Tax - best and worst system's

Bye-bye, buy bonds....

That's what they said in the war anyway.

 

I do actually read the WW2 post's, however I prefer not to post questions around subject's when such questions have already been asked. However I do see your point and will make more of an effort in the WW2 aspect of things. No offense was taken rather in fact it was appreciated, Some times we don't notice we doing something until we called out. so Cheers mate

Incorrect, Even with all the tax loop holes and write off's in general the rich still pay a higher tax bill then the poor. It's not just the actual tax taken away you need to account for, You also need to account for the cost of living. The poorest section of the community would have their tax rates inflated to what they would have been.

Say a person on $20,000 and another on $200,000. Currently the person on $20,000 would lose 7.5% in tax, While the person on $200,000 would lose 24.8%, Under your arrangement the high income earner would lose about the same amount and the losses for the low income earner would actually grow. Now you may say that with out any corporate taxes that the cost of living will fall, However 1. That makes the assumption that corporations will pass the savings on and 2. The actual saving's from no corporate tax would actually be minimal. A corporations tax rate is not based on its revenue, it is based on it's profits. Assuming 10% profit is the norm then the savings for such a product would be around 4.2% - 4.3%, Not something that will be of any use to the lower income bracket when their tax rates have jumped 200%+

You are simply throwing out factual number's i have put out and not giving back any number's of your own, You are basing your argument entirely off of your own personal view's rather then hard fact's. Want to have some hard fact's, Then you tell me what the how hold incomes are for the entire US because house hold incomes are the profit's taken home.

There is a reason to have a progressive tax system, The people less able to afford it are let slide and those that can afford it have to couch up. When you start taxing those that can least afford it then all you are doing is driving the poorer section of the community into debt.

Request, Give up mentioning the 25% tax rate as it is simply impossible t o run the nation with a flat 25% tax rate on income.

 

OK, now I am really curious...

Basically, this is the system, bloated as it is, that the US has today. A system, you supposedly want to "change."

Why is that? Other than just arguing for argument's sake.

 

You are missing the central point that the current system is terribly regressive because of the hidden taxes in consumer goods and services. If you can't grasp that (don't feel alone, most people can't...), then there's little point in continuing the discussion.

I'll try one more time. Much of the tax revenue is generated through business and corporate taxes. All of those are passed to the consumer. The guy at the low end who is living paycheck to paycheck is literally spending all of his money on goods and services. He's being taxed twice; once on his income and then again for everything he buys to stay afloat. Those who make more money spend a smaller percentage on food, fuel, power (goods and services) and can put more of their money in savings or investments where it is not taxed. This is a regressive system.

The Tax Policy Center studies indicate that to garner the same revenues with a flat income tax and elimination of business and corporate taxes we'd need to tax between 20 and 25% percent. The number varies depending on whether you include debt and deficits and so on. Even at 25% you'd still be offering a tax cut to most working Americans.

And... There's no reason it couldn't be structured to favor those at the very lowest end. One proposal was to keep only the earned income credit for children as a tax loophole. A 5 or 10K break for each child. Or, you could have a stepped system that started at 5 or 10% and worked up to 25% at the lowest end.

The more you earn, the more you pay. But, more importantly, there's no hidden taxes. And no way for politicians to stick you with hidden taxes. You have transparency in government spending.

The other huge positive is that business doesn't have to inflate the cost of goods. It's makes the system much more competitive. It creates jobs, which creates more revenue.

 

True the US does have such a system, However while other nations in the past have torn down old system's and rebuilt them the US simply has built on top of each preceding system making it extremely bloated and ineffective.

 

Ok now you have just put forth two different systems, Let me see if I understand you correctly.

Option One:

A single flat tax applying to every one regardless of how much they make with the elimination of corporate taxes

Option Two:

A progressive flat tax rising based upon the earning's of the person with the elimination of corporate taxes

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Setting that aside you make the claim/assumption that corporate taxes make up the bulk of tax revenue, In this you would be wrong. http://www.cbpp.org/research/policy-basics-where-do-federal-tax-revenues-come-from

According to the link Corporate taxes make up about 11% of federal tax revenue, Any elimination of them would be marginal on the consumer and depending on the tax system you prefer could actually be worse then the current system. One also must not make the mistake that getting rid or corporate taxes will see the cost of the item drop 30% - 40%, It doesn't work that way. Corporate taxes apply only on finances earned after costs, Allowing a 15% profit margin for a company (before tax, and this is a very generous rate), the removal of the corporate tax rate would only see the price of the item fall around 5% assuming the company actually passed on the savings.

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If you go for option one then this wont have a snow balls chance in hell of working, It would drive a larger portion of the community into debt. However if option two is the system you are suggesting then it could be made to work.

 

I make no such claim. I said "much of" the tax revenue. And of course (and you still don't grasp this), all of those taxes are passed to the consumer. It's overhead. This makes the tax system in all western countries a regressive system. In fact, I'd go so far as to say it punishes the poor. The less you make, the higher percentage of your earnings go to cover that cost. You have no excess income to avoid that cost by saving or investing.

You fail to grasp that each product is taxed many times, not just once. And each of those taxes is passed down the chain. The tax is like interest to be compounded at each stage. The producer of the raw material (plastic, oil, iron, wheat, beef) is taxed. The transporter of that raw material is taxed. The refiner of that raw material is taxed. The transporter of that refined material is taxed. The factory that turns it into a product is taxed. The transporter of that finished product is taxed. The distributor of that product is taxed. The retailer of that product is taxed.

That's just the direct federal business and corporate taxes. They also pay fuel taxes and a host of other little taxes that aren't even counted in such a calculation, but add up to tremendous cost.

That's about as simple a chain as I can make, and that product was taxed 8 times along that chain, all of which is passed along as overhead to the consumer.

 

KODY has a good point about products being taxed many times....I'll add that when .I buy a car I pay taxes on it...then I pay taxes on it every year after that.. !!! then on my phone bill, I have a list of all kinds of godang extra taxes.....the money is taxed many times so the politicians can get free healthcare when the rest of us have to pay for it...I say ENOUGH!

 

It is a pity that some of you think you are being taxed because a corporation collects sales tax from you when you buy their product and it would be logical to assume such a thing........however you show how much you do not know about corporate taxation. In fact many of those companies do not pay any tax at all and this is nowhere pointed out in this discussion. I am only posting this to show how little is really known about our tax system and how much we are at the mercy of "propaganda" when we want some form of reform. It is not even hard to find out the companies that make up the lists of corporations that pay no tax at all. There are so many ways they can acheive "zero" taxation based on where and how their corporate structure is located be it within certain states or foreign countries. It is free public knowledge. Just do a search for that and lists of corporations that pay no taxes and you will find large lists of leading corporations. In the world of finance, there is not the greatest respect for companies that pay their taxes as they are treated by analysts as not doing the "smart" thing to dodge taxes so some companies try to pay some taxes but not too much to affect their stock valuations. So quickly do we assume that taxing the rich would include the corporate structure that we assume that would be simply burdening all of us at the bottom because we again "assume" that up the ladder they are paying a tax that might have been collected from us at the bottom. Well, making things more complicated.....even the rich at the top have ways similar to the corporation to keep from paying a tax at all. That is harder to find out about but not very much harder as you can find this out in a more complex search but so many simply drink the cool-aid here and will not learn what is going on. There is much "cool-aid" in the above discussions but I do find one statement that I can agree with that not many people understand the complexities of our taxation so the population doesn't know what it needs so things don't get changed.

 

This is why our tax system is so messed up. You can explain it, draw diagrams, make it as simple as possible and yet most people will never grasp it.

Victor, nobody has brought up sales taxes. We're talking about corporate and business taxes which are all passed to the consumer, you, in every product you buy. You (and me) pay all the corporate taxes. All of them.

 

Post #5 old chap. No wonder I think nobody loves me!

(#5 leaves it unsaid that all corporate and income taxes are eliminated)

 

I could live with a national sales tax. I'd prefer a flat tax.

 

Are they? How so? Note that they also allow people to have a significant say in what their taxes are and what they are used for. I personally don't think that that is a bad thing, indeed just the opposite. There's also the question that if living in some areas requires more governemnt services why should people living elsewhere be forced to pay for them?

One problem here is you seam to be under the misaprhension that the sole reason for taxes is to generate income for the state. At least in the US this is clearly not the case. The tax code also serves a number of other uses. For instance it promotes or discourages certain behaviours: retirement savings for instance are encouraged by tax deductions or deferals. Governement spending is also not always the best or the most efficient way to take care of certain issues. Take disaster relief for instance, there are private organizations (such as the Salvation Army) that can provide relief both quicker and more econmically than the federal governemnt so offering a tax deduciton is sort of win win (in most tax brackets if you donate $30 to such an organization it reduces your tax by $10 and the individual gets some say in where is money goes). The latter point is a key to a lot of deductions which also acknoledges that the governement doesn't always make the best decisions and thus they become the expresion of a "group mind" of the population. This may have it's own issues but certainly avoids the all the eggs in one basket problem.


On Kodiak's point I'm not certain everyone here understands his point so perhaps this example will help (or illustrate that I don't understand): Say tax adds 10% at each step to the cost of production. So an item that would require $100 worth of raw materials now requires raw materials that cost $110 to produce. Typically mark up is 100% so that means the raw materials cost the parts amker $220 rather than $200. Which means that they cost the assembly maker $484 rather than 400. Which further means they cost the system maker $1,064.8 rather than $800. Which costs the final product maker $2,342.56 rather than $1,600. Which costs the wholesaler $5,153.63 instead of $3,200. Which costs the retailer $11,337.99 instead of $6,400. Which costs the buyer $24,943.58 instead of $12,800. I.e it's more than doubled the cost and some things go through several more levels.

 

LWD, so it's really not charity if you're getting something for it, so there shouldn't be a deduction....people will still give to charity without the deductions..disaster relief?? these countries should be thanking the US for being able to deploy carriers and amphib ships to disaster areas...that in itself is worth $millions..the US should stop spending the huge amount we do on foreign relief.....the government is still paying if they are not getting the fair share of taxes, and guess what? they'll go into debt........if someone wants to give to charity, let them, but they don't need, or deserve, a deduction
taxes are not made so people can retire....they are for revenue for the state....I'm not working so some RICH person can retire with even more money...I'm not working for someone to adopt a foreigner....it's not the states' job to make people happy......the Feds spend to much $....plain and simple....

http://apps.irs.gov/app/picklist/list/formsInstructions.html;jsessionid=9bI-rL40r104smKbCkUhIg__?indexOfFirstRow=25&sortColumn=sortOrder&value=&criteria=&resultsPerPage=25&isDescending=false

here is a link to IRS forms...I stopped at page THIRTY ONE !! they are out of their minds...look at page 8 for the EIC....just that by itself is ridiculous....not only more complicated than it should be, but it's giving money back for a certain income level, after the initial deduction, and then after the dependent deduction....2 deductions, and then money back...obviously, ridiculously complicated

obviously, yes, obviously, the current system is not working....the US is in HUGE debt..

 

Either you didn't understand me or I'm not understaning you. If I give $30 to the Salvation Army and as a consequence have to pay $10 less on my taxes how is it not a charity?

But will they give as much and will as many give?

Actually my point was more toward domestic disaster relief. Arguably that is mandated in the constitution under the protecting the people clause. After Katrina for instance the Salvation Army had soup kitchens set up and operating whent the state and the feds were still trying to get themselves straitened out. Due to the low overhead those same soup kitchens operated much cheaper than federally administered ones could. Foreign disaster relief is at least constituionally more of a diplomatic issue. Even there however donations to various chariable organizations may be more cost effiicent than US governmental efforts or allow said efforts to focus where they do best. I suspect for instance that Doctors Without Borders can supply medical care significantly cheaper than doctors working for the US governemnt.

The point is that the governement is going to do these disaster relief operations both internal and external. Given that the tax deduction benefits the government and the taxpayers in general by lowering their costs. It's to the governments and our benefit to encourage such donations. It also allows people to have some say on where their money is spent which is also a pretty clear way to indicate to the politicians what people really care about.

If someone doesn't have adequate retirement income then they end up costing the governement more one way or another. IRA's for instance don't help the rich all that much more than a regular guy who can afford to put his money in one. The same with 401K's. They are limited to amounts well under what makes much of a difference to someone who is really rich. They can however help keep retirees with more limited funds from becoming drains of governement resources. Thus it can be a worthwhile "investment" as far as the government and the taxpayer is concerned.

Now that said there are indeed deductions that make little sense for the government or the taxpayer.

But it is the states job to keep people safe, at least to some extent and the most economical way to do so may involve offering tax deductions to some. Of course some of the tax deductions are still around that are incentavising things we likely no longer need to and others are for things that never should have been but telling the difference is not always easy.

I'll agree with you on that one.

whilte the US does have a huge debt I would disagree with the assesement that it is not work. It's certainlly not working as well as I would like it to and it could certainly be improved but it could get much worse as well.

*** edit to correct a typo I meant not not nut but considering it's me some might thing the latter more accurate ***

 

please allow me to add this<>..the EIC stands for Earned Income Credit....!!??? who thinks of this stuff?? it's nothing but money given to parents who do not make a certain level of salary.....a child credit/$....where do they get ''Earned'' from??

 

It is "earned" by producing more "potential" taxpayers for the government...Duh!

Those of us individuals who are not producing potential taxpayers get the stinky end of the stick, while those who do get a windfall of several thousand dollars come tax time.

 

One of the holdovers in the tax code IMO goes back to the time when the US really wanted and needed more people. That's no longer the case but once something is engrained in the law/code it becomes difficult to change particuarly if a significant portion of the population start seeing it as an entitelment. Clearly there are problems with the tax code but if it was all bad then it wouldn't be that difficult to fix. The fact that some of it makes sense and/or is beneficial makes it more difficult.

 

Thinking people with a lot of "stuff", should pay a lot of taxes.
George Carlin:
https://www.youtube.com/watch?v=MvgN5gCuLac