Forbes disappointed me the most, as I (perhaps surprisingly) thought he would be fairer. He advocated exempting capital gains and dividends from any taxation.
Pure Flat Tax?
- Thread starter achilles28
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Forbes disappointed me the most, as I (perhaps surprisingly) thought he would be fairer. He advocated exempting capital gains and dividends from any taxation.
On the "fairness" front, he has a point. Some other countries don't tax capital gains/dividends. Besides... in the US corporations have already been subject to corporate income tax on the money they distribute as dividends. As a result, corporate earnings get taxed TWICE... at the corporate level then as ordinary income in dividends. Personally, I think that is unfair.... not that fairness is usually considered when it comes to taxes.
Let's say a corporation has $100 in earnings and pays 35% corporate income tax. That leaves $65 to be distributed as dividend. The dividend receiver could pay ~ 32%, more or less, Federal and State income tax on the $65. That leaves $44. Then... if the person is wealthy enough to pay 55% in Federal Estate tax, that $44 could end up being $20. IOW... You the shareholder took the risk to buy the stock, the company did the work to make the money, but the government could ultimately end up with $80 of the $100.
What's "fair" about that?
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IIRC, dividends are expensed in Canada. That way Corporate profits are only taxed after dividend payout. Perhaps this is why Forbes advocates a flat tax that excludes dividends? Since Corporate profits are already taxed? Easiest way is to tax profits after dividend payout. That way a Corp and dividend pays same tax rate and Corp investors aren't double-taxed.
Many states already have their own tax deals, some have sales tax, others have high property tax, bad for the federal government to get involved.
Prove to me otherwise, the only fair tax is an income tax. Poor little old ladys forced to sell the home they have lived in since the civil war due to property taxes. Kids starting out forced to pay outrageous sales tax to pay for the next war. On and on, etc and etc.
corporations should pay no tax, I can pay it as a shareholder when I get it
do you know how much it is costing me to pay thousands of accountants to keep me straight with the IRS? Money pissed down the government urinal, not making me one red cent, just making the government rich
I will gladly pay you my taxes when I get it in the form of dividends or cap gains
until then, leave me the hell alone
Scat, I don't see this as a left vs. right issue, rather more as a matter of trying to understand what a flat tax would really do. Certainly a truly flat tax on all net income (earned or otherwise) with no exceptions would greatly simplify our tax code if that was all there was to it. There would be no more tax incentives for this or that, no more loopholes, no more depreciation schedules to drive a person batty, no more special rules here and there. But I fear the consequences. The data I quoted, approximately, came from an article in "The Economist" : http://www.economist.com/blogs/democracyinamerica/2012/07/taxes-and-rich-0
Also, I have noted that the growth in income inequality picks up after the "golden age" of the post war years that ended with a period of stagflation in the 1970s and the "Volcker Recession" and high interest rates of the very early 1980s. This was followed by the supply-side experiments. It is from the time of supply-side economics really kicking in full force that we see growing income inequality becoming evident. It is important to realize that it wasn't just during the 1980s that trickle down supply-side economics has held sway in Washington, but actually ever since the early 1980s. It has lasted through the entire period of the "great moderation" (the Greenspan era) and wasn't even killed off by the financial collapse of 2007-9.
There are multiple reasons for the income redistribution from labor to capital that we have experienced since the 1980s, but certainly the flattening of the income tax rates was a significant contributor.
The graph below shows the share of total income going to the wealthiest 10% of the population. (capital gains are excluded)
the above graph appeared in the ny times in 2007. For the actual source of this data see: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCAQFjAA&url=http://eml.berkeley.edu/~saez/piketty-saezAEAPP06.pdf&ei=UaJ_VI7pJYj3yQTSjYKgCA&usg=AFQjCNE35r3_Lri9h7rIcivr39T0WPP5pQ&bvm=bv.80642063,d.aWw
"The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover didn't know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellow's hands." -- Will Rogers
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Consumption tax is the only form that makes sense. Under that system criminals all pay their taxes when they buy stuff, illegals would be paying their taxes, everybody, corporations included, would be paying their taxes. Every other form of tax is some bullshit masquerading behind "fairness".
Income taxes are voluntary! This is very under-reported to say the least. I had access to the actual tax codes once, I could open any of the books to any random page and there was 99% probability that I was looking at some tax law that had been stuck in some bill by some congressional official that exempted a specific business from paying any income tax. It would read like "if a business is located east of the river, and north of the highway" and be crafted such that you couldn't find out exactly which business it is without a little work.
The only people that can be reliably taxed by an income tax are those receiving a paycheck, it's optional for everybody that can donate to a political campaign. That's why the expansion of government is coupled with the death of the middle class under the income tax regime. Consumption tax would put a limit on government simply because buyers could see the cost very directly every time they purchased something.
Income taxes are voluntary! This is very under-reported to say the least. I had access to the actual tax codes once, I could open any of the books to any random page and there was 99% probability that I was looking at some tax law that had been stuck in some bill by some congressional official that exempted a specific business from paying any income tax. It would read like "if a business is located east of the river, and north of the highway" and be crafted such that you couldn't find out exactly which business it is without a little work.
The only people that can be reliably taxed by an income tax are those receiving a paycheck, it's optional for everybody that can donate to a political campaign. That's why the expansion of government is coupled with the death of the middle class under the income tax regime. Consumption tax would put a limit on government simply because buyers could see the cost very directly every time they purchased something.
Even though a flat tax seems like a good idea, it is irrelevant, if the government keeps spending money like a drunken sailor. The cause of the problem must be dealt with first.
There is a natural tendency to spend money less wisely the more there is of it to spend. We see this both in individuals and in government.
There are ways to structure consumption taxes so they are quite progressive, and thus circumvent the most often heard objection to them.