Creating Fair Taxation

not everyone can ask the Wizard for a clue or a Cause.

 

The question posed in this thread employs two words, fair and taxation, and while there is probably little disagreement on the definition of taxation it appears that any acceptable resolution would require first achieving agreement on the definition of fair.

 

only a warfare-State needs to Tax income, not a welfare-State.

 

If you really feel that to be true let's stop taxing income, putting an end to all wars, and at the same time eliminate any reason to complain about the welfare-State which would present no cost.

 

http://usa.abalancingact.com/

US federal budget simulator. ^
If this hasn't being posted yet.

 

the right loves their, Orwellian, right wing fantasy too much. they can't do without their warfare-State.

 

A balanced budget:
spending budget <= revenue collection

 

I hadn't seen this calculator before and it was quite interesting. It doesn't quite work with my proposal but I played with it anyway.

I zeroed the negative tax rates on lower and lower-middle income households. This reflects tax credits (welfare assistance) that my proposal eliminates along with deductions and replaces with an "Exemption" up to median household income. Instead of negative tax rates where $56.7 billion is paid out in the form of a tax refund I added the $56.7 billion in "welfare assistance" to "Supplemental Security Income" expenditures to "balance" the books.

I left the middle income tax rate of 3.3% unchanged on average incomes of $62,100..

I increased the upper middle income tax rate to 10% on average incomes of $110,500.

I increased the tax rate on high income to 18% on average incomes of $431,100.

I lowered the top income tax rate to 25% on incomes in excess of $720,900.

These adjustments result in a surplus of $40 billion.

This calculator does have inherent problems of course. It mixes in Social Security/Medicare that have a dedicated tax revenue source with general expenditures that are funded by all other forms of taxation. It also fails to break out capital gains taxes that have a cap of 20% on long term capital gains that the super-wealthy top 1/10th of 1% pay taxes on. In any case it was fun to run the numbers.

My proposal is much easier to calculate. Divide gross annual personal income in half to account for the "Exemption" (based upon medial income) and then divide it by the general expenditures and it gives you the tax rate on all income above median income.

 

OR

Revenue >= Expenditures

Republicans are often myopic in believing the only way to balance the budget is to cut the necessary spending authorized by Congress when there are two sides to the equation. They can also increase taxation to balance the budget.

Let me provide an example. The top 400 income households in the United States have an average income of over $250 million per year and pay an average tax rate of 17.2% (if I recall correctly). That means they're paying about $43 million in federal income taxes leaving them with a "paltry" $207 million to live on for the year. If we doubled their tax rate to 34.4% they'd pay $86 million in taxes and only have about $164 million to live on that year. Does anyone really think that only having $164 million to live on for one year in anyway diminishes their lavish lifestyle or that they would be hard-pressed to get by? Seriously?

 

Rather than increasing the taxes of the top 400 income households $43,000,000 each, the total of $17,200,000,000 would be much better used by employing an additional 344,000 persons at $50,000 per year producing some product or performing some function that those 400 households might purchase.

 

Garbage. If the objective were to produce greater revenues to the government, the super-duper uber-rich wouldn't be getting richer an order of magnitude faster than government revenue is increasing.

HELLO???

No, I'm obviously pointing out that the fact that there are job openings is completely irrelevant to the issue: lack of productive work opportunities for those willing and able to take them. There are always jobs for people who are good at separating other people from their cash. So what? Is that supposed to mean the economy is generating real opportunities for honest working people?

 

Nope.

IOW, the type of food is crucial.

Two food sources that contain all the same nutrients are the same food. Hello?

But lemons are not oranges. HELLO??

Ah, no, they are different. Vitamin A is not protein.

HELLO??????

Now that, that really IS a false analogy. You are deleting the information that different kinds of food have different nutrients, just as you are trying to delete the information that different kinds of income have different effects on the economy and society. The difference between $50 and $20 is purely quantitative, not qualitative. The difference between sugar and protein is qualitative, just as the difference between income earned by building a house is qualitatively different from income obtained by conning retirees out of their life savings.

Until you find a willingness to know such facts, you will not have anything relevant or interesting to say about income taxation.

They don't all ARRIVE the same.

HELLO???????

The fact that you had to resort to such a transparently false and illogical analogy effectively proves my analogy was true, valid and informative -- in fact, just a little too true, valid and informative.

 

If we are going to be fair then we must recognize the reality that the government must get its revenue from economic activity.
In the past the government got all its revenue from two types of economic activity, imported goods and liquor. A proportionate and reasonable tax scheme once the government agreed to accept script for tax payments from liquor makers.
In a compromise with teetotallers it agreed to outlaw liquor and institute a tax on income, indirect economic activity. Over the years the government has passed a myriad of legislation that has complicated the taxation of income onto an unbelievably Byzantine taxing system so complicated that no one, not even the government can parse it. The tax code has skewed the entire economy because such a huge amount of individual and business decision making is made with tax considerations. To put it simply, this income tax thing has totally screwed up the economy by making some economic activity more tax advantageous than others.

So anyway, the ideal system would be for the government to gain its revenue from the economy indiscriminately, in other words equally from every sort of economic activity. It would also need to preclude the government from favouring one type of economic activity over any other. The only way to do that is with a universal transaction tax, which is something that can be done now that almost all transactions are electronic. It has been estimated that a universal transaction tax of 10 cents on every $100 that changes hands in the US could eliminate the need for all other taxes and entirely fund government expenditures at every level including all federal state and local governments, pay off all their debts within ten years and generate enough money after that to provide free health care for everyone in the US.

Think about that. One tiny tax on everything and no taxes on anything else. How is that possible you ask since you are paying some 5-9% sales tax on your retail purchases. It is possible because retail transactions are about $2Trillion a year but equity market transactions are often over $1Trillion a day. Daily interbank transfers are often multiples of that. This is not even to mention wholesale transactions, loan payments and other transactions.

A $1 tax on $1,000. The tax on your new $30,000 truck would be $30, on your $300,000 house it would be $300 with no property tax, ever.

 

While it IS the objective of government to produce greater revenues, government recognizes the fact that continuing to do so requires that it does not eliminate the source from which most revenue (in dollars) is obtained.

HELLO??? indeed.

A growing portion of our economy is being generated by the redistribution of tax revenues being paid by the productive working members of our societies along with debt for which future working population will be held liable. Constant controlled inflation has created great disparity in both the wealth acquired and the value of labour of individuals diminishing opportunities available to a growing population while allowing government(s) to increase their revenue collection and deficit spending, and while beneficial for government allowing it to compare accumulated debt as a percentage of the GDP which is also kept constantly growing due more and more to inflation it has reduced the ability of most everyone to put aside anything for their retirement years making them more and more dependent on government for that.

Looking at the inflation calculator, $1 when I was born (4 hours of labour at minimum wage) is the equivalent of $17.38 in 2016 (2.4 hours of labour at minimum wage) in terms of purchasing power. But when I was born, few of the wants that exist today existed at all, colour TV, TV at all for that matter, cell phones, personal computers, and the list is really extensive. And as these wants came into existence, few people could afford them until automation made it possible to greatly increase the supply without greatly increasing the cost of production allowing the price to be lowered to a point that profit was able to be acquired as a result of sales quantity. The economy should be the result of every individual spending of their individual earnings, requiring each of us to live within our individual produced means. The rich would then only become richer as a result of more people becoming employed and earning enough to purchase their products. As it is, government is maintaining and even growing consumption by providing means to a large portion of the population to consume without need of their contribution to the production of anything they consume.

 

Actually the type of food is not critical so long as it contains the nutrients the body requires. If the "type of food" was critical then we'd all have to eat the identical foods to survive but we don't. There are numerous different diets that all provide the necessary nutrients that human body requires for survival.

But let's get back to taxes as opposed to trying to discuss analogies that are always "similar to" as opposed to being "identical to" what is being proposed.

The money always ARRIVES in the form of income where a monetary transfer occurs and the source of the income is irrelevant. Does it really matter if one person works as a bank teller while another person works as a ditch digger? Both receive a paycheck. Does it matter if one person sells a "bag of peanuts" while another person sells partial ownership in a corporation (stocks)? The "tax" is an "income tax" and that income is always derived from a monetary transfer based upon either what the person does and/or what they sell.

We can also note that "income" is always "gross revenue minus cost" and I account for that with the "Exemption" in my tax proposal. There's fundamentally no difference between the "rent" a business pays for and the "rent" a person pays for because both are a "cost" that must be deducted from the gross revenue. The only difference I impose is that only the "necessary" rent is included as a component in the "Exemption" whereas an enterprise can spend whatever it damn well pleases on the "rent" for the enterprise.

 

There are several flaws with this proposition that hopefully I can address at least in part.

As proposed the "transaction tax" would only be applied to digital transactions and it would be applied to all digital transactions.

If, for example, I made an online transaction moving money from my savings account to my checking account that is a digital money transfer and it would be subjected to a tax. If I have an auto-payment for utilities then I have to pay the "transaction tax" on the purchase of the utilities. If I use my debit card to purchase an item at the store I pay the "transaction tax" on the purchase but I don't pay the "transaction tax" if I pay for the purchase in cash.

When an employer pays their workers they would be paying the "transaction tax" which is an "income tax" on the labor of the worker albeit paid directly by the employer as opposed to being paid by the worker. The current "payroll tax" is literally an income tax paid by the employer based upon the compensation for labor of the worker today.

Think about the investor that purchases $100,000 in stocks based upon a digital transfer from their bank account. They have to pay the "transaction tax" on the purchase even though a "transaction tax" (income tax) was paid when the money was transferred electronically into their bank account. It's double taxation on the same money.

Many enterprises would have to dramatically increase pricing because every time they purchase an item for "resale" there would be a transaction tax imposed on the purchase.

The "transaction tax" doesn't take into account that there's mandatory spending and discretionary spending and when a tax is imposed upon mandatory spending it's a "regressive" form of taxation that disproportionately imposes the tax burden on the poor. For example a household with only $30,000/yr in income (all of which was already subjected to an "income tax" paid for as a "transaction tax" by their employer) spends all of their $30,000 on mandatory expenditures and they pay the "transaction tax" on all expenditures. A wealthy household with $10 million in income (where the money was also subjected to a transaction/income tax when they received the income) may only spend $1 million/yr to live a lavish lifestyle (keeping the remaining $9 million in "cash" so they don't pay any other "transaction tax" such as the "transaction tax" on purchasing stocks or bonds) and they'll only have 1/10th the tax burden relative to the household with $30,000 in income. Of course the "wealthy" household can use that $9 million to purchase goods/services overseas that aren't subjected to the "transaction tax" that can only be imposed in the US.

I've only addressed a few flaws with the proposal and if we attempt to address all of the flaws the "transaction tax" becomes as perverted as our current income tax codes. We will find it so laced with "favoritism" that it could never result in a "fair tax" based upon the principle of "government to gain its revenue from the economy indiscriminately" because the government would be forced by necessity to discriminate in the collection of the "transaction tax" proposed.

In fact I support the principle for the "government to gain its revenue from the economy indiscriminately" and I've included that principle in my income tax proposal. The "income" being taxed is the "profit" (i.e. gross revenue minus cost) where the mandatory costs for the household are addressed by the "Exemption" that, by necessity, has to be simplified for tax purposes. Enterprise is still allowed to itemize deductions based upon the understanding that it's illogical for the enterprise to waste money upon unnecessary expenditures. Many do but the "owner" does not "profit" if they waste money on unnecessary expenditures.

People do disparage the income tax but that's because our current income tax codes are unfair but my proposal attempts to correct that by only taxing the "profits" as opposed to "costs" related to income and it applies the identical tax rate to all "profits" regardless of source or the entity that earns the profits.

I've admitted my proposal not "perfect" but it comes as close to perfection as pragmatically possible and I've always welcomed, and incorporated, suggestions to improve it to ensure it comes as close as possible to the principle that the government is "to gain its revenue from the economy indiscriminately." Additionally it's not based upon a "fixed rate" of annual taxation but instead uses a "floating rate" to always ensure that the authorized expenditures of Congress are fully funded to eliminate all deficit spending so it's a fiscally conservative tax proposal where the "bills are being paid" for by our government.

 

No, that's false. The problem with the current tax system is precisely that it does get its revenue from economic activity, which is inherently unfair. The only way we can possibly be fair is by taxing people according to what they TAKE FROM the community, not according to what they CONTRIBUTE TO the community through their economic activity. That means income tax is, has always been, and always will be unfair as well as harmful. It is always inherently The Wrong Thing To Tax.

No, that's never been true.

While one could make an argument for Pigovian taxes on a few goods like alcohol, they are never going to raise the kind of revenue a modern government requires, and they are certainly not proportionate.

Income is not indirect economic activity.

Correct. And more importantly, it has made economic INactivity more advantageous than productive contribution.

No, that's objectively incorrect. There are exactly two fundamental, indisputable, and therefore universally accepted (among those with any understanding of the matter) principles of sound taxation policy: ability to pay (self-evidently necessary) and beneficiary pay (self-evidently fair). The ideal tax system is therefore one that gets its revenue from those most able to pay -- i.e., the rich, NOT those with the highest incomes -- in proportion as they benefit from government spending, which is easily and accurately measured by the value of the government-issued and -enforced privileges they own: land titles, patents and copyrights, bank charters, etc. This is logically inescapable and not open to dispute.

What you are saying is that you want the government to continue favoring economic INactivity -- i.e., parasitism -- over economic activity.

Why do you demand that government tax the productive in order to shovel money into the pockets of rich, greedy parasites? Could it be because you prefer injustice to justice, evil to good?

But only by fools who can't figure out that massive number of financial market transactions that hedge funds and speculators undertake hoping to make $0.01/$100 will all disappear when they are taxed at $0.10/$100

Conclusively refuted above.

It will always be impossible, as proved above.

No, that is why it is IMpossible. Equity market transactions won't support that level of taxation, or anything remotely close to it. Those transactions simply will no longer be made.

You need to stop typing and start thinking.

Ah, I wondered when you would mention your real agenda: getting their one, tiny, remaining tax burden (property taxes) off rich, greedy parasites and onto the productive.

 

So you agree that the type of food is critical, a fact that every dieter actually knows very well.

No, that is a blatant non sequitur. People are biochemically different, live in different environments, etc., and foods that are not identical can nevertheless provide virtually identical nutrients. Sardines are not mackerel, but there's not a significant difference in nutritional value between a kilo of sardines and a kilo of mackerel.

And every single one of them is based on recognizing the fact that the type of food consumed is critical. You can can your protein, minerals and vitamins a lot of different ways, but not by eating Doritos and drinking Coke.

IMO the analogy with diet is quite illuminating for people who don't understand economics.

No it doesn't. Even the IRS knows enough to tax transfers in kind. You're just objectively wrong, and that's only the beginning of how wrong you are. You are trying to pretend that when some rich, greedy parasite exercises stock options to buy $1M worth of stock for $1K, he hasn't received any income he should be taxed on.

Only when you are trying to pretend that there is no difference between building houses and conning seniors out of their retirement savings, or between flipping burgers and flipping houses.

It matters when a rich, greedy parasite gets 1Kx as much money as either of them without working, or doing, or contributing anything at all.

You'd better believe it does. Selling peanuts is getting a useful product into the consumer's hands. Selling corporate stock just changes which rich, greedy parasite gets to pocket other people's wages in return for doing nothing.

So you are explicitly stating that people who do productive work should be robbed of their rightful wages by government BECAUSE they are doing productive work, and the loot should be given to rich, greedy parasites because they are NOT doing any productive work, selling anything, or contributing in any other way.

Thanks for making that clear.

No, that's just more false, absurd garbage from you. In what sense is someone's earned wage income reduced, for tax purposes, by the cost associated with accessing the opportunity to work? Is it reduced by the tuition and living expenses they had to pay to go to university to become qualified for the job? Do they get to deduct the cost of dressing for success?

Wrong. You just assume everyone has the same costs. They don't.

But there is a difference between the rent paid for LAND, whose value comes from the community, not the land's owner, and the rent paid for improvements, which comes from the builder/maintainer.

How do you know how much rent workers have to pay parasitic landowners in order to access the services and infrastructure government provides and the opportunities and amenities the community provides, as well as the physical qualities nature provides, in order to earn their wages?

 

Wrong three times in one sentence: taxing the rich more would not eliminate the source, most revenue is obtained from working people, not the super-duper uber-rich, and it is self-evidently NOT the objective of government to obtain greater revenues, or they would be raising a lot more.

And the money is going to rich, greedy parasites.

Ungrammatical gibberish that, if it meant anything (it doesn't), would be false. It is not inflation that stops working people from putting money aside for their retirement, but the need to support the super-duper uber-rich in the manner to which they demand to remain accustomed.

Irrelevant nonsense.

Except that rich, greedy parasites should get to take all the money everyone else earns, in return for producing nothing whatever. That about it?

BWAHAHHAHHAAAAAA!!! The super-duper uber-rich don't produce, son, they just take from those who do produce.

You know this, and you like it that way.

No, the greedy, parasitic, super-duper uber-rich are a tiny portion of the population, not a large one -- but they get an order of magnitude more from government than the order-of-magnitude-more-numerous poor you are whining about.

 

you get a fair tax when every adult pays the same just like you get a fair price in the super market when everyone pays the same price for a can of soup. Govt is no different. Why do poor people get govt for less than rich people?

 

It is self-evidently different.

"In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets and steal loaves of bread." -- Anatole France

The rich should pay more because they are the ones who get the benefit of government spending, not the poor. Everything you claim government does for the poor, it actually does for their landlords, who charge them full market value for all government-provided services and infrastructure.

 

of course thats absurd since entitlements go to the poor and account for most of govt spending. Its in all the papers every day!!

 

so when govt gives free housing to the poor it does it for the landlord and not for the poor who cant afford housing?
so when the govt gives free health care to the poor it does so for the doctors, not for the poor who cant afford medical care?

Do you see the absurdity of that?

 

The poor must pay their landlords full market value for everything they get from government. That is why spending trillions on the poor has made landowners rich in return for nothing, but not helped the poor one jot.

 

Government rarely gives free housing to the poor. It usually just gives them money, which they must then pay to their landlords. Sometimes it pays the landlords directly. The poor don't end up with the money. Landowners do. This is not rocket science.

No, it doesn't do it only for the doctors (though they do get a lot of the money), as the poor must also pay landowners full market value for access to the doctors, hospitals, labs, etc.

Do you?