Oh, and the family didn't lose a ton of it as they didn't have it in the first place. The only reason they get any is because the person dying gives it to them.
I still fail to understand how taxing the rich more is "punishing success"
Regardless of taxes, Poor guy has to watch money tightly in order to eat and have shelter and all the other necessities of life. Even if Poor guy had to pay no tax, he would very likely still be poor.
However, even if you tax the fuck out of Rich guy, Rich guy still has the means to afford a house that probably has a room bigger than Poor guy's entire house/apartment/refrigerator box. Not to mention all the other luxuries he can still afford that Poor guy can never even hope to.
If that's punishment, VoodooV has been a very bad boy. :winky:
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
You realize your consumption tax disincentivizes production, right?
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firewaterwordSatchitanandaPais Vasco to San FranciscoRegistered Userregular
Yeah, I just want one example of someone who decided to live in poverty because the wealthy and successful are "punished".
Like, someone who would have been a doctor or a lawyer but decided "WELL FUCK IT THEY'LL JUST TAX ME" so they work at burger king instead.
Yes, this.
I heard (HEARSAY!) that the Swiss face a similar sort of problem where those in the highest bracket, such as lawyers and doctors, just end up taking half the year off as continued work would be of no benefit to them.
Yeah, I just want one example of someone who decided to live in poverty because the wealthy and successful are "punished".
Like, someone who would have been a doctor or a lawyer but decided "WELL FUCK IT THEY'LL JUST TAX ME" so they work at burger king instead.
Yes, this.
I heard (HEARSAY!) that the Swiss face a similar sort of problem where those in the highest bracket, such as lawyers and doctors, just end up taking half the year off as continued work would be of no benefit to them.
This may or may not be utter bullshit.
In portions of Europe, where the upper tax rate can be 80%+, I can imagine it.
In the U.S., where it doesn't even break 50%, I can't.
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
You realize your consumption tax disincentivizes production, right?
It disincentivizes production for consumption anyway. Usually VAT regimes don't tax exports.
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
You realize your consumption tax disincentivizes production, right?
It disincentivizes production for consumption anyway. Usually VAT regimes don't tax exports.
The only way you avoid making businesses pay the same taxes as consumers is by exempting businesses from the consumption tax. And if you allow that, you may as well just stop pretending you're planning on taxing rich people at all, because they'll just incorporate (along with probably a whole hell of a lot of middle class people) in order to avoid it.
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 should add that this is the way it was described to me and how I understand the basic flaw of not having an "inheritance tax" as we call it here. I could be wrong, and would in fact be very interested to know any other dimensions to the "issue." (I"m not at all concerned at a personal level because it is so far removed from my reality it is scary.)
It disincentivizes production for consumption anyway. Usually VAT regimes don't tax exports.
The only way you avoid making businesses pay the same taxes as consumers is by exempting businesses from the consumption tax. And if you allow that, you may as well just stop pretending you're planning on taxing rich people at all, because they'll just incorporate (along with probably a whole hell of a lot of middle class people) in order to avoid it.
We don't charge sales tax on exports right now. Does that get you riled up too?
It disincentivizes production for consumption anyway. Usually VAT regimes don't tax exports.
The only way you avoid making businesses pay the same taxes as consumers is by exempting businesses from the consumption tax. And if you allow that, you may as well just stop pretending you're planning on taxing rich people at all, because they'll just incorporate (along with probably a whole hell of a lot of middle class people) in order to avoid it.
We don't charge sales tax on exports right now. Does that get you riled up too?
If we were solely dependent upon sales tax for a functioning government I'd assume it would.
It disincentivizes production for consumption anyway. Usually VAT regimes don't tax exports.
The only way you avoid making businesses pay the same taxes as consumers is by exempting businesses from the consumption tax. And if you allow that, you may as well just stop pretending you're planning on taxing rich people at all, because they'll just incorporate (along with probably a whole hell of a lot of middle class people) in order to avoid it.
We don't charge sales tax on exports right now. Does that get you riled up too?
If we were solely dependent upon sales tax for a functioning government I'd assume it would.
Hmm... assuming it was a VAT, we'd still see some money, and more money when the foreign income is spent. Not having an export sales tax could help with out trade deficit by making foreign consumers a more attractive market.
It disincentivizes production for consumption anyway. Usually VAT regimes don't tax exports.
The only way you avoid making businesses pay the same taxes as consumers is by exempting businesses from the consumption tax. And if you allow that, you may as well just stop pretending you're planning on taxing rich people at all, because they'll just incorporate (along with probably a whole hell of a lot of middle class people) in order to avoid it.
We don't charge sales tax on exports right now. Does that get you riled up too?
If we were solely dependent upon sales tax for a functioning government I'd assume it would.
Hmm... assuming it was a VAT, we'd still see some money, and more money when the foreign income is spent. Not having an export sales tax could help with out trade deficit by making foreign consumers a more attractive market.
I'm not saying that we should have a sales tax on exports. I'm also not saying that we should push the entire tax burden onto sales. I'm of the belief that it's better to nickel and dime your government funding revenues rather than one massive cost.
Though I would like to see States switch from sales tax to VAT if only because it makes the price reflected on the shelf more accurate.
It disincentivizes production for consumption anyway. Usually VAT regimes don't tax exports.
The only way you avoid making businesses pay the same taxes as consumers is by exempting businesses from the consumption tax. And if you allow that, you may as well just stop pretending you're planning on taxing rich people at all, because they'll just incorporate (along with probably a whole hell of a lot of middle class people) in order to avoid it.
We don't charge sales tax on exports right now. Does that get you riled up too?
Are you ignoring what he is saying?
ANYONE can own a business, man. Incorporating is rather cheap.
You know, the commedian Gallagher? His corporation (which he owns) owns his house, and then lets him live in it as part of his pay for being the owner/product.
I incorporate, and then simply have my business buy me everything I'd buy, as a part of my salary. Suddenly, I'm living tax free.
Yeah, I just want one example of someone who decided to live in poverty because the wealthy and successful are "punished".
Like, someone who would have been a doctor or a lawyer but decided "WELL FUCK IT THEY'LL JUST TAX ME" so they work at burger king instead.
Yes, this.
I heard (HEARSAY!) that the Swiss face a similar sort of problem where those in the highest bracket, such as lawyers and doctors, just end up taking half the year off as continued work would be of no benefit to them.
This may or may not be utter bullshit.
In portions of Europe, where the upper tax rate can be 80%+, I can imagine it.
In the U.S., where it doesn't even break 50%, I can't.
Okay, so, someone who is presumably making millions per year realizes that the extra work isn't worth the extra money they'd get, so they take the rest of the year off— letting work fall onto someone else, who presumably does need the extra money.
Oh, and the family didn't lose a ton of it as they didn't have it in the first place. The only reason they get any is because the person dying gives it to them.
It's very easy to imagine an asset that several generations of a family would make use of, even if it's owned by one member. Take the cottage in my example. Grandpa buys a cottage for cheap 60 years ago, the whole family uses it and it has considerable sentimental value to everyone. It will probably increase in value owning to inflation and demand, and when he dies, hopefully, there will be enough liquid assets to pay the taxes on that cottage - if not, that cottage might be lost outright, solely because Grandpa died. So the inheritor's do stand to lose something - perhaps not their legal property, but access to something that previously had access to. In such a scenario the inheritance tax seems like a pretty arbitrary cash grab.
But then again I'm still not sure exactly how the U.S. inheritance tax works - maybe it is just a capital gains disposition - or the level it kicks in. I think the tax is a unnecessary and arbitrary, but obviously I can't be bothered to care too much if turns out that it only applies to inheritances in the $texas range.
Yeah, I just want one example of someone who decided to live in poverty because the wealthy and successful are "punished".
Like, someone who would have been a doctor or a lawyer but decided "WELL FUCK IT THEY'LL JUST TAX ME" so they work at burger king instead.
Yes, this.
I heard (HEARSAY!) that the Swiss face a similar sort of problem where those in the highest bracket, such as lawyers and doctors, just end up taking half the year off as continued work would be of no benefit to them.
This may or may not be utter bullshit.
In portions of Europe, where the upper tax rate can be 80%+, I can imagine it.
In the U.S., where it doesn't even break 50%, I can't.
Okay, so, someone who is presumably making millions per year realizes that the extra work isn't worth the extra money they'd get, so they take the rest of the year off— letting work fall onto someone else, who presumably does need the extra money.
And this is supposed to be a negative?
The theoretical problem is that if the tax level is too high, then eventually you will run out of people willing to do the work in exchange for the returns.
Oh, and the family didn't lose a ton of it as they didn't have it in the first place. The only reason they get any is because the person dying gives it to them.
It's very easy to imagine an asset that several generations of a family would make use of, even if it's owned by one member. Take the cottage in my example. Grandpa buys a cottage for cheap 60 years ago, the whole family uses it and it has considerable sentimental value to everyone. It will probably increase in value owning to inflation and demand, and when he dies, hopefully, there will be enough liquid assets to pay the taxes on that cottage - if not, that cottage might be lost outright, solely because Grandpa died. So the inheritor's do stand to lose something - perhaps not their legal property, but access to something that previously had access to. In such a scenario the inheritance tax seems like a pretty arbitrary cash grab.
But then again I'm still not sure exactly how the U.S. inheritance tax works - maybe it is just a capital gains disposition - or the level it kicks in. I think the tax is a unnecessary and arbitrary, but obviously I can't be bothered to care too much if turns out that it only applies to inheritances in the $texas range.
That'd have to be one hell of a cottage in order to be worth $4m from 'cheap' over the course of 60 years.
I incorporate, and then simply have my business buy me everything I'd buy, as a part of my salary. Suddenly, I'm living tax free.
Which is exactly what you could do right now, claiming everything you buy as a business expense. You'd be a tax cheat in this system as well as the other.
I incorporate, and then simply have my business buy me everything I'd buy, as a part of my salary. Suddenly, I'm living tax free.
Which is exactly what you could do right now, claiming everything you buy as a business expense. You'd be a tax cheat in this system as well as the other.
So we would need an IRS of comparable size and scope with a comparably rigorous auditing process to deal with the comparable level of fraud, right?
So we would need an IRS of comparable size and scope with a comparably rigorous auditing process to deal with the comparable level of fraud, right?
Actually, no, nothing even remotely close to it. A sales tax charged at the register is far easier to govern and enforce. Most people work for small businesses, where it is all too easy to forgo the whole payroll thing, half the jobs I've ever had I was paid cash or check without any documentation. Most purchasing is done through large outlets who are easier to scrutinize and have a lot to lose. The vast majority of purchasing I've ever done had a receipt and sales tax on it. The exception is Internet shopping, but that is only tax free because it is interstate and therefore difficult to manage and enforce.
But we'd still need something, yes. I shouldn't have really said "get rid of the IRS" as if that were a huge benefit to this (I just realized I put that in the OP). That isn't the point.
So we would need an IRS of comparable size and scope with a comparably rigorous auditing process to deal with the comparable level of fraud, right?
Actually, no, nothing even remotely close to it. A sales tax charged at the register is far easier to govern and enforce. Most people work for small businesses, where it is all too easy to forgo the whole payroll thing, half the jobs I've ever had I was paid cash or check without any documentation. Most purchasing is done through large outlets who are easier to scrutinize and have a lot to lose. The vast majority of purchasing I've ever done had a receipt and sales tax on it. The exception is Internet shopping, but that is only tax free because it is interstate and therefore difficult to manage and enforce.
But we'd still need something, yes. I shouldn't have really said "get rid of the IRS" as if that were a huge benefit to this (I just realized I put that in the OP). That isn't the point.
When it comes to the IRS, the benefits of a revamping like this are so small as to be completely negligible.
I incorporate, and then simply have my business buy me everything I'd buy, as a part of my salary. Suddenly, I'm living tax free.
Which is exactly what you could do right now, claiming everything you buy as a business expense. You'd be a tax cheat in this system as well as the other.
Actually, it's not cheating at all. It's quite legal. Consider the following example: say a small business owner wants go on vacation in Hawaii. The small business owner waits until there is a conference on an area related to his business in Hawaii, then goes to the conference. He can claim his airline flight, hotel room, food, rental car, etc., as business expenses for tax purposes, all quite legally, even if he only goes to the conference for an hour or so each day he's there. You can do a similar thing with vehicles. If you own a construction business, for example, you can have your business buy a truck, paint the logo on the side, then loan it out to yourself for personal use. You might have to pay some nominal rent to your company, but you can definitely avoid a significant portion of your tax liability.
I incorporate, and then simply have my business buy me everything I'd buy, as a part of my salary. Suddenly, I'm living tax free.
Which is exactly what you could do right now, claiming everything you buy as a business expense. You'd be a tax cheat in this system as well as the other.
yes, but under a sales tax system, I could also continue to pay myself exorbinate tax-free ammounts, to be spent in the black and gray markets as well.
So we would need an IRS of comparable size and scope with a comparably rigorous auditing process to deal with the comparable level of fraud, right?
Actually, no, nothing even remotely close to it. A sales tax charged at the register is far easier to govern and enforce. Most people work for small businesses, where it is all too easy to forgo the whole payroll thing, half the jobs I've ever had I was paid cash or check without any documentation. Most purchasing is done through large outlets who are easier to scrutinize and have a lot to lose. The vast majority of purchasing I've ever done had a receipt and sales tax on it. The exception is Internet shopping, but that is only tax free because it is interstate and therefore difficult to manage and enforce.
But we'd still need something, yes. I shouldn't have really said "get rid of the IRS" as if that were a huge benefit to this (I just realized I put that in the OP). That isn't the point.
And you don't think that things will change?
Purchasing will be done through smaller black and gray market areas, which have cheaper p[rices (due to no sales tax).
I incorporate, and then simply have my business buy me everything I'd buy, as a part of my salary. Suddenly, I'm living tax free.
Which is exactly what you could do right now, claiming everything you buy as a business expense. You'd be a tax cheat in this system as well as the other.
Actually, it's not cheating at all. It's quite legal. Consider the following example: say a small business owner wants go on vacation in Hawaii. The small business owner waits until there is a conference on an area related to his business in Hawaii, then goes to the conference. He can claim his airline flight, hotel room, food, rental car, etc., as business expenses for tax purposes, all quite legally, even if he only goes to the conference for an hour or so each day he's there. You can do a similar thing with vehicles. If you own a construction business, for example, you can have your business buy a truck, paint the logo on the side, then loan it out to yourself for personal use. You might have to pay some nominal rent to your company, but you can definitely avoid a significant portion of your tax liability.
Well... kinda. For tax purposes the question is: what is the primary purpose of the trip? If the "business" part is obviously just a front then it wouldn't be a business expense for the company. Either way, the IRS has nowhere near the manpower to check up on this kind of stuff so while your scenario is probably fine, one that technically isn't could easily go unnoticed.
@Evander/Yar: right now, if you have your business buy you everything as part of your salary, you as an individual still have to pay taxes on it, because it's salary. Only expenses that are directly related to your business and are not personal expenses are deductible as business expenses.
Yeah, I just want one example of someone who decided to live in poverty because the wealthy and successful are "punished".
Like, someone who would have been a doctor or a lawyer but decided "WELL FUCK IT THEY'LL JUST TAX ME" so they work at burger king instead.
Yes, this.
I heard (HEARSAY!) that the Swiss face a similar sort of problem where those in the highest bracket, such as lawyers and doctors, just end up taking half the year off as continued work would be of no benefit to them.
This may or may not be utter bullshit.
In portions of Europe, where the upper tax rate can be 80%+, I can imagine it.
In the U.S., where it doesn't even break 50%, I can't.
Quoting the rate for the top bracket is rather meaningless if you don't also specify where the bracket starts. If the top percentage is 95% but only after $15 million, that's not really bad at all.
Oh, and the family didn't lose a ton of it as they didn't have it in the first place. The only reason they get any is because the person dying gives it to them.
It's very easy to imagine an asset that several generations of a family would make use of, even if it's owned by one member. Take the cottage in my example. Grandpa buys a cottage for cheap 60 years ago, the whole family uses it and it has considerable sentimental value to everyone. It will probably increase in value owning to inflation and demand, and when he dies, hopefully, there will be enough liquid assets to pay the taxes on that cottage - if not, that cottage might be lost outright, solely because Grandpa died. So the inheritor's do stand to lose something - perhaps not their legal property, but access to something that previously had access to. In such a scenario the inheritance tax seems like a pretty arbitrary cash grab.
This is what's known as the "family farm" scenario, and the reality is that there has never been a case where a middle class family had to sell off ancestral land to deal with the tax burden on it. Not one.
I would like to think that even the most liberal American would think that is way too high. If it's not too much of a derail, how do portions of Europe get away with something like that? Just different mentality or are the old money so obscenely rich that even after 80 percent they still have an ungodly sum?
I would like to think that even the most liberal American would think that is way too high. If it's not too much of a derail, how do portions of Europe get away with something like that? Just different mentality or are the old money so obscenely rich that even after 80 percent they still have an ungodly sum?
I would like to think that even the most liberal American would think that is way too high. If it's not too much of a derail, how do portions of Europe get away with something like that? Just different mentality or are the old money so obscenely rich that even after 80 percent they still have an ungodly sum?
It used to be that high here you know.
During periods considered some of the most prosperous for the US, in fact. The very high rates only kick in on very high earnings - the average Joe never sees anything resembling that level of taxation.
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.
To reiterate this point, since it got buried in the previous page:
ALL CONSUMPTION TAXES, TAX PRODUCTION. Sales taxes and value-added taxes are identical in incidence and impact, the only difference is ease of enforcement.
Income taxes tax labor. Progressive income tax taxes expensive labor, in particular. Companies therefore imperfectly substitute away towards capital or cheaper labor: income taxes hence do not have the same impact as a revenue-equivalent consumption tax.
Deeply disappointed, Yar - this is pretty econ101 stuff. A tax reform advocate should at least pretend to know this stuff :P
I would like to think that even the most liberal American would think that is way too high.?
Negative, if someone's pulling down 500 million a year I have no problem with their marginal rate being over 80, or even 90%.
In Hong Kong, the taxation rate on buying/first registering a car can be well over 100%, depending on how much it initially cost and how big it is. I saw no shortage of German and Italian cars.
Right just to clear up some misconceptions in this thread. All tax is distortionary and second-best. Income tax does disincentivize labour at the margin. Think about it this way: people can either choose to work and earn income for consumption or they can enjoy leisure time. By taxing income at the margin you change the point at which it is no longer worthwhile for them to work and instead consume leisure time. No matter if you feel "ok" with this (and taxing 90% or whatever on the richest) it is inefficient. But of course all taxes suffer from a similar inefficiency in that they distort someone's incentives. This is indisputable economics 101.
Something like a sales tax does change a fair bit. Probably its biggest effect would be the period before its introduction. By shifting the whole tax burden to a sales tax you incentivize people to consume before its introduction due to the extreme changes in relative prices it would introduce, probably leading to a fairly significant negative demand shock. Once implemented I think the main distortion you'd see was that investment would become much more attractive. You also create the problem of very high inflation expectations with its introduction and that's probably going to be a fairly major headache. Otherwise there should also be some concern for the lack of progressiveness in this system, but only to the extent that government services also fail to cater more toward the poor.
It's an interesting idea and certainly would simplify our current tax system. Not so sure it would be easy to introduce, nor that its distributional effects would be desirable (I would think it would make it even easier for the rich to avoid paying tax).
Right just to clear up some misconceptions in this thread. All tax is distortionary and second-best. Income tax does disincentivize labour at the margin. Think about it this way: people can either choose to work and earn income for consumption or they can enjoy leisure time. By taxing income at the margin you change the point at which it is no longer worthwhile for them to work and instead consume leisure time. No matter if you feel "ok" with this (and taxing 90% or whatever on the richest) it is inefficient. But of course all taxes suffer from a similar inefficiency in that they distort someone's incentives. This is indisputable economics 101.
This assumes that working harder is directly proportional to earning more. A high income tax could instead mean that a CEO decides to pay their employees more because heaping the wealth on themselves isn't worth the dirty feeling it leaves any more.
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Regardless of taxes, Poor guy has to watch money tightly in order to eat and have shelter and all the other necessities of life. Even if Poor guy had to pay no tax, he would very likely still be poor.
However, even if you tax the fuck out of Rich guy, Rich guy still has the means to afford a house that probably has a room bigger than Poor guy's entire house/apartment/refrigerator box. Not to mention all the other luxuries he can still afford that Poor guy can never even hope to.
If that's punishment, VoodooV has been a very bad boy. :winky:
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Like, someone who would have been a doctor or a lawyer but decided "WELL FUCK IT THEY'LL JUST TAX ME" so they work at burger king instead.
I heard (HEARSAY!) that the Swiss face a similar sort of problem where those in the highest bracket, such as lawyers and doctors, just end up taking half the year off as continued work would be of no benefit to them.
This may or may not be utter bullshit.
In the U.S., where it doesn't even break 50%, I can't.
It disincentivizes production for consumption anyway. Usually VAT regimes don't tax exports.
I should add that this is the way it was described to me and how I understand the basic flaw of not having an "inheritance tax" as we call it here. I could be wrong, and would in fact be very interested to know any other dimensions to the "issue." (I"m not at all concerned at a personal level because it is so far removed from my reality it is scary.)
We don't charge sales tax on exports right now. Does that get you riled up too?
If we were solely dependent upon sales tax for a functioning government I'd assume it would.
Hmm... assuming it was a VAT, we'd still see some money, and more money when the foreign income is spent. Not having an export sales tax could help with out trade deficit by making foreign consumers a more attractive market.
I'm not saying that we should have a sales tax on exports. I'm also not saying that we should push the entire tax burden onto sales. I'm of the belief that it's better to nickel and dime your government funding revenues rather than one massive cost.
Though I would like to see States switch from sales tax to VAT if only because it makes the price reflected on the shelf more accurate.
Are you ignoring what he is saying?
ANYONE can own a business, man. Incorporating is rather cheap.
You know, the commedian Gallagher? His corporation (which he owns) owns his house, and then lets him live in it as part of his pay for being the owner/product.
I incorporate, and then simply have my business buy me everything I'd buy, as a part of my salary. Suddenly, I'm living tax free.
Okay, so, someone who is presumably making millions per year realizes that the extra work isn't worth the extra money they'd get, so they take the rest of the year off— letting work fall onto someone else, who presumably does need the extra money.
And this is supposed to be a negative?
But then again I'm still not sure exactly how the U.S. inheritance tax works - maybe it is just a capital gains disposition - or the level it kicks in. I think the tax is a unnecessary and arbitrary, but obviously I can't be bothered to care too much if turns out that it only applies to inheritances in the $texas range.
The theoretical problem is that if the tax level is too high, then eventually you will run out of people willing to do the work in exchange for the returns.
That'd have to be one hell of a cottage in order to be worth $4m from 'cheap' over the course of 60 years.
It's not that improbable if it is on a decent chunk of land.
Of course, if we're talking about a family-owned business, $4m isn't necessarily that much money.
Then you subdivide the property and liquidate the couple acre parcels.
So we would need an IRS of comparable size and scope with a comparably rigorous auditing process to deal with the comparable level of fraud, right?
But we'd still need something, yes. I shouldn't have really said "get rid of the IRS" as if that were a huge benefit to this (I just realized I put that in the OP). That isn't the point.
Actually, it's not cheating at all. It's quite legal. Consider the following example: say a small business owner wants go on vacation in Hawaii. The small business owner waits until there is a conference on an area related to his business in Hawaii, then goes to the conference. He can claim his airline flight, hotel room, food, rental car, etc., as business expenses for tax purposes, all quite legally, even if he only goes to the conference for an hour or so each day he's there. You can do a similar thing with vehicles. If you own a construction business, for example, you can have your business buy a truck, paint the logo on the side, then loan it out to yourself for personal use. You might have to pay some nominal rent to your company, but you can definitely avoid a significant portion of your tax liability.
yes, but under a sales tax system, I could also continue to pay myself exorbinate tax-free ammounts, to be spent in the black and gray markets as well.
And you don't think that things will change?
Purchasing will be done through smaller black and gray market areas, which have cheaper p[rices (due to no sales tax).
You incentivize people, they will respond.
Well... kinda. For tax purposes the question is: what is the primary purpose of the trip? If the "business" part is obviously just a front then it wouldn't be a business expense for the company. Either way, the IRS has nowhere near the manpower to check up on this kind of stuff so while your scenario is probably fine, one that technically isn't could easily go unnoticed.
@Evander/Yar: right now, if you have your business buy you everything as part of your salary, you as an individual still have to pay taxes on it, because it's salary. Only expenses that are directly related to your business and are not personal expenses are deductible as business expenses.
Quoting the rate for the top bracket is rather meaningless if you don't also specify where the bracket starts. If the top percentage is 95% but only after $15 million, that's not really bad at all.
This is what's known as the "family farm" scenario, and the reality is that there has never been a case where a middle class family had to sell off ancestral land to deal with the tax burden on it. Not one.
I would like to think that even the most liberal American would think that is way too high. If it's not too much of a derail, how do portions of Europe get away with something like that? Just different mentality or are the old money so obscenely rich that even after 80 percent they still have an ungodly sum?
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It used to be that high here you know.
During periods considered some of the most prosperous for the US, in fact. The very high rates only kick in on very high earnings - the average Joe never sees anything resembling that level of taxation.
To reiterate this point, since it got buried in the previous page:
ALL CONSUMPTION TAXES, TAX PRODUCTION. Sales taxes and value-added taxes are identical in incidence and impact, the only difference is ease of enforcement.
Income taxes tax labor. Progressive income tax taxes expensive labor, in particular. Companies therefore imperfectly substitute away towards capital or cheaper labor: income taxes hence do not have the same impact as a revenue-equivalent consumption tax.
Deeply disappointed, Yar - this is pretty econ101 stuff. A tax reform advocate should at least pretend to know this stuff :P
Negative, if someone's pulling down 500 million a year I have no problem with their marginal rate being over 80, or even 90%.
In Hong Kong, the taxation rate on buying/first registering a car can be well over 100%, depending on how much it initially cost and how big it is. I saw no shortage of German and Italian cars.
Something like a sales tax does change a fair bit. Probably its biggest effect would be the period before its introduction. By shifting the whole tax burden to a sales tax you incentivize people to consume before its introduction due to the extreme changes in relative prices it would introduce, probably leading to a fairly significant negative demand shock. Once implemented I think the main distortion you'd see was that investment would become much more attractive. You also create the problem of very high inflation expectations with its introduction and that's probably going to be a fairly major headache. Otherwise there should also be some concern for the lack of progressiveness in this system, but only to the extent that government services also fail to cater more toward the poor.
It's an interesting idea and certainly would simplify our current tax system. Not so sure it would be easy to introduce, nor that its distributional effects would be desirable (I would think it would make it even easier for the rich to avoid paying tax).
This assumes that working harder is directly proportional to earning more. A high income tax could instead mean that a CEO decides to pay their employees more because heaping the wealth on themselves isn't worth the dirty feeling it leaves any more.