Just wondering everyones thought about a Flat Tax and Federal Sales tax. I read in the paper that someone asked Bush about the flat tax and a Federal Sales tax. Bush said he thought it was worth taking a close look at. Kerry quickly said he was against it and that it would hurt the Poor.

I personally feel we do need to change the way all Americans pay taxes. Need to reform the IRS which I feel is a total mess. Move to a system that gives no deductions to big business, the Rich or anyone for that matter. My exceptions would be a child deduction and home owner deduction. I feel this would eliminate much of the abuse that we see in the current system. ;)

Morgan

Just wondering everyones thought about a Flat Tax and Federal Sales tax. I read in the paper that someone asked Bush about the flat tax and a Federal Sales tax. Bush said he thought it was worth taking a close look at. Kerry quickly said he was against it and that it would hurt the Poor.

I personally feel we do need to change the way all Americans pay taxes. Need to reform the IRS which I feel is a total mess. Move to a system that gives no deductions to big business, the Rich or anyone for that matter. My exceptions would be a child deduction and home owner deduction. I feel this would eliminate much of the abuse that we see in the current system. ;)

Morgan

I don't know enough about the issue to take a stand. One of my many questions would be as a person who has no dependents, why does having a child give you a tax break? Also, I think there are way too many people with a vested interest in keeping the tax system complicated for us to ever move to a simple flat tax or national sales tax. I'm talking about the government, accountants, and lawyers. On the whole I think it's probably a good idea but I'd like someone to explain to me why one economic strata would be harmed over another, especially if tax shelters were eliminated.

Federal income tax is an abomination. It should be done away with altogether--but I'm not holding my breath. I would be in favor of anything that shut down the IRS though

Generally, I oppose a flat income tax because it amounts to a shift of tax burden onto lower-income people. But your post raises lots of interesting points to discuss.

Let's start with whether we are talking revenue-neutral or revenue-reducing. Let's say neutral so we can talk about tax schemes without the added factor of where to cut government with reduced revenue.

With a neutral revenue situation a flat tax would require an increase of taxes for 70% or so (a blind guess) of tax payers and a tax cut for the top 30% or so top incomes. The numbers might actually be 80% and 20%. For the folks at the very bottom of the income scale the tax increase would be greatest, leaving them with proportionally much less to live on. A multi-tiered tax structure attempts to distribute the tax burden according to who can pay. Yes, those of us in higher/top tax brackets pay more on those higher income dollars, but we pay the same rate on the comparable level of income that lower income earners do. I don't see that as unfair.

I'm not sure how the IRS is a total mess. It implements the policies Congress establishes. The IRS seems to do amazingly well at connecting bureaucratic dots in the horrifically complex tax law rat's nest created by Congress. I think blame for the complexity of tax law rests with Congress, not the IRS. But maybe I'm missing something here. Is there something the IRS is doing wrong?

I'm not sure business deductions are so much the issue as business accounting. It makes sense to me that a business should not have to pay income tax on raw income in the face of business expenses. Net income should be the measure. The issue is corporate accounting that blurs expenses and profits. One default is to simply charge a tax on gross income, but I think that is inherently unworkable...

Then there's the issue of a Federal sales tax. Our liberal notion is that it is regressive and bad. But I suspect that the regressivity could be addressed with low income tax rebates. I also think that cheating would be harder - both for businesses and individuals. Businesses would becomes government's bill-collectors and might try to skim that money, so there would be another IRS-esque agency that would delve into the books of businesses...

One thing though is that the sales tax should cover everything... goods, services, securities, etc. Buy a bike, pay a sales tax. Buy a stock, pay a sales tax. Buy a house, pay a sales tax. Then the tax shift would not be entirely onto just the goods and services bought by the middle & lower income folks.

I'm for a flat percentage, with no deductions. Individual and corporate. The only deductions I would allow are for double taxation.

I'll get flamed for this but here goes. The problem with a progressive tax structure is that they just do not seem fair for the "services" you receive. It's like going into the store wanting to buy a shirt, you ask the clerk how much and he asks you what your income is. When informed of your income the clerk states that the shirt will be $100.00. The next guy comes into the store and the same routine follows but this time the new guy has little income so the clerk states that the shirt will be free and the store will kick in $10.00 to the deal. I believe that this is the way that most conservatives see the tax structure. They think they get the same out of government but have to pay more for it than the other guy. This example of course ignores all the aspects of our society and business environment that exist because of government and that people really do not "go it alone" but receive valuable assistance from our society as a whole and government programs that are in place. I believe this is how liberals view the justness of a progressive tax system. I would be in favor of a flat tax if most of the deductions were eliminated and if the floor at which a family with low income was set high enough so that they did not pay any tax. Not totally flat tax but close. Also I have never understood why you get a tax break for having a kid. Kids are a huge drain on society. They suck up a lot of our tax dollors and yet those who have them don't have to pay for the extra burden imposed on the rest of us! :D

Also I have never understood why you get a tax break for having a kid. Kids are a huge drain on society. They suck up a lot of our tax dollors and yet those who have them don't have to pay for the extra burden imposed on the rest of us! :D
I don't really get this either, but suffice it to say that you'll spend way more on your kid than any tax break you receive so it isn't really in your best interest to have them just to save money on taxes.

I'm for a flat percentage, with no deductions. Individual and corporate. The only deductions I would allow are for double taxation.
that would be way too easy. you'd put all the poor cpa's and tax lawyers out of work.

Anyone saying less than 40% is dreaming or scheming.

http://www.ncpa.org/edo/bb/2004/20040809bb.htm

Consumption taxes will never be a political starter, since that would hit the elderly VERY hard. Raise total tax burden on the elderly? I want to see the politician who proposes THAT.

I would point out that our tax system is very simple. It is the calculation of taxable income that is complicated. Simplify what "income" is, and everything will fall into place. Why can't defining income take a page, instead of 8000?

Ah, so the tax lawyers can make their money!

BTW, do you all know that Bush says in his stump speech that raising taxes on the rich won't work (ala Kerry), because they have accountants and don't pay the taxes anyway? A shining moment of honesty.


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Found the quote:

Bush also said high taxes on the rich are a failed strategy because "the really rich people figure out how to dodge taxes anyway."


http://www.dailypress.com/news/local/virginia/dp-va--bushvisit0809aug09,0,6920595.story?coll=dp-headlines-virginia

that would be way too easy. you'd put all the poor cpa's and tax lawyers out of work.

Yes, that includes a surprisingly large number of good friends of mine. But no worries. There will always be a need for corporate structuring across states and internationally. The rest can become financial planners, since everyone will get to keep so much more of their own money and will want to invest it.

Spoken like someone who has never heard the term "AMT."

I don't really get this either, but suffice it to say that you'll spend way more on your kid than any tax break you receive so it isn't really in your best interest to have them just to save money on taxes.

Uh, who's going to be changing your coostomy bag when you're old and decrepid? Someone's kid, that's who.

For all thos people who think kids are a drain on society, imagine, for a moment, what would happen if no more children were born -- ever. There wouldn't be tremendous change for at least a decade and perhaps for 15 years. But after that, there wouldn't be enough workforce to sustain our standard of living -- or any country's standard of living. Kids are like infrastructure. You pay taxes to support infrastructure, right? Same deal.

For all thos people who think kids are a drain on society, imagine, for a moment, what would happen if no more children were born -- ever. There wouldn't be tremendous change for at least a decade and perhaps for 15 years. But after that, there wouldn't be enough workforce to sustain our standard of living -- or any country's standard of living. Kids are like infrastructure. You pay taxes to support infrastructure, right? Same deal.

Italy and Japan are approaching that problem - too few kids.

No good to use infrastructure as an example. Anti-tax Repubs believe that we should be using existing infrastructure (paid for by previous generations) to the point of failure. Future generations can fend for themselves. It's the Ultimate Me Generation... the hippies in the 60's had nothing on these guys.

I don't have any education on this subject but rather personal observations which could be flawed. I think we should abolish the current way we do taxes; though the government would never do this because of all the people that would be put on the unemployment line. I think we should have a combination tax system; flat tax and value added tax (Federal sales tax). The flat tax could be based on a flat 10% for everyone, so if one person made only 10,000 a year his tax would be 1,000, while a person making 500,000 tax would be 50,000. This tax may be less then a wealthy person pays now, but most wealthy people figure out ways to avoid tax as much as possible by have a high degree of deductions. The value added tax could be set a 12%, thus the poorer people who do not buy expensive items would pay less whereas the weathly people who buy expensive items would pay more. The value added tax would not apply to essential food from "grocery" stores, because everyone needs to buy food, rich or poor, so let's not make it more difficult for the poor; but value added tax would be added to restaurants/fast food, and apply to snacks/luxury food since snack/luxury food is not essential food; and a higher value added tax of 15% would be added to tobacco and alcohol products since those products lead to an increase of health care problems.

The percentages I used above is just an example, one would have to figure out how much money the federal goverment needs and adjust accordingly, especially the value added tax, to compensate for any shortfalls. If done right (that's why I suggested a 12% value added tax), you could eliminate state sales tax and let the federal goverment sent fair shares to the states. Or reduce the value added tax to 6% and let the states charge whatever state sales tax they need.

One major problem now in the US is the portion of real estate tax designated for schools. If a person (no matter race) lives in a poor neighborhood (district) and that neighborhood, due to lower home values, pay less real estate taxes that go towards their schools, they end up getting lower quality teachers, none of the frills the expensive neighborhoods get, and they get lower quality of education which reflects badly with colleges when they attempt to apply for college. Believe it or not, just as certain colleges are better than others and you have the right to choose the best one for you, those colleges know which high schools are bad and not to select students from those schools because their education is lower. So what the cities need to do is to put the school tax money into a general fund and then divide it equally amoung the all the schools, then you would truely have an environment for equal opportunity for all people.

One major problem now in the US is the portion of real estate tax designated for schools. If a person (no matter race) lives in a poor neighborhood (district) and that neighborhood, due to lower home values, pay less real estate taxes that go towards their schools, they end up getting lower quality teachers, none of the frills the expensive neighborhoods get, and they get lower quality of education which reflects badly with colleges when they attempt to apply for college. Believe it or not, just as certain colleges are better than others and you have the right to choose the best one for you, those colleges know which high schools are bad and not to select students from those schools because their education is lower. So what the cities need to do is to put the school tax money into a general fund and then divide it equally amoung the all the schools, then you would truely have an environment for equal opportunity for all people.

I empathize with the goal, however let me give you an example of how this can back fire.

A community near where I lived (not where I went to school) raised money to purchase equipment for a state of the art computer lab and paid for teacher training. This was in the mid 80s, so they were way ahead of the curve. The state decided to cut the schools funding because they had such good community support. Guess how much community support they got in the following years? Zilch.

People take pride in contributing to their local and regional interests, which I think is a good thing. Although I can see how people living in poor districts may be in a pinch, I would hate to deflate the ambitions of many well-meaning people by diverting funds away from their local schools.

Dumb idea. You ought to call it "increased tax on the poor", because that's all it is. The rich will continue to find ways around paying tax.

I get mail all the time calling for abolition of the income tax and wiping out the IRS, but nobody ever goes beyond Step 1. There are certain things--national defense, for instance, and probably at least some highways--that can only be the responsbility of the federal government. How would you pay for those?

Many, many reasons, but primarily it would be the abolishment of favored tax treatment toward special interest groups. Clinton used to call it "targeted tax cuts", and it was a favorite way of paying back the constituent groups who supported him. But it was not just Clinton - every other president has done the same thing. Tax breaks for this group and that are a time-honored tradition of economic back-slapping. Its not the lawyers and CPAs who would suffer so much as the influential friends of the lawmakers.

Another reason it won't happen is the increased cost of municipalities to build things. Capital projects in cities are typically funded by tax free municipal bonds. Because they are tax free, they don't have to pay a rate as high as taxable bonds. This is a tremendous cost saving for cities, counties and states. If they no longer have that advantage, they have to borrow at higher rates. That means higher local taxes, which no one is real fond of.