional dollar they make? Is it a lack of understanding of how income tax brackets work (all of the articles about couples trying to tailor their income so they don't get hit by the Obama "increase" in income over $250,000........not realizing that it was an increase in the top marginal rate, not on their overall income).
For example, my girlfriend's dad pays a relatively high tax rate. This does not prevent him from aggressively seeking out ways to increase his pre-tax income because, even if he's taxed at the top marginal rate, he's still making more money overall. Perhaps this would be an issue if top marginal rates got ridiculous but at where they are now? Hardly.
All arguments which can be equally applied to a consumption tax if that's how you want to view things.
Some adjustments need to be made if Congress decides to vote on it:
1. Exceptions should be established (if not already) for essential items such as grocery foods, pharmaceuticals, healthcare services, and basic clothing (sweaters, jeans, t-shirts, etc.). Basically, anything that doesn't already get hit by a state sales tax.
That's what the credit is for. It isn't the items that should be exempt, it's a certain level of spending that is necessary to support a family at a certain quality of life that ought to be exempt. And that's done by only taxing consumption over a certain amount.
Second, if you want to avoid massive cheating (and it's associated, black market problems), it needs to be a VAT. I don't understand how anyone could propose a 30% sales tax. Think of the incentives that creates.
Somehow we are able to function with an income tax despite how easy it is to just pay people without reporting the income. I don't see how this is any different. Yes, we'd need enforcement. No, most people wouldn't cheat.
You cannot apply an extremely simple tax code to an extremely complex economy.
You keep saying this, but you don't back it up with anything. Why not? I don't believe there is ever just one simple answer to anything that must be pursued ideologically, but I think most agree that our current tax code is beyond absurd in its complexity and a vastly simpler one could be more beneficial to all.
Corporate Taxes: Here is where I think Yar's proposal completely falls apart.
No, it's one of the biggest plusses. Do you have any clue what kind of effort and investment goes into calculating and estimating and arguing and dodging corporate tax liability every year?
Furthermore, all of a sudden, a company has no incentive to invest in themselves. Why? Because investing in yourself is expensive. Normally, you spend money on improving the company, and that money is tax-deductible; subtracted from your profits at the end of the year, meaning you don't pay taxes on it. This goes for everything from employees to equipment. So, if you get a $2,000/year raise, really, it probably only costs your company $1,300/year, because they pay $700 less in taxes. Under a tax regime with no corporate taxes, this is no longer true. Also no longer true is the fact that buying new things for the company not only won't be tax-deductible, it will be 30% more expensive on top of that. By doing this, you've created a marginal cost increase on employee pay of 54% (i.e. paying an employee will cost a company half again as much under this tax plan), and a marginal cost increase of over 100% on any equipment or physical product cost for use or expansion. This assumes a corporation with revenues in the tens of millions of dollars, so the effect on smaller corporations won't be as bad, but will still be quite significant. This is a fucking huge disincentive for investment in improving a company, when they can just pay out a tax-free dividend to their shareholders. The shareholders have no reason to want the company to reinvest in itself, since that's just going to mean them getting hit with taxes.
The details you suppose here are all completely false. You are calculating a tax exemption as if it were a profit, which is not the case. Owing $10 in taxes and getting a $5 credit is NOT $5 better than owing no taxes at all! If you are comparing a tax exemption to no tax at all, they are equal. Your numbers are clearly wrong. But the underlying idea, that businesses would now be able to make decisions based on business and not based on how best to avoid taxes, is exactly right.
Currently, a company with profits in the tens of millions pays a 35% corporate tax rate. So, if they pay an employer $40,000 per year, it costs them $26,000. We get rid of corporate taxes altogether, and it will cost them $40,000 to pay the same employee the same amount, which is a marginal increase of $14,000 over the $26,000 they're currently spending, roughly 54%.
I am literally dumbfounded by the logic here. WTF? How does removing tax liability mean that they now are paying their employees more? A tax exemption is not revenue! If you pay an employee $40,000, that's what it costs you.
Currently, a company with profits in the tens of millions pays a 35% corporate tax rate. So, if they pay an employer $40,000 per year, it costs them $26,000. We get rid of corporate taxes altogether, and it will cost them $40,000 to pay the same employee the same amount, which is a marginal increase of $14,000 over the $26,000 they're currently spending, roughly 54%.
I am literally dumbfounded by the logic here. WTF? How does removing tax liability mean that they now are paying their employees more? A tax exemption is not revenue! If you pay an employee $40,000, that's what it costs you.
Without a tax on profit a company has more incentive to fire an employee, as they will recoup more money than if there was a tax. I have no idea if that would actually influence anything, though.
Second, if you want to avoid massive cheating (and it's associated, black market problems), it needs to be a VAT. I don't understand how anyone could propose a 30% sales tax. Think of the incentives that creates.
VAT has fairly wide ranging fraud associated with it as well. See "carousel fraud" for a particularly sophisticated example of it.
Second, if you want to avoid massive cheating (and it's associated, black market problems), it needs to be a VAT. I don't understand how anyone could propose a 30% sales tax. Think of the incentives that creates.
VAT has fairly wide ranging fraud associated with it as well. See "carousel fraud" for a particularly sophisticated example of it.
Carousel fraud requires lots of capital and a fair degree of international cooperation between organisations. This leaves a paper trail the width of a rampaging elephant.
A sales tax, on the other hand, incentivizes frontline retailers and customers to hide or discount transactions. Such sales, and such retailers, are going to be very numerous. Enforcement is going to suck, in essence.
The black market in retail would somehow be more devastating than the black market in labor?
I think enforcement would be a whole lot harder than it is now and the black market for items will always be easier to run. If the IRS audits you and sees that you have money floating around that you didn't report on your income tax forms they'll put you in jail, unless you want to launder it (something I can only assume Joe the Plumber isn't going to be able to do easily).
But with items? You pretty much need to catch the transaction as it happens or else they'll just say they DID pay income tax on it, unless you're going to make everyone keep their receipt for everything they buy. The income tax fraud can be caught anytime during the statute of limitations, whereas the black market item is pretty much a one shot deal.
The black market in retail would somehow be more devastating than the black market in labor?
I think enforcement would be a whole lot harder than it is now and the black market for items will always be easier to run. If the IRS audits you and sees that you have money floating around that you didn't report on your income tax forms they'll put you in jail, unless you want to launder it (something I can only assume Joe the Plumber isn't going to be able to do easily).
But with items? You pretty much need to catch the transaction as it happens or else they'll just say they DID pay income tax on it, unless you're going to make everyone keep their receipt for everything they buy. The income tax fraud can be caught anytime during the statute of limitations, whereas the black market item is pretty much a one shot deal.
Not really. It's true that individuals can't be relied on to report individual transactions reliably. But consumption taxes are not collected from individuals directly, but through companies, the vast majority of which are large enough to be unable to hide taxes in this manner (there is no effect on prices from switching this incidence, after all).
VAT is still easier to enforce than a sales tax, but both are consumption taxes and are generally pursued through firms.
When I get my pay slip and notice that tax has been deducted, I don't feel a single pang of anger or resentment. I don't feel cheated or thieved in any way, and I don't sit there thinking what could've been, had I not been deducted that fraction of a payslip.
Maybe I'm just crazy, because it seems to me that so many people do not feel this way. My perspective is probably because of my realisation that I wouldn't have been able to make this money had others not been taxed. Sure, it's a little more obvious a situation than most people due to my parents' poor finances, but it's a realisation nonetheless. I'm grateful. It's pretty nice.
I've never once felt a pang of anger over my taxation.
I do, but not for psychotic objectivist reasons or anything, I just don't like the percentage that goes into blowing the crap out of brown people.
Ah but the libertarian vision just hasn't worked because we haven't tried it! If we do it, it will work, cuz we're americans and smarter than them dumb forenerz.
I know, Libertarianism is against Nationalism, but they make no attempt to explain why it hasn't worked anywhere else but it would be unicorns and butterflies here.
Ah but the libertarian vision just hasn't worked because we haven't tried it! If we do it, it will work, cuz we're americans and smarter than them dumb forenerz.
I know, Libertarianism is against Nationalism, but they make no attempt to explain why it hasn't worked anywhere else but it would be unicorns and butterflies here.
To be fair, a lot of the countries I put up there aren't completely fucked. Slovakia and the UAE have done well for themselves, but for the most part it has relied on foreign investment (European automakers for Slovakia, real estate developers in the UAE) and the backs of extremely low-wage workers.
They tend to do well as long as money comes in to fuel production, but when it comes to creating their own consumer economy, they completely fail. That's why with the recession these are by far the hardest hit economies today.
Russia, Saudi Arabia and Nigeria get the majority of their revenue from Oil Exports. Several of the others have major problems with black market/criminal activity that make trying to get a progressive income tax going very hard.
As for Somalia? there is no taxation, there is only pay up or die warlordism.
Kipling217 on
The sky was full of stars, every star an exploding ship. One of ours.
Ah but the libertarian vision just hasn't worked because we haven't tried it! If we do it, it will work, cuz we're americans and smarter than them dumb forenerz.
I know, Libertarianism is against Nationalism, but they make no attempt to explain why it hasn't worked anywhere else but it would be unicorns and butterflies here.
To be fair, a lot of the countries I put up there aren't completely fucked. Slovakia and the UAE have done well for themselves, but for the most part it has relied on foreign investment (European automakers for Slovakia, real estate developers in the UAE) and the backs of extremely low-wage workers.
They tend to do well as long as money comes in to fuel production, but when it comes to creating their own consumer economy, they completely fail. That's why with the recession these are by far the hardest hit economies today.
I don't know much about Slovakia but doesn't the UAE essentially run off the backs of a de facto slave labor force?
I don't know much about Slovakia but doesn't the UAE essentially run off the backs of a de facto slave labor force?
You misread the map; the bright green areas are countries with no income tax, flat or not. The reason is oil: the government doesn't need any other source of revenue. The UAE does employ a lot of cheap foreign labor, but they don't pay tax either as far as I know.
"Man, this new tax code is going to be so simple WE CAN GET RID OF THE IRS!!!!!"
Yeaaaaaah no.
There is no magical X% tax rate you can apply to the entire economy that will be simple, enforceable, and functional. You need to cover what counts as consumption, what doesn't, when can you get double-taxed, when can't you, who collects the tax, who doesn't, what enforcement mechanisms ensure the taxes are properly collected, who issues the magical progressive debit cards to all the poor folks, who verifies their addresses, who verifies their identities, who searches for fraud, who handles disputes on the cards, etc. etc. etc.
If someone wants to argue the merits of a consumption tax on some other level they are welcome to, "it magically simplifies everything NO MORE IRS WE SAVE BILLIONS!" is a load of total horseshit.
And yet all of these problems are somehow magically solved by most states and municipalities in this country that thrive on ever-popular consumption taxes.
A debit card with $X per month would be more complicated that the current 1040 process?
Enforcement would be harder than it is now?
The black market in retail would somehow be more devastating than the black market in labor?
I'm sorry but can you actually prove that this is not a matter of department naming instead? The revenue of an entire country is a big and complicated thing, so of course they build it a building and give it it's own name and staff.
How are you not simply ignoring the administration issues here because you see no similar buildings or specially named departments for taxation applied over much smaller areas and volumes?
Moreover how much support currently goes from the IRS to smaller entities in managing their revenue collection?
I'm sorry but can you actually prove that this is not a matter of department naming instead? The revenue of an entire country is a big and complicated thing, so of course they build it a building and give it it's own name and staff.
How are you not simply ignoring the administration issues here because you see no similar buildings or specially named departments for taxation applied over much smaller areas and volumes?
I see the inheritance tax has been mentioned off and on in here. My understanding was that the inheritance tax is needed to prevent a major loophole in the way capital gains taxes are done. Basic scenario I've been given is that it is a disincentive to selling property that has gained tremendously in value. (Basically, if you have something that has gained 2 million in value, when you sell you will be taxed on that appreciation. If you die and leave it as inheritance, the capital growth effectively starts over for who inherited it. If the property is worth less than the "cutoff," than no taxes are paid on something simply because you died.)
Is this still the case? Shouldn't there be some other way to address that?
Second, if you want to avoid massive cheating (and it's associated, black market problems), it needs to be a VAT. I don't understand how anyone could propose a 30% sales tax. Think of the incentives that creates.
Somehow we are able to function with an income tax despite how easy it is to just pay people without reporting the income. I don't see how this is any different. Yes, we'd need enforcement. No, most people wouldn't cheat.
That's because payroll is a deductible expense to a business. They don't have an incentive to underreport it. Just like input cost are a deductible expense under a VAT scheme. That's what makes it enforceable at high levels.
If you are seriously proposing a consumption tax as the only source of tax revenue, why the hell would you be opposed to a VAT? It may still be vulnerable to some types of fraud; but it is superior to a sales tax in almost every conceivable way. Seriously, name one reason why you want a sales tax instead.
There is a reason why most civilized, i.e. tax you out the ass ;-) , countries use VATs and not sales taxes.
I see the inheritance tax has been mentioned off and on in here. My understanding was that the inheritance tax is needed to prevent a major loophole in the way capital gains taxes are done. Basic scenario I've been given is that it is a disincentive to selling property that has gained tremendously in value. (Basically, if you have something that has gained 2 million in value, when you sell you will be taxed on that appreciation. If you die and leave it as inheritance, the capital growth effectively starts over for who inherited it. If the property is worth less than the "cutoff," than no taxes are paid on something simply because you died.)
Is this still the case? Shouldn't there be some other way to address that?
If I understand you correctly, you're saying the loophole is something like this:
Your uncle buys a cottage for $10,000, and on his death it is worth $100,000. He leaves it to you and you sell it ten years later for $200,000. You think the loophole might work by only taxing you on the $100,000 gain that occurred while the property was in your hands ($200,000 - $100,000), rather than the full $190,000 gain ($200,000 - $10,000)?
If all the "inheritance" tax does is close that loophole, it's hardly even an inheritance tax. We do the same thing in Canada, as I mentioned before, with a deemed disposition. When the owner dies the estate would be taxed on the $90,000 capital gain, and the inheritor will be assumed to have acquired the property for $100,000 and only have to pay capital gains taxes on any increase over $100,000 in the future. It's strictly a capital gains thing and has nothing to do with someone dying. Deemed dispositions are also calculated every 21 years too.
It kind of sucks that the estate will have to pay the taxes on the $90,000 gain when there might not be enough liquid assets to do so (so they might be forced to sell the cottage to pay the taxes on it) or it's really not their "fault" the value of the property increased in price by so much, but the tax burden remains completely unchanged and is the same as if the uncle lived for 10 more years and sold the cottage for $200,000 and was taxed on the $190,000 gain (well, actually, splitting it up into two parts - one on death and another when sold could actually be advantageous, since you could be in lower brackets).
I think enforcement would be a whole lot harder than it is now and the black market for items will always be easier to run. If the IRS audits you and sees that you have money floating around that you didn't report on your income tax forms they'll put you in jail, unless you want to launder it (something I can only assume Joe the Plumber isn't going to be able to do easily).
But with items? You pretty much need to catch the transaction as it happens or else they'll just say they DID pay income tax on it, unless you're going to make everyone keep their receipt for everything they buy. The income tax fraud can be caught anytime during the statute of limitations, whereas the black market item is pretty much a one shot deal.
Not really. It's true that individuals can't be relied on to report individual transactions reliably. But consumption taxes are not collected from individuals directly, but through companies, the vast majority of which are large enough to be unable to hide taxes in this manner (there is no effect on prices from switching this incidence, after all).
VAT is still easier to enforce than a sales tax, but both are consumption taxes and are generally pursued through firms.
But if we're talking black market (which I am, despite the rambley way I go about it), we usually aren't talking about a company, more a sort of fly-by-night flee market (at least I think that's how it works, I don't profess to be an expert).
I am sort of interested in your idea that a smaller company would be more able to hide things like that. If you think that small companies would be able to sneak around it then what do you think of the possibility of larger stores being crushed by the competition of tons of stores small enough to hide their not taxing-ness?
Sounds fine until your realise that the goverment needs taxes to live. Revenue shortfalls are bad news for any entity including goverment.
That was sort of my point. I wasn't suggesting that having thousands of tiny stores that avoid taxes and damage the companies that do pay them is a good thing, I was just saying that it was a possibility in his scenario, even if it is pretty unlikely.
If you are seriously proposing a consumption tax as the only source of tax revenue, why the hell would you be opposed to a VAT? It may still be vulnerable to some types of fraud; but it is superior to a sales tax in almost every conceivable way. Seriously, name one reason why you want a sales tax instead.
There is a reason why most civilized, i.e. tax you out the ass ;-) , countries use VATs and not sales taxes.
I just want to add to the inheritance tax discussion that was going on earlier.
The Inheritance tax only kicks in for multimillion dollar estates and thereby helps prevent concentration of wealth over generations. It seems to me, if our goal is to maintain a functioning democracy/republic then measures which help prevent the formation of a plutocracy are not only appropriate, but necessary.
I disagree with the central premise that an income tax disincentivizes working. There aren't really a whole lot of alternatives to working. People can and will consume less if it costs them more, but even with a progressive tax structure, people who work and make more money will earn more money even as they pay more in taxes.
Corporate Taxes: Here is where I think Yar's proposal completely falls apart.
No, it's one of the biggest plusses. Do you have any clue what kind of effort and investment goes into calculating and estimating and arguing and dodging corporate tax liability every year?
Quite a bit. We can solve this by simplifying the corporate tax, we don't need to eliminate it.
Furthermore, all of a sudden, a company has no incentive to invest in themselves. Why? Because investing in yourself is expensive. Normally, you spend money on improving the company, and that money is tax-deductible; subtracted from your profits at the end of the year, meaning you don't pay taxes on it. This goes for everything from employees to equipment. So, if you get a $2,000/year raise, really, it probably only costs your company $1,300/year, because they pay $700 less in taxes. Under a tax regime with no corporate taxes, this is no longer true. Also no longer true is the fact that buying new things for the company not only won't be tax-deductible, it will be 30% more expensive on top of that. By doing this, you've created a marginal cost increase on employee pay of 54% (i.e. paying an employee will cost a company half again as much under this tax plan), and a marginal cost increase of over 100% on any equipment or physical product cost for use or expansion. This assumes a corporation with revenues in the tens of millions of dollars, so the effect on smaller corporations won't be as bad, but will still be quite significant. This is a fucking huge disincentive for investment in improving a company, when they can just pay out a tax-free dividend to their shareholders. The shareholders have no reason to want the company to reinvest in itself, since that's just going to mean them getting hit with taxes.
The details you suppose here are all completely false. You are calculating a tax exemption as if it were a profit, which is not the case. Owing $10 in taxes and getting a $5 credit is NOT $5 better than owing no taxes at all! If you are comparing a tax exemption to no tax at all, they are equal. Your numbers are clearly wrong. But the underlying idea, that businesses would now be able to make decisions based on business and not based on how best to avoid taxes, is exactly right.
I'm not saying owing $10 in taxes and getting a $5 credit is $5 better than owing no taxes at all. I'm saying that getting a $5 tax credit is $10 better than having to pay $5 in extra taxes, which I don't see how you can argue.
Furthermore, yeah, they can now make decisions based entirely on "business." What is "business?" "Business" is the concentration of wealth into fewer and fewer hands. It encourages them to spend their profits giving money back to shareholders rather than hiring new employees, or expanding their business. And in fact, they can't make their decisions based solely on "business," because now, thanks to the new consumption tax, the cost of making any purchases to expand their business has doubled.
Currently, a company with profits in the tens of millions pays a 35% corporate tax rate. So, if they pay an employer $40,000 per year, it costs them $26,000. We get rid of corporate taxes altogether, and it will cost them $40,000 to pay the same employee the same amount, which is a marginal increase of $14,000 over the $26,000 they're currently spending, roughly 54%.
I am literally dumbfounded by the logic here. WTF? How does removing tax liability mean that they now are paying their employees more? A tax exemption is not revenue! If you pay an employee $40,000, that's what it costs you.
Nobody has said that a tax exemption is revenue. But if you pay an employee $40,000, that is not, in fact, what it costs you. Ask an accountant. This incredibly basic econ/accounting-101-level stuff, here.
Just to make it clearer: under the current tax regime, a Fortune 500 company brings in $40,000. They log that money as profit, and pay their taxes on it. After paying taxes (at their 35% rate), they have $26,000 in profit left. If they had instead paid an employee with it, they wouldn't have had to pay any taxes on that $40,000. The employee would have gotten $40,000 instead, so what was the cost to the company of paying that employee $40,000? $26,000. Or maybe, instead of using it to pay an employee, the company uses it to buy some upgraded equipment, which allows them to expand their operation. Same thing, it only costs them $26,000 in potential profit to get $40,000 worth of goods. In this way, we incentivize spending on the company, hiring and employing people, and innovation, all of which are good for society.
Under your proposed tax regime, a Fortune 500 company brings in $40,000. They take that money as profit, and pay no taxes on it, which, yes, is a 54% marginal gain in profit. However, now paying their $40,000 a year employees instead costs them $40,000 in profit. So, you just created a huge incentive for them to not employ as many people. Maybe a lot of people who were cost-effective when it was only costing them $26,000, but are not now cost-effective when it's costing them $40,000, a 54% marginal increase in cost. And if, say, the company needed to buy some new equipment to expand, now instead of getting $40,000 worth of equipment at the cost of $26,000 in profit, the same $40,000 worth of equipment costs them $52,000 in profit ($40,000 for the equipment, plus $12,000 in taxes on the equipment). That's a 100% increase from the $26,000 in profit it was costing them previously.
You've completely distorted the cost of expansion and supplies with your tax proposals, here, and created a huge incentive for an even more "take the money and run" kind of business model (from the perspective of the shareholders and executives) than we currently have now. And while that may be good for wealthy shareholders and executives (hell, it's great for them), it's really, really terrible for society.
If you are seriously proposing a consumption tax as the only source of tax revenue, why the hell would you be opposed to a VAT? It may still be vulnerable to some types of fraud; but it is superior to a sales tax in almost every conceivable way. Seriously, name one reason why you want a sales tax instead.
There is a reason why most civilized, i.e. tax you out the ass ;-) , countries use VATs and not sales taxes.
Because VATs tax production, not consumption.
That's a negatory. VATs are mathematically equivalent to sales taxes in terms of tax incidence. It's just a different collection mechanism.
Example: Business 1 (B1) creates product out of thin air and sells it for $10 to Business 2 (B2), who retails it for $20 to the consumer (C1).
The difference is that with a VAT cheating is minimized because:
1. You collect a little money throughout the supply chain, as opposed to a larger amount at one spot.
2. You can compare B1's tax payment to B2's tax deduction to make sure they are identical. I.e. B2 has a strong incentive to inform on B1.
I disagree with the central premise that an income tax disincentivizes working. There aren't really a whole lot of alternatives to working. People can and will consume less if it costs them more, but even with a progressive tax structure, people who work and make more money will earn more money even as they pay more in taxes.
The argument isn't that people will stop working altogether, unless you have a generous social safety net as well. The argument is that people will work less.
If you are seriously proposing a consumption tax as the only source of tax revenue, why the hell would you be opposed to a VAT? It may still be vulnerable to some types of fraud; but it is superior to a sales tax in almost every conceivable way. Seriously, name one reason why you want a sales tax instead.
There is a reason why most civilized, i.e. tax you out the ass ;-) , countries use VATs and not sales taxes.
Because VATs tax production, not consumption.
That's a negatory. VATs are mathematically equivalent to sales taxes in terms of tax incidence. It's just a different collection mechanism.
Example: Business 1 (B1) creates product out of thin air and sells it for $10 to Business 2 (B2), who retails it for $20 to the consumer (C1).
The difference is that with a VAT cheating is minimized because:
1. You collect a little money throughout the supply chain, as opposed to a larger amount at one spot.
2. You can compare B1's tax payment to B2's tax deduction to make sure they are identical. I.e. B2 has a strong incentive to inform on B1.
All taxes that a business is responsible for will ultimately factor into supply and demand in the same fashion. But when you say "throughout the supply chain" you're saying exactly what I said. Production gets taxed. Adding value to the world we live in gets taxed. Your B1s and B2s either have to pass that entire cost on, which has the same effect as the sales tax at the register, or else they get penalized for production. Taxes should not disincentivize production
If you are seriously proposing a consumption tax as the only source of tax revenue, why the hell would you be opposed to a VAT? It may still be vulnerable to some types of fraud; but it is superior to a sales tax in almost every conceivable way. Seriously, name one reason why you want a sales tax instead.
There is a reason why most civilized, i.e. tax you out the ass ;-) , countries use VATs and not sales taxes.
Because VATs tax production, not consumption.
That's a negatory. VATs are mathematically equivalent to sales taxes in terms of tax incidence. It's just a different collection mechanism.
Example: Business 1 (B1) creates product out of thin air and sells it for $10 to Business 2 (B2), who retails it for $20 to the consumer (C1).
The difference is that with a VAT cheating is minimized because:
1. You collect a little money throughout the supply chain, as opposed to a larger amount at one spot.
2. You can compare B1's tax payment to B2's tax deduction to make sure they are identical. I.e. B2 has a strong incentive to inform on B1.
All taxes ultimately factor into supply and demand in the same fashion. But when you say "throughout the supply cahin" you're saying exactly what I said. Production gets taxed. Adding value to the world we live in gets taxed.
Considering you started this thread, you ought to understand this better. There are tremendous incentive impact differences between taxing consumption (VAT, sales tax) and taxing income (income and payroll taxes). They do not "factor into supply and demand in the same fashion."
What you are thinking of is that it doesn't matter whether you impose taxes on buyers or sellers in a transaction. That's tax incidence neutral. Ironically, that's also the precise reason VATs and sales taxes are distributionally equivalent.
I just want to add to the inheritance tax discussion that was going on earlier.
The Inheritance tax only kicks in for multimillion dollar estates and thereby helps prevent concentration of wealth over generations. It seems to me, if our goal is to maintain a functioning democracy/republic then measures which help prevent the formation of a plutocracy are not only appropriate, but necessary.
That's a terrible argument.
People shouldn't be taxed more just because they were successful and weren't immune to death. They've already paid a higher percentage of income tax due to their higher earnings. If they've worked hard all their life building up a good amount of money for their family to live on, their family shouldn't lose a ton of it just because it happens to be a high amount.
I hate to break it to you, but the existence of rich people doesn't automatically destroy democracy.
I just want to add to the inheritance tax discussion that was going on earlier.
The Inheritance tax only kicks in for multimillion dollar estates and thereby helps prevent concentration of wealth over generations. It seems to me, if our goal is to maintain a functioning democracy/republic then measures which help prevent the formation of a plutocracy are not only appropriate, but necessary.
That's a terrible argument.
People shouldn't be taxed more just because they were successful and weren't immune to death. They've already paid a higher percentage of income tax due to their higher earnings. If they've worked hard all their life building up a good amount of money for their family to live on, their family shouldn't lose a ton of it just because it happens to be a high amount.
I hate to break it to you, but the existence of rich people doesn't automatically destroy democracy.
The hoarding of wealth over generations does hurt a democracy.
I just want to add to the inheritance tax discussion that was going on earlier.
The Inheritance tax only kicks in for multimillion dollar estates and thereby helps prevent concentration of wealth over generations. It seems to me, if our goal is to maintain a functioning democracy/republic then measures which help prevent the formation of a plutocracy are not only appropriate, but necessary.
That's a terrible argument.
People shouldn't be taxed more just because they were successful and weren't immune to death. They've already paid a higher percentage of income tax due to their higher earnings. If they've worked hard all their life building up a good amount of money for their family to live on, their family shouldn't lose a ton of it just because it happens to be a high amount.
I hate to break it to you, but the existence of rich people doesn't automatically destroy democracy.
When their wealth only grows it eventually outpaces anything anyone could hope to match. And the inheritance tax doesn't keep them from being incredibly rich, merely less incredibly rich.
I just want to add to the inheritance tax discussion that was going on earlier.
The Inheritance tax only kicks in for multimillion dollar estates and thereby helps prevent concentration of wealth over generations. It seems to me, if our goal is to maintain a functioning democracy/republic then measures which help prevent the formation of a plutocracy are not only appropriate, but necessary.
That's a terrible argument.
People shouldn't be taxed more just because they were successful and weren't immune to death. They've already paid a higher percentage of income tax due to their higher earnings. If they've worked hard all their life building up a good amount of money for their family to live on, their family shouldn't lose a ton of it just because it happens to be a high amount.
I hate to break it to you, but the existence of rich people doesn't automatically destroy democracy.
There's a difference between "rich people" and an aristocracy. One need only look at the past eight years to see the danger of the latter.
I just want to add to the inheritance tax discussion that was going on earlier.
The Inheritance tax only kicks in for multimillion dollar estates and thereby helps prevent concentration of wealth over generations. It seems to me, if our goal is to maintain a functioning democracy/republic then measures which help prevent the formation of a plutocracy are not only appropriate, but necessary.
That's a terrible argument.
People shouldn't be taxed more just because they were successful and weren't immune to death. They've already paid a higher percentage of income tax due to their higher earnings. If they've worked hard all their life building up a good amount of money for their family to live on, their family shouldn't lose a ton of it just because it happens to be a high amount.
I hate to break it to you, but the existence of rich people doesn't automatically destroy democracy.
There's a difference between "rich people" and an aristocracy. One need only look at the past eight years to see the danger of the latter.
Right, successful people who've generated a lot of wealth should be able to determine what happens to that wealth. However it is not in the best interests of our democracy if we allow a situation where multiple generations are entitled to ever increasing amounts of wealth for doing nothing but be born. It decreases social mobility, and allows money and power to concentrate in a de facto aristocracy.
The inheritance tax reduces the risk of this happening, though doesn't eliminate it completely.
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I've never considered anything but the number at the end of the check saying "paid to you" to be mine. Same way I don't consider my mother's wealth or possessions to be mine until they're in my hands. The inheritance taxes don't phase me a bit. It's not my money, what do I care about what happens to Theoretical Monies.
I've found this to be a happy way to not care about taxes beyond how obnoxiously complicated it is in april.
For one thing, the goods and services that your parents produced to earn that money are long since gone, so there is a limit to the time that that money can remain extant and not contribute to inflation. At the most fundamental macroeconomic level, taxes do not exist to "pay for things" - because the government can allocate resources to itself as it sees fit - but to curb inflation.
What's sad is that Thorstein Veblen was taking these things into account a hundred years ago, and we're just now getting around to realizing this.
Completely untrue. Consumption as a whole is way more stable than income.
The tax rate is the same for everyone. It is made more progressive by granting a credit, and also by adding a progressive income tax or capital gains tax if the Dems insist on it.
And yet all of these problems are somehow magically solved by most states and municipalities in this country that thrive on ever-popular consumption taxes.
A debit card with $X per month would be more complicated that the current 1040 process?
Enforcement would be harder than it is now?
The black market in retail would somehow be more devastating than the black market in labor?
All arguments which can be equally applied to a consumption tax if that's how you want to view things.
That's what the credit is for. It isn't the items that should be exempt, it's a certain level of spending that is necessary to support a family at a certain quality of life that ought to be exempt. And that's done by only taxing consumption over a certain amount.
Why? Income tax rates blow past 20%.
Somehow we are able to function with an income tax despite how easy it is to just pay people without reporting the income. I don't see how this is any different. Yes, we'd need enforcement. No, most people wouldn't cheat.
You keep saying this, but you don't back it up with anything. Why not? I don't believe there is ever just one simple answer to anything that must be pursued ideologically, but I think most agree that our current tax code is beyond absurd in its complexity and a vastly simpler one could be more beneficial to all.
No, it's one of the biggest plusses. Do you have any clue what kind of effort and investment goes into calculating and estimating and arguing and dodging corporate tax liability every year?
The details you suppose here are all completely false. You are calculating a tax exemption as if it were a profit, which is not the case. Owing $10 in taxes and getting a $5 credit is NOT $5 better than owing no taxes at all! If you are comparing a tax exemption to no tax at all, they are equal. Your numbers are clearly wrong. But the underlying idea, that businesses would now be able to make decisions based on business and not based on how best to avoid taxes, is exactly right.
I am literally dumbfounded by the logic here. WTF? How does removing tax liability mean that they now are paying their employees more? A tax exemption is not revenue! If you pay an employee $40,000, that's what it costs you.
VAT has fairly wide ranging fraud associated with it as well. See "carousel fraud" for a particularly sophisticated example of it.
I made a game, it has penguins in it. It's pay what you like on Gumroad.
Currently Ebaying Nothing at all but I might do in the future.
Carousel fraud requires lots of capital and a fair degree of international cooperation between organisations. This leaves a paper trail the width of a rampaging elephant.
A sales tax, on the other hand, incentivizes frontline retailers and customers to hide or discount transactions. Such sales, and such retailers, are going to be very numerous. Enforcement is going to suck, in essence.
I think enforcement would be a whole lot harder than it is now and the black market for items will always be easier to run. If the IRS audits you and sees that you have money floating around that you didn't report on your income tax forms they'll put you in jail, unless you want to launder it (something I can only assume Joe the Plumber isn't going to be able to do easily).
But with items? You pretty much need to catch the transaction as it happens or else they'll just say they DID pay income tax on it, unless you're going to make everyone keep their receipt for everything they buy. The income tax fraud can be caught anytime during the statute of limitations, whereas the black market item is pretty much a one shot deal.
Not really. It's true that individuals can't be relied on to report individual transactions reliably. But consumption taxes are not collected from individuals directly, but through companies, the vast majority of which are large enough to be unable to hide taxes in this manner (there is no effect on prices from switching this incidence, after all).
VAT is still easier to enforce than a sales tax, but both are consumption taxes and are generally pursued through firms.
I do, but not for psychotic objectivist reasons or anything, I just don't like the percentage that goes into blowing the crap out of brown people.
These nations are, for the most part, economic disasters.
I know, Libertarianism is against Nationalism, but they make no attempt to explain why it hasn't worked anywhere else but it would be unicorns and butterflies here.
To be fair, a lot of the countries I put up there aren't completely fucked. Slovakia and the UAE have done well for themselves, but for the most part it has relied on foreign investment (European automakers for Slovakia, real estate developers in the UAE) and the backs of extremely low-wage workers.
They tend to do well as long as money comes in to fuel production, but when it comes to creating their own consumer economy, they completely fail. That's why with the recession these are by far the hardest hit economies today.
As for Somalia? there is no taxation, there is only pay up or die warlordism.
I don't know much about Slovakia but doesn't the UAE essentially run off the backs of a de facto slave labor force?
You misread the map; the bright green areas are countries with no income tax, flat or not. The reason is oil: the government doesn't need any other source of revenue. The UAE does employ a lot of cheap foreign labor, but they don't pay tax either as far as I know.
How are you not simply ignoring the administration issues here because you see no similar buildings or specially named departments for taxation applied over much smaller areas and volumes?
Moreover how much support currently goes from the IRS to smaller entities in managing their revenue collection?
In this vein: hey look, it's the California Franchise Tax Board!.
Yeah so state-level tax agencies do exist. The IRS ain't gonna vanish.
Is this still the case? Shouldn't there be some other way to address that?
That's because payroll is a deductible expense to a business. They don't have an incentive to underreport it. Just like input cost are a deductible expense under a VAT scheme. That's what makes it enforceable at high levels.
If you are seriously proposing a consumption tax as the only source of tax revenue, why the hell would you be opposed to a VAT? It may still be vulnerable to some types of fraud; but it is superior to a sales tax in almost every conceivable way. Seriously, name one reason why you want a sales tax instead.
There is a reason why most civilized, i.e. tax you out the ass ;-) , countries use VATs and not sales taxes.
Your uncle buys a cottage for $10,000, and on his death it is worth $100,000. He leaves it to you and you sell it ten years later for $200,000. You think the loophole might work by only taxing you on the $100,000 gain that occurred while the property was in your hands ($200,000 - $100,000), rather than the full $190,000 gain ($200,000 - $10,000)?
If all the "inheritance" tax does is close that loophole, it's hardly even an inheritance tax. We do the same thing in Canada, as I mentioned before, with a deemed disposition. When the owner dies the estate would be taxed on the $90,000 capital gain, and the inheritor will be assumed to have acquired the property for $100,000 and only have to pay capital gains taxes on any increase over $100,000 in the future. It's strictly a capital gains thing and has nothing to do with someone dying. Deemed dispositions are also calculated every 21 years too.
It kind of sucks that the estate will have to pay the taxes on the $90,000 gain when there might not be enough liquid assets to do so (so they might be forced to sell the cottage to pay the taxes on it) or it's really not their "fault" the value of the property increased in price by so much, but the tax burden remains completely unchanged and is the same as if the uncle lived for 10 more years and sold the cottage for $200,000 and was taxed on the $190,000 gain (well, actually, splitting it up into two parts - one on death and another when sold could actually be advantageous, since you could be in lower brackets).
I am sort of interested in your idea that a smaller company would be more able to hide things like that. If you think that small companies would be able to sneak around it then what do you think of the possibility of larger stores being crushed by the competition of tons of stores small enough to hide their not taxing-ness?
The Inheritance tax only kicks in for multimillion dollar estates and thereby helps prevent concentration of wealth over generations. It seems to me, if our goal is to maintain a functioning democracy/republic then measures which help prevent the formation of a plutocracy are not only appropriate, but necessary.
I'm not saying owing $10 in taxes and getting a $5 credit is $5 better than owing no taxes at all. I'm saying that getting a $5 tax credit is $10 better than having to pay $5 in extra taxes, which I don't see how you can argue.
Furthermore, yeah, they can now make decisions based entirely on "business." What is "business?" "Business" is the concentration of wealth into fewer and fewer hands. It encourages them to spend their profits giving money back to shareholders rather than hiring new employees, or expanding their business. And in fact, they can't make their decisions based solely on "business," because now, thanks to the new consumption tax, the cost of making any purchases to expand their business has doubled.
Nobody has said that a tax exemption is revenue. But if you pay an employee $40,000, that is not, in fact, what it costs you. Ask an accountant. This incredibly basic econ/accounting-101-level stuff, here.
Just to make it clearer: under the current tax regime, a Fortune 500 company brings in $40,000. They log that money as profit, and pay their taxes on it. After paying taxes (at their 35% rate), they have $26,000 in profit left. If they had instead paid an employee with it, they wouldn't have had to pay any taxes on that $40,000. The employee would have gotten $40,000 instead, so what was the cost to the company of paying that employee $40,000? $26,000. Or maybe, instead of using it to pay an employee, the company uses it to buy some upgraded equipment, which allows them to expand their operation. Same thing, it only costs them $26,000 in potential profit to get $40,000 worth of goods. In this way, we incentivize spending on the company, hiring and employing people, and innovation, all of which are good for society.
Under your proposed tax regime, a Fortune 500 company brings in $40,000. They take that money as profit, and pay no taxes on it, which, yes, is a 54% marginal gain in profit. However, now paying their $40,000 a year employees instead costs them $40,000 in profit. So, you just created a huge incentive for them to not employ as many people. Maybe a lot of people who were cost-effective when it was only costing them $26,000, but are not now cost-effective when it's costing them $40,000, a 54% marginal increase in cost. And if, say, the company needed to buy some new equipment to expand, now instead of getting $40,000 worth of equipment at the cost of $26,000 in profit, the same $40,000 worth of equipment costs them $52,000 in profit ($40,000 for the equipment, plus $12,000 in taxes on the equipment). That's a 100% increase from the $26,000 in profit it was costing them previously.
You've completely distorted the cost of expansion and supplies with your tax proposals, here, and created a huge incentive for an even more "take the money and run" kind of business model (from the perspective of the shareholders and executives) than we currently have now. And while that may be good for wealthy shareholders and executives (hell, it's great for them), it's really, really terrible for society.
That's a negatory. VATs are mathematically equivalent to sales taxes in terms of tax incidence. It's just a different collection mechanism.
Example: Business 1 (B1) creates product out of thin air and sells it for $10 to Business 2 (B2), who retails it for $20 to the consumer (C1).
Sales Tax (20%):
B1 -> B2: not taxed.
B2 -> C1: $4 tax (= $20 * 20%).
Total tax = $4
VAT (20%):
B1 -> B2: $2 tax (= $10 * 20%).
B2 -> C1: $2 tax (= $10 * 20% = $20 * 20% - $10 * 20%)
Total tax = $4
The difference is that with a VAT cheating is minimized because:
1. You collect a little money throughout the supply chain, as opposed to a larger amount at one spot.
2. You can compare B1's tax payment to B2's tax deduction to make sure they are identical. I.e. B2 has a strong incentive to inform on B1.
The argument isn't that people will stop working altogether, unless you have a generous social safety net as well. The argument is that people will work less.
Considering you started this thread, you ought to understand this better. There are tremendous incentive impact differences between taxing consumption (VAT, sales tax) and taxing income (income and payroll taxes). They do not "factor into supply and demand in the same fashion."
What you are thinking of is that it doesn't matter whether you impose taxes on buyers or sellers in a transaction. That's tax incidence neutral. Ironically, that's also the precise reason VATs and sales taxes are distributionally equivalent.
That's a terrible argument.
People shouldn't be taxed more just because they were successful and weren't immune to death. They've already paid a higher percentage of income tax due to their higher earnings. If they've worked hard all their life building up a good amount of money for their family to live on, their family shouldn't lose a ton of it just because it happens to be a high amount.
I hate to break it to you, but the existence of rich people doesn't automatically destroy democracy.
Wait that sounded gay
The hoarding of wealth over generations does hurt a democracy.
There's a difference between "rich people" and an aristocracy. One need only look at the past eight years to see the danger of the latter.
Right, successful people who've generated a lot of wealth should be able to determine what happens to that wealth. However it is not in the best interests of our democracy if we allow a situation where multiple generations are entitled to ever increasing amounts of wealth for doing nothing but be born. It decreases social mobility, and allows money and power to concentrate in a de facto aristocracy.
The inheritance tax reduces the risk of this happening, though doesn't eliminate it completely.