How would you build the perfect tax system and how much would the state do?

Yeah...Sweden actually tried this...they gave up in two years because it killed their financial industry.

think of it this way: I give you $20,000 for a diamond, and then you undo the transaction. We've been involved in $40,000 worth of trade, but only $20,000 actually exists in our little two person economy. When the velocity of money is very high, you can get stratospheric transaction turnover dollar values. It's a fallacy the assume then that that number is the same number as the amount of money everyone actually has.

I keep explaining to my socialist friend (well, she's way more socialist than I am) that this won't work. We already tax their profits. I *really* hate people that say "these people make too much money. We need to tax them!" Who are you to say someone makes "too much" money? What would you do with that money? Redistribute it, possibly to yourself? That's called Communism, and it brings everyone down. Capitalism at least attempts to bring everyone up, although then we have idiots who hoard their wealth (either due to avarice or our oppressive taxation system) instead of spending it so it can remain in the economy, and *that* is what causes income and social inequality.

 

1. Eliminate all corporate taxes.

Reasons - promote domestic business investment, end the double taxation in US, corporations don't pay tax anyway because they lobby congress to get special tax deductions, it ELIMINATES ALL MONEY IN POLITICS (no reason to lobby congress for special treatment because they would no longer pay any tax) so politicians would be more likely to listen to the people instead of business leaders. No reason for businesses to be involved with influencing elections. If the jobs don't come home as I think they would, then implement tariffs on imported goods and tell the WTO to jump off a bridge.


2. Impose flat tax on all individual income, dividends AND STOCK APPRECIATION (taxed if it appreciates not when selling it). NO DEDUCTIONS.

Reasons - simple one page tax form, abolish the IRS, to promote savings instead of spending (to get the deduction), to eliminate progressive tax rates, to eliminate the ability to hide wealth gains in stocks when they are not sold.


3. Eliminate tax withholdings from paychecks

Reason - To make citizens take money from their pockets to pay taxes, which should make them more angry when government does not act fiscally responsible



State taxes would be the same structure. I can't think of anything else that would be needed.

 

The transaction tax on your hypothetical $20,000 diamond exchange would be $40 per transaction or $80. $80 on $40,000 in transactions is a trivial amount, pocket change, certainly far far less than the non-refundable sales tax you would have paid when you bought the diamond in the first place which, depending on where you were, could be anywhere from $500-900. In order for you to pay the same $500 in transaction taxes you would have to spend $250,000 but I guess you believe that paying $500 in sales tax to buy a $20,000 diamond is somehow better.

Taxing money arbitrarily, like for example, on what it is spent on or how it is spent or who spends it or whose hands it ends up in is seriously damaging to the economy, distorting economic decision making, skewing spending and investment with the result that a large amount of economic activity is not based on market economics. Taxes on profits is a prime example of arbitrary taxation since the standard for what is considered profit is so completely arbitrary that many of the wealthiest people and corporations on the planet pay little to no taxes on enormous profits.

Sweden's financial transaction tax experiment failed because the tax was more than trivial and its financial market is quite small and dominated by international firms that could easily move their business away. The EU is about to adopt a financial transaction tax that will be far more difficult for the financial industry to flee from. It is likely that Sweden will reimpose its transaction tax when the EU tax begins.

Anyway, what I am proposing has very little in common with these financial transaction taxes which will introduce even more arbitrary distortion into the economy. My idea would tax all economic activity and because of that it can be trivial and raise enormous revenues while eliminating the gross distortions in the economy created by arbitrary taxation.

 

You're not thinking...$30,000 per year, accumulating year after year, on a $600K property, in 10 short years the seller will need to pay $300K in deferred taxation...good luck collecting that!

Maybe the asset appreciates 3% per year but you want to take 5% per year for taxation...what would be the motivation to own property?

When you tax property, who is paying this tax...well it is people and corporations and business owners. Every penny you tax people and business comes out of the economy so there is no gain in terms of the economy. Where does 100% of taxation dollars come from...people and business...the economy...

 

The purpose of owning land would be to open a business on it, or at least have some sort of method to pay the tax. If you don't want to pay the tax, you should rent.

The land values are economic rent, which is the portion of profit due to having a better location. Nobody worked to create land values.

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We've already explained why this would devastate the economy.

 

You have not.
I am waiting for a real economic criticism instead of your vague platitude about not understanding the difference between the velocity of money and wealth accumulation.
Please explain to me how taxing the buying of stocks and bonds and commodities at a tiny tiny amount is more devastating to the economy than taxing the buying of actual goods and services at far higher rates and how having high taxes on the incomes of the people that buy the most goods and services is more beneficial to the world economy than the trading of stocks and bonds and commodities tax free.
Explain that to me. Go into as much detail as you feel necessary. Use your own words, be specific.

 

If there is only $100 actual dollars in the economy, and over the year that same $100 serves in 100 transactions, $10,000 of trade has taken place. If you tax each transaction at 1%, all the $100 in the economy is gone at the end of the year.

Tiny amounts add up. You don't seem to understand the difference between turnover volume and the actual amount of money existing.

Tax value creation, not monetary transactions. There is already taxes on broker commissions and exchange fees.

 

I will provide you with a simple explanation of how economies function:
If you have $100 in actual dollars in the economy and those $100 facilitate $10,000 in transactions that means that every dollar has seemingly changed hands 100 times. More likely is that some of that $100 has changed hands 1,000 times while some has never changed hands. Anyway, a transaction tax of 0.002% would take $20 from the economy, which the government would spend immediately, maintaining the $100 in the economy and contributing to the transaction volume from which it gains its revenue.

Let's now look at a more traditional tax regime, like a tax on income in this $100 economy with $10,000 in transactions. The government's aim is to get its $20 in revenue. All those $10,000 in transactions result in $50 net income for all participants in the economy. The government must tax net income at 40% to gets its $20. Let's look at the retail sales tax, about 1% of current daily transactions is retail sales so $10,000 in total transactions would result in $100 in retail sales. The sales tax would need to be 20%.

It is idiotic to assume that taxing transactions will somehow reduce the total amount of money in the economy. The government does not take taxes and squirrel them away, it spends them, usually immediately.

 

If someone lives in the USA...that someone should be paying for the government which they demand. This applies to all 315 million Americans. Government should not be constructed in such a way that the 315 million Americans cannot fund it and therefore requires 'some' to pay much more than their fair share. This is tantamount to people visiting a theme park in which some people pay nothing, some people pay a small amount, and others pay 10 times as much...yet all of them receive the same services at the theme park. Liberalism could never accept that those paying nothing only have access to some parts of the theme park, while those paying more gain additional access...this is entitlement and since entitlement is free to those making the demands, they are motivated to demand more and more. Conversely those paying the lion's share will demand less and less government. Taxes serve no purpose other than to fund the government which the taxpayers demand...if taxpayers are unwilling to fund the government then government spending needs to be reduced! Trying to extract more and more taxes from the economy to fund bloated government is a fool's game...

 

In bold above, when you take $3 trillion out of the economy in taxation the government will not spend that $3 trillion back into the US economy...perhaps 15-20% will be spent outside of the US economy. If we have a $15 trillion economy and $3 trillion is taxation to federal government (realizing there also are lots of taxes at local and state levels), this is about 20% of the economy (plus the % for local and state governments). Seems to me we lose about $600 billion from the private economy in this annual process. It would be interesting to have a disclosure stating how much of the annual US budget is spent outside of the USA...

 

Really, 15-20% of government spending outside the US is quite a high number, orders of magnitude greater than all foreign aid and state department spending and defence department expenditures in foreign lands. A more likely estimate is 0.5-2%, including payments of interest on the government debt to foreign debt holders.

Estimates from economists who study these things have calculated that government spending generates about 40% of all US consumption spending. This is because the government spends most of its money buying stuff and paying people wages and benefits and the multiplier effect from that type of spending is far greater than other types of economic activity, like stock and bond trading for example which is estimated to generate less than 5% of US consumption spending despite all those high rollers.

In an economy that is dependent on consumption government spending brings far more economic benefit than the mere parsing of tax receipts in a fantasy world of massive government overseas transfers coupled with a deliberate ignorance of the economics of government spending would indicate.

 

$3 trillion in collected taxes means outside spending might be $450 billion to $600 billion...don't see these numbers being too much out of line since annual debt interest alone is $450 billion.

No matter what the actual number might be...government spending is not 100% inside of the USA.

Federal government spending is at $3.9 trillion although taxes are only $3.4 trillion tops. If you actually believe larger government is a good thing solely because it creates consumption and jobs, then why not allow government to spend $5 trillion or more? Which is more beneficial for the economy; jobs created in the private sector or jobs created in government? IMO we should minimize government and maximize the private sector.

Lastly, when government spends $17 trillion more than they receive in taxation, all of this wild spending creates a false economy. In the last 8-9 years government has spent $500 billion to $1.4 trillion more each year than they have...who would even know what the true economy looks like? Here's a test you can do...immediately end all deficit spending and cap government spending increases equal to annual inflation...give it a couple of years to sink in and then talk about how great or poor the US economy truly might be...

 

This is my favorite thread, because of all the bad ideas!
If I were to get creative, I would issue a flat tax with a progressive super based on windfall.

If I were to be realistic, I would have a lower progressive tax, with four brackets, divided into a further three supers per bracket.

 

And would your tax system proposals have all Americans paying taxes?

 

40% is a good number. I think that most of that burden should be carried by the top 10% income wise. I don't think a millionaire or billionaire needs the governments protection. They have the money to take care of themselves.

The three big money swallowing areas in my budget would be security, health care and education. The laws should in my opinion have a few objectives:

1. protect the individual from other individuals
2. protect the individual from big business interests
3. protect the individual from the government
4. protect the individual from the community
5. protect the community from other communities
6. protect the community from big business interests
7. protect the community from the government

If a law doesn't serve any of these objectives it would have to be explained long and hard why it needs to be there. Also I would legalize as much as possible and control it. Gambling, drugs, prostitution, etc. have a market, so if government makes them illegal they just loose money, and spend more money trying to prevent it. Rather control these businesses and make them as safe as possible.

The spending like I said is threefold in my opinion. I think it is in the governments interest, that their citizens don't fear for their security (I know makes it harder to win elections), are healthy (meaning they can work and pay taxes) and have a decent education (making a high income job more likely). Definitely the criteria in education has to be high, to insure that less than 20% of the population holds advanced degrees.

 

100% inheritance tax above $20,000, 10% corporate tax, 10% tax on all income (ordinary or capital gains) with no loopholes or deductions, and the rest would be left up to the state. There would be strict rules about transferring wealth. I would remove the corporate tax and FICA taxes which will incentivize foreign companies to invest here. Healthcare, welfare, and education would be up to the states so that we can have 50 laboratories of innovation. I would also only like to see the disability insurance part of Social Security still in place. I don't believe in the concept of retirement if you're still able to work. If you want to retire in your old age save your own money. Warren Buffet is still going strong in his 80's. For those who can't work anymore, because they get Alzheimer's or something like that they'll go on disability. For states I recommend a high sales tax and an extremely high tax on tobacco.

 

If when I die all that I have worked for, all that I have created, all that I have saved, should be handed over to the government...please explain what would be the incentive for anyone to achieve these things?

Corporate and FICA taxes have little to do with companies moving into the USA...they come here when it is beneficial to their business model. And, most other nations also have corporate taxes so the USA is not unique in this area, although, due solely to politics, the US does have some of the highest corporate tax rates.

It's not possible for the individual states to fund an equitable public education system...many simply do not have the population and tax base for this.

Your idea of people being forced to work beyond retirement age is silly. My father died when he was 95 and was able-bodied and mentally astute until the day he died...you're saying he should have worked until he was 95 years old? People who receive SS paid into SS...it is their money they are receiving in retirement...it's not their fault if government is incapable of managing these programs.

Lastly, you throw out tax numbers but you don't provide any metrics? You have no idea the upside or downside of your preferences? Why do 50-100 million Americans who are currently not paying income taxes continue to complain about income taxes? Why do these same Americans complain about FICA taxes when these same people demand SS and Medicare at retirement? Why change the current system which is working just fine...

 

I would do away with all taxes and let the government print what it needs to operate, subject to better spending oversight. That would be tantamount to a perfectly equal tax on every dollar out there.

 

Interesting you believe the government can freely print money then in the same sentence you say 'subject to better spending oversight'...pretty silly...

 

‘Unpatriotic Loophole’ Targeted by Obama Costs Taxpayers $2 Billion

By Zachary R. Mider Dec 2, 2014

U.S. companies that have already carried out inversions are likely to cost the government a record $2.2 billion or more in lost tax revenue next year, double the amount in 2014, according to calculations based on companies’ financial results.

That doesn’t include the impact of companies that shift their legal addresses abroad in the future, which one Congressional study pegged at about $2 billion a year over the next decade. Since the first inversion in 1982, the deals have cost more than $9.8 billion in inflation-adjusted dollars, the calculations based on data compiled by Bloomberg show.

In an era when tax rates paid by U.S. companies overall have declined, those that inverted reduced their taxes far more than competitors did. They were able to lower their effective tax rates between 6.6 and 17.4 percentage points more than peers that didn’t take a foreign address, the calculations show.

The data highlight how the U.S. government is paying the price for inversions it allowed to happen years or decades earlier. Even if Congress or President Barack Obama, who has called inversions an “unpatriotic tax loophole,” were to stop them today, the erosion of the tax base by past deals will continue to accelerate.

Many inverted companies are using their tax edge to out-compete U.S. rivals or buy them. Actavis Plc, a drugmaker with roots in New Jersey and California, took a legal address in tax-friendly Ireland last year. Since then, it has struck deals to acquire four U.S. competitors and slash their tax bills by hundreds of millions of dollars.

more...

http://www.bloomberg.com/news/2014-...ophole-targeted-by-obama-costs-2-billion.html

 

You don't think the government is freely printing money right now or what? You don't think every dollar that comes off the press is a tax on a dollar you have in your wallet or what?

 

Inversions are not a loophole...they are part of tax laws. If the US does not want company headquarters leaving then change the tax codes in order to compete against other nations tax rates. Calling them 'unpatriotic' is political BS. We live and function today in a global marketplace so in areas in which the US does not compete...change something so the US can compete...instead of the political BS rhetoric. This is yet another example in which Americans and politicians are incapable of doing what's in the best interest of the USA, it's industries and it's people...incapable of finding long-term consensus and instead politics and ignorance as usual...

 

Those printed dollars dilute the value of the dollar and increase US debt so they are not free dollars. One solution is for so-called Americans to fund the government which they demand to eliminate ongoing deficit spending...but Americans refuse to do this. The same Americans whine and complain which forces idiot politicians to keep spending debt money. Americans are greedy self-serving hounds with zero concern about creating more debt and passing this debt burden to many...many future generations to pay...it's quite pathetic...

 

Right, they are the same as a tax on your dollars. Which is why I think the government should print the dollars it needs and not tax our incomes.

 

What you are saying makes no sense??