Tax

[dazzleman]

There a few different ways we could go, all of them flawed in one way or another.

One possibility is a national sales tax.  As NYM90 pointed out, this is inherently regressive, since poor and middle income people spend most or all of their money, while wealthy people have a choice on how much to spend vs. invest.  This could be solved with a floor of some type - only income spent in excess of $XX per year is taxed, as an example.

This would encourage investment by those with higher incomes, but it may go too far in discouraging consumption, and hurt the economy.  People forget that even "wasteful" spending on luxuries by rich people benefits somebody, often the poor and middle class they are seeking to defend.  When rich people spend lavishly on luxury cars, boats, restaurant meals, those who sold and served them those things make money, sometimes lots of it.  So while the idea of heavily taxing luxury (which a national sales tax would effectively do) may sound good, it could end up hurting those who have less to begin with.

The other flaw to this plan, and this also applies to the current income tax, is that a dollar does not effectively have the same value across the country.  An income that would classify one as "rich" in some parts of the country is barely middle class in other parts of the country.  This would penalize, as our current tax code does, those who live in more expensive areas of the country.

Then there is the flat tax.  I'm not sure whether I like this or not.  I think that tax rates should be somewhat graduated; it's really a question of how steep.  I'm not sure I can justify a person who makes $25,000 per year paying the same percentage of his income in tax as the person who makes $10,000,000 per year.

One good thing about the flat tax however is that everybody would be required to pay something.  I think it's highly important politically that large numbers of people not effectively be given a free ride.  Both Democrats and Republicans have moved us in that direction, applauding themselves for eliminating the need for many people to pay any income tax at all.  The problem with this is that self-government is implicitly predicated upon the vast majority of people being self-sufficient, pulling their own weight, and contributing their fair share.  If we reach the point that enough people decide they can force other people to pull their weight through the ballot box, and vote themselves benefits for which they will not have to pay, self-government will be in grave danger.  I fear that in some parts of the country, we are perilously close to this point.

One thing that those on the left tend not to deal with is the social security issue.  They seem to lump social security togther with income tax, and make the argument that poorer and middle income people shouldn't necessarily be making any contribution to the retirement system.

This is a perversion of the intent of social security.  It was deliberately intended NOT to be an ENTITLEMENT program that one received without having paid for it.  The thinking was that social security would only be safe politically if there was a sense that the benefits received had been paid for, and were not charity or some form of welfare.

The politicians have greatly obscured this original intention in the years since social security was started, and have bought votes effectively by giving many people benefits far beyond the level for which they actually paid.  This is one reason the system is in such deep trouble.  But this problem will not be solved by divorcing contributions to the system from benefits, as many liberals effectively propose, through their ideas of eliminating the earnings cap on social security taxes and waiving taxes for lower and middle income wage earners.

I guess I am in the minority of people who doesn't see the problem so much in terms of the current tax system, but in the level of spending by the government.

[A18]

I say give a flat rebate to everyone which would cover spending up to the poverty level (NOT based on your personal spending; you can spend nothing and still get the few hundred dollars). Then go with a national sales tax.

It would not punish consumption because you're keeping your entire income. Prices go up, so does your paycheck.

[dazzleman]

I say give a flat rebate to everyone which would cover spending up to the poverty level (NOT based on your personal spending; you can spend nothing and still get the few hundred dollars). Then go with a national sales tax.

It would not punish consumption because you're keeping your entire income. Prices go up, so does your paycheck.

That's an extremely liberal idea, effectively guaranteeing everybody a minimum income whether they work or not.  George McGovern proposed it in 1972.  I think it's a terrible idea.

I like the EARNED income tax credit, because it helps and rewards lower income people who are working.  The way out of poverty is to encourage work, not to give handouts to people.  Once people figure out that they can get a handout without working, the cost of this type of program will go way up.  It would be a disaster, making the abominable situation with the former AFDC look like a smashing success.

[A18]

You can't live on $300.

The only point would be to curb the affects of the national sales tax on basic needs (food, rent, etc.).

[nomorelies]

aBOLISHG TAXES.

[jaichind]

Income tax based on "One $ One Vote."  The weight of ones vote in elections should be proprotional to the amount of taxes any one person pays to the government.  This way a pro-poor ruling party can raise taxes on the rich only to make the rich more powerful in the next election and vice versa for a pro-rich ruling party.

[dubhdara]

In order to answer this question I believe one needs to answer two questions:

(1) are taxes necessary?

(2) does an individual have the inherent and inalienable right to the absolute ownership and control of his own property?

I believe the answers to both are YES. This means that taxes can, lawfully, only be collected from those who have *agreed* to pay them.

The next question should be - what should taxation pay for?

Well, I believe that justly it must only pay for those things which benefit all people equally such as constabularies and armies.

The final question is: should all taxes be equal (an equal percentage)? I believe the answer to this must be YES because of (2) above - unless you believe some people have less of a right to own and control property than others, which I do not.

Another way of looking at this primary premise: i do not have the right to take my neighbour's property by force - therefore I cannot delegate that power to my servant, government, to do it for me.

Dubhdara.

[Geoffrey Howe]

I thought I might 'bump' this just so we can be reminded what parts of Atlas were like back in 2004.

[True Federalist (진정한 연방 주의자)]

I still stand by what I said way back then.

what % of a national sales tax would have to be to replace the income tax.  

It depends upon what all gets covered.  It could be as low as 10% if everything were covered including the sale of labor (i.e. an earned wages tax.)  Once you start exempting whole categories of the GDP from being taxed, the rate on what remains would need to be increased.  Assuming a sales tax on just the items traditionally covered by such a tax, you're getting up into the 30% range.  (Assuming the percentage is reported as it traditionally is, as an addition to the quoted price.  If you do it as the proponents of the self-described Fair Tax do, as a percentage of the total amount paid by the buyer for the good or service, then you get numbers in the 23% range.)  The biggest problem with switching to a national sales tax instead of an national income tax, is that if it is done quickly, the shock to our economy would probably be devastating while a gradual change that gave people time to adjust to the new system would likely get stuck midway, leaving us with both taxes.

[Kahane's Grave Is A Gender-Neutral Bathroom]

Cut taxes for most people, raise them on the top 0.1%. Implement $0.01 on ever dollar over $50-100 million.

Introduce a student deduction so that college students don't have to deal with paying taxes in addition to overpriced everything.

Introduce a negative income tax for the poorest 1-2%.

[True Federalist (진정한 연방 주의자)]

Cut taxes for most people, raise them on the top 0.1%. Implement $0.01 on ever dollar over $50-100 million.

Introduce a student deduction so that college students don't have to deal with paying taxes in addition to overpriced everything.

Introduce a negative income tax for the poorest 1-2%.

We already have one. It's called the Earned Income Tax Credit.

[Kahane's Grave Is A Gender-Neutral Bathroom]

Cut taxes for most people, raise them on the top 0.1%. Implement $0.01 on ever dollar over $50-100 million.

Introduce a student deduction so that college students don't have to deal with paying taxes in addition to overpriced everything.

Introduce a negative income tax for the poorest 1-2%.

We already have one. It's called the Earned Income Tax Credit.

Increasing it.

[mileslunn]

-  Rely more on VATs, ideally should be around 15%, but lower or zero on essential goods and rebates for low income.

-  Limit payroll taxes to direct funding of self funded ones like social security and since regressive and hurt small businesses, keep rates as low as possible, but high enough to ensure financially feasible.

-  Flat corporate tax rate of 25%.  In countries were corporate tax levied at multiple levels, then try to ensure combined rate is around 25%.

-  A progressive income tax but with not too many brackets, 3 is around ideal, but 4 or 5 okay but no more than 5.   

Have a high basic minimum and when fiscally feasible, work towards ensuring anyone whose income puts them below the poverty line pays no income tax.  Likewise have tax credits for low income families who have children to encourage higher birth rate but phase them out on higher incomes.  Bottom rate should be those above poverty line but below median income for full time year round worker.  It should for marginal rate be no higher than 20%.  Another one for above median income but not top in top 10%.  This should be around 30% for marginal rate.  One for top 10% and marginal rate around 40%.  In countries where inequality is really bad but not where low and additional one for top 1% and that should be around 45% but outside of war or crisis should not exceed 50% for any income.  Note these are combined rates so where sub-national governments levy income tax, then national should be lower.

- Have as few tax credits as possible and limit to ones that help primarily low income individuals.  Instead use savings to lower rates for everyone.

-  Dividends should be income tax rate - corporate tax rate to avoid double taxation

-  Capital gains tax should be around half of whatever income tax rate is, but no lower than 40%, and no higher than 2/3 of income tax rate.

-  Income should be taxed based on where earned and residence and ensure if different they are deductible to avoid double taxation.  Citizens who neither reside or earn money in country of citizenship should not have to pay taxes.

-  Property taxes should be low, ideally rate should be whatever would result in a middle income earner paying around 5% of income so in expensive places millage rate lower than in lower cost areas, but normally that would mean 0.5% to 1.5% on property value.

-  No Wealth taxes

- Inheritance tax only on super high inheritances, otherwise high enough that any farmer passing on a farm won't get hit.  For US I would say around $5 million and should be to avoid wealthy dynasties high but not confiscatory.  Ideally around 40% on inheritances in excess of threshold, 0% below.

-  Sin taxes, put as high as possible without creating a black market.  We should tax more things we want less of and tax less things we want more of.

-  Carbon tax - around $50/ton and ensure strong rebates for low income while fully revenue neutral overall

[Geoffrey Howe]

-  Rely more on VATs, ideally should be around 15%, but lower or zero on essential goods and rebates for low income.

May I ask why this? Geoffrey Howe was keen on the ‘tax switch’ - shifting burden from income to expenditure - but he never really explains why.

[True Federalist (진정한 연방 주의자)]

-  Dividends should be income tax rate - corporate tax rate to avoid double taxation

Why?

The limited liability of corporations is a reasonable basis for corporate income to be more highly taxed than individual income.

[Geoffrey Howe]

-  Dividends should be income tax rate - corporate tax rate to avoid double taxation

Why?

The limited liability of corporations is a reasonable basis for corporate income to be more highly taxed than individual income.

The UK’s taxation philosophy generally balks at charging two taxes at the same time.  On death, where there’s an exposure to IHT, the CGT slate is wiped clean and the value of assets for CGT purposes is re-based (uplifted) to the date of death value.  This applies even if the assets qualify for 100% relief from IHT (business or agricultural assets) or the estate is left, say, to a widow/widower or to a surviving civil partner, such that the IHT spouse exemption applies.  Not only is no IHT payable but if assets are subsequently sold, CGT is calculated from the value at the date of death; increases in value from acquisition to the date of death will escape CGT completely.

But that doesn’t have much to do with corporation tax.

[parochial boy]

It's not the case everywhere, and in practice almost never works perfectly - but lots of jurisdictions tax dividends at a lower rate than other income, with the idea being that the tax on the dividend + the corporation tax combine to a rate that is essentially the marginal income tax rate.

Then it's also pretty unusual for companies to pay all of their distributable income as dividends, so overall a corporation tends to wind up under taxed relative to individuals.

[AGA]

It's not the case everywhere, and in practice almost never works perfectly - but lots of jurisdictions tax dividends at a lower rate than other income, with the idea being that the tax on the dividend + the corporation tax combine to a rate that is essentially the marginal income tax rate.

Then it's also pretty unusual for companies to pay all of their distributable income as dividends, so overall a corporation tends to wind up under taxed relative to individuals.

If a corporation retains its profits, it's taxed indirectly through the capital gains of its owners.

[parochial boy]

It's not the case everywhere, and in practice almost never works perfectly - but lots of jurisdictions tax dividends at a lower rate than other income, with the idea being that the tax on the dividend + the corporation tax combine to a rate that is essentially the marginal income tax rate.

Then it's also pretty unusual for companies to pay all of their distributable income as dividends, so overall a corporation tends to wind up under taxed relative to individuals.

If a corporation retains its profits, it's taxed indirectly through the capital gains of its owners.

What? If a corporation doesn't disburse all of its profits, then there are a number of things that it might do with the cash that could lead to inrcerasing its share price - but - well already profits don't mean you've actually got a load of cash just sitting there to use in a share buyback or further investment.

In any case, a company's share price is theoretically (let's pretend the efficient market theory is slightly more than just magical thinking for a moment) based on the the anticipation of future profits, not already realised ones - so notwithstanding the very temporary effect where not paying a dividend doesn't mean that the share price drop for a short while post disbursement - a company's retained earnings really won't be driving its share price. Or in the case of blue chips, not paying a dividend will probably crash the share price because dividends are a large part of why people buy stock in blue chips in the first place.

[mileslunn]

-  Rely more on VATs, ideally should be around 15%, but lower or zero on essential goods and rebates for low income.

May I ask why this? Geoffrey Howe was keen on the ‘tax switch’ - shifting burden from income to expenditure - but he never really explains why.

Most economists have shown VATs are less harmful to growth than income or corporate tax while has lowest evasion rate of all taxes so you collect most of what you are expected to.  In addition it is a stable reliable source with less variation than other taxes.  Big downside is it is regressive, but this can be dealt with by a lower rate or no VAT on essentials (which is what poor spend most of money on) and rebates for those below a certain income.

Why?

The limited liability of corporations is a reasonable basis for corporate income to be more highly taxed than individual income.

Essentially it is to avoid double taxation.  Because corporate side is already taxed, taxing income side at full rate results in higher taxation than otherwise so integrating the two is most logical.  Most countries generally put them same as capital gains.  UK while not perfect, has 7.5% for lower bracket, 32.5% for higher bracket and 38.5% for additional bracket so not perfect but close.  Canada gives a tax credit so again not perfect but same idea.  Australia and New Zealand I believe directly integrate them and so whatever is paid by corporation, individual pays the remained so marginal rate the same.

[AGA]

It's not the case everywhere, and in practice almost never works perfectly - but lots of jurisdictions tax dividends at a lower rate than other income, with the idea being that the tax on the dividend + the corporation tax combine to a rate that is essentially the marginal income tax rate.

Then it's also pretty unusual for companies to pay all of their distributable income as dividends, so overall a corporation tends to wind up under taxed relative to individuals.

If a corporation retains its profits, it's taxed indirectly through the capital gains of its owners.

What? If a corporation doesn't disburse all of its profits, then there are a number of things that it might do with the cash that could lead to inrcerasing its share price - but - well already profits don't mean you've actually got a load of cash just sitting there to use in a share buyback or further investment.

In any case, a company's share price is theoretically (let's pretend the efficient market theory is slightly more than just magical thinking for a moment) based on the the anticipation of future profits, not already realised ones - so notwithstanding the very temporary effect where not paying a dividend doesn't mean that the share price drop for a short while post disbursement - a company's retained earnings really won't be driving its share price. Or in the case of blue chips, not paying a dividend will probably crash the share price because dividends are a large part of why people buy stock in blue chips in the first place.

If a company were to stop paying dividends, its share price would likely drop in the short run, yes, but capital gains taxes are based on the growth of share price, not its current level. Companies balance two ways to reward their shareholders: growth in share price and dividends. They can either distribute profits as dividends and forego reinvesting them, sacrificing growth in share price (ex: REITs), or they can pay little in dividends to maximize growth in share price (tech megacaps). So a company paying less in dividends would have its shareholders pay more in capital gains taxes.

[parochial boy]

It's not the case everywhere, and in practice almost never works perfectly - but lots of jurisdictions tax dividends at a lower rate than other income, with the idea being that the tax on the dividend + the corporation tax combine to a rate that is essentially the marginal income tax rate.

Then it's also pretty unusual for companies to pay all of their distributable income as dividends, so overall a corporation tends to wind up under taxed relative to individuals.

If a corporation retains its profits, it's taxed indirectly through the capital gains of its owners.

What? If a corporation doesn't disburse all of its profits, then there are a number of things that it might do with the cash that could lead to inrcerasing its share price - but - well already profits don't mean you've actually got a load of cash just sitting there to use in a share buyback or further investment.

In any case, a company's share price is theoretically (let's pretend the efficient market theory is slightly more than just magical thinking for a moment) based on the the anticipation of future profits, not already realised ones - so notwithstanding the very temporary effect where not paying a dividend doesn't mean that the share price drop for a short while post disbursement - a company's retained earnings really won't be driving its share price. Or in the case of blue chips, not paying a dividend will probably crash the share price because dividends are a large part of why people buy stock in blue chips in the first place.

If a company were to stop paying dividends, its share price would likely drop in the short run, yes, but capital gains taxes are based on the growth of share price, not its current level. Companies balance two ways to reward their shareholders: growth in share price and dividends. They can either distribute profits as dividends and forego reinvesting them, sacrificing growth in share price (ex: REITs), or they can pay little in dividends to maximize growth in share price (tech megacaps). So a company paying less in dividends would have its shareholders pay more in capital gains taxes.

Except that I already pre-emptively answered that point. For a start, retained earnings, or profits, are not the same thing as cash on hand that companies actually have available to them to invest. for a second, not paying a dividend in no way guarantees that a company's future value will increase. In many cases, it could be taken as a sign that things are going badly wrong. Paying a dividend generally causes a short term reduction in share price, but only a brief one, so not really relevant for the question of CGT.

Even then, the point hardly even counters the original point I made seeing as CGT is not a tax on profits, and is not an income tax - so doesn't even factor into the question of whether a company's income is double taxed or not.

[AGA]

It's not the case everywhere, and in practice almost never works perfectly - but lots of jurisdictions tax dividends at a lower rate than other income, with the idea being that the tax on the dividend + the corporation tax combine to a rate that is essentially the marginal income tax rate.

Then it's also pretty unusual for companies to pay all of their distributable income as dividends, so overall a corporation tends to wind up under taxed relative to individuals.

If a corporation retains its profits, it's taxed indirectly through the capital gains of its owners.

What? If a corporation doesn't disburse all of its profits, then there are a number of things that it might do with the cash that could lead to inrcerasing its share price - but - well already profits don't mean you've actually got a load of cash just sitting there to use in a share buyback or further investment.

In any case, a company's share price is theoretically (let's pretend the efficient market theory is slightly more than just magical thinking for a moment) based on the the anticipation of future profits, not already realised ones - so notwithstanding the very temporary effect where not paying a dividend doesn't mean that the share price drop for a short while post disbursement - a company's retained earnings really won't be driving its share price. Or in the case of blue chips, not paying a dividend will probably crash the share price because dividends are a large part of why people buy stock in blue chips in the first place.

If a company were to stop paying dividends, its share price would likely drop in the short run, yes, but capital gains taxes are based on the growth of share price, not its current level. Companies balance two ways to reward their shareholders: growth in share price and dividends. They can either distribute profits as dividends and forego reinvesting them, sacrificing growth in share price (ex: REITs), or they can pay little in dividends to maximize growth in share price (tech megacaps). So a company paying less in dividends would have its shareholders pay more in capital gains taxes.

Except that I already pre-emptively answered that point. For a start, retained earnings, or profits, are not the same thing as cash on hand that companies actually have available to them to invest. for a second, not paying a dividend in no way guarantees that a company's future value will increase. In many cases, it could be taken as a sign that things are going badly wrong. Paying a dividend generally causes a short term reduction in share price, but only a brief one, so not really relevant for the question of CGT.

Even then, the point hardly even counters the original point I made seeing as CGT is not a tax on profits, and is not an income tax - so doesn't even factor into the question of whether a company's income is double taxed or not.

As you said, a share price is theoretically based on the present value of future expected profits. Apologies if I am misinterpreting your post, but you seem to think that I said increased retained earnings results in higher growth in share price, when it's increased growth in retained earnings that results in higher growth in share price.

Retaining profits instead of paying dividends allows a company to increase capital investment, which should increase future profits. If a company continues to retain profits, its growth in retained earnings will be higher than it would have been if the company had chosen to pay those profits as dividends instead. Higher growth in retained earnings allows for a faster growth in capital, which should result in higher growth of profits and thus a higher growth of share price. It seems that you know that this is a general trend because you said this is not "guaranteed" to happen. Since higher profits indirectly result in higher capital gains tax liability if those profits are reinvested, the capital gains tax is a double tax. The US's investment tax credit helps offset this, though. Also important to note that double taxation isn't necessarily a bad thing as long as the rate is the same whether a company chooses to reinvest or pay dividends, which would depend on the capital gains rate.

[Kahane's Grave Is A Gender-Neutral Bathroom]

Tax Churches and other religious establishments (with this we could house all homeless people and pay for all food stamps).

I'm thinking:
0%: $0-$15,000
2.5%: $15,000-$25,000
5%: $25,000-$30,000
7.5%: $30,000-$40,000
10%: $40,000-$50,000
12.5%: $50,000-$60,000
15%: $60,000-$80,000
18%: $80,000-$100,000
22%: $100,000-$115,000
25%: $115,000-$185,000
27.5%: $185,000-$210,000
30%: $210,000-$250,000
33%: $250,000-$350,000
36%: $350,000-$550,000
39%: $550,000-$950,000
41%: $950,000-$2,000,000
43%: $2,000,000-$6,000,000
45%: $6,000,000-$12,000,000
47%: $12,000,000-$25,000,000
49%: $25,000,000+

$3,000 EITC
$2,000 Childcare credit (+$1000 per child)