Ideas on how to properly tax and spend

I like a big, fat, juicy government doing lots of things for the people. Parks, libraries,welfare for all and so on. I want it all. Of course if we went 100%, we would be communist, but I don't want to be communist because I like more than one brand of toilet paper.

I am willing to go 60%. I think that if we taxed everyone 60% on their income- and doubled the corporate tax rate, we could have it both ways. Of course we wouldn't have much money left over.

What's the magic formula and how can we include settling the National Debt into the equation?

Feel free to go into details with your ideas. Keep the one liners to yourselves, folks.

 

Why do you assume income should be the tax base? There are two fundamental and widely accepted principles of taxation policy: ability to pay, and beneficiary pay. Income is not strongly related to either of them. IMO you have meekly accepted the industriously repeated lie that income is somehow the natural thing to tax.

 

Yes- and you made half a post: you pointed out the problem but offered no solution or input apart from criticism. This forum could use less of that.

 

For the time being I want to eliminate all corporate income, social payroll, customs, excise, gift, estate, luxury, and sin taxes, and shift the revenue-generating responsibilities for the individual republics comprising the United States to the federal level. Set the marginal individual income taxes to progressive brackets with the lowest starting at 10% and then rising by increments of 20% until reaching 90% - and don't include any exceptions or deductions to the code. Rates should not differ based on marriage status or how many dependents are in the person's care. All the income bracket floors and ceilings ought to float, being adjusted for inflation or deflation each year rather than locked at fixed values.

I reckon the income to be taxed for each individual should be the sum of all monies procured that year from gifts, capital gains, and payments received in exchange for labour. I think the tax should apply to all denizens of the United States but not to citizens who are living abroad for more than six months' time and as a result ought to pay into and receive most of their benefits from the programs of whatever state they happen to fall under the territorial jurisdiction of - well, except for all our diplomatic and military service-persons and their support personnel, who need to pay their U.S. taxes and should obviously be kept in the loop on our native, domestic collection of public goods and benefits.

The federal government would first cover its expenses from the revenue obtained by it each year and then apportion the remaining sum to the individual republics at percentages proportional to the percentages of federal revenue the denizens of the republics previously sent in (e.g., if folks living in Montana contribute 1% of income tax revenue, 1% of all remaining tax dollars will be sent back for Montana to use as it deems fit, within constitutional bounds). Individual counties, parishes, municipalities, etc. should be permitted to collect taxes in accordance to the laws of their respective republics so long as they tax none of the same sources of income as the feds and do not tax any welfare benefits.

Rates of tax ought to change if there is too much or little revenue to balance the budget, and if the federal government takes too much of the tax revenue for its own purposes we ought to enact amendments to the constitution for tightening the constitutional limits set on its power, so as to delegate more responsibilities away from the federal tier to the several republics. Of course, these policies are not well tailored to address revenue generation for the U.S. as it is today. I am looking ahead to if/when the country switches over to a socialist economy and scraps the entire liberal workfare regime. The defense budget would be quite a bit smaller, Social Security and Medicare would no longer exist, many regulatory responsibilities would be more decentralized than they are today, and a basic minimum income would replace nearly all of our current targeted, means-tested benefits, making for a somewhat "smaller" federal government than we have today.

Lots of left-leaning people will disagree with me on this, but I reckon some basic controls on labour compensation in the cooperatives and workplace democracy would be better for the economy in the long-run than burdening businesses with special taxes, complex regulatory obligations, or otherwise using the tax code as the main tool by which to moderate the amount of income inequality in society. I sort of stand halfway between proper liberals and socialists on many issues. xD

 

Oi, as an added note that I forgot before, I also favour a provision that allows the individual to choose between the aforementioned tax calculation scheme or paying a 50% flat tax on all the same forms of income, to avoid unfairly overburdening inheritance recipients and the highest income earners with heavy tax.

 

My point was that you were asking the wrong question: "How much of our income should be taxed away."

You could start with two distinct issues: what government should do, and how it should be paid for. I've already pointed you to the answer to the second one: ability to pay, and beneficiary pay. These principles of public finance are well known and not controversial, except to economic ignorami. If you like, we could quickly go through the proof that the principles imply taxing the value of government-issued and -enforced privileges like land titles, IP monopolies, union and professional monopolies, and private banks' issuance of debt money, but not income, corporate profits, sales, capital gains, consumption, movable capital, inheritances (or estates) or real estate improvements. That would leave the more interesting and difficult question of what government should do.

Mkay?

 

See my response to jmpet. You have assumed income taxation but have provided no rationale for it. The reason for this is that you cannot provide a plausible logical, economic or ethical rationale for it. No one can, and no one ever will.

Again, you are just telling us what, not why, because, I suspect, there is no why.

 

I'm not supporting the 9-9-9 plan, but our tax system should be varied and low, in each form. We really do need a sales tax. Most people decry that it's a regressive tax (to which I say "w/e), but sales taxes are far better for the economy, and a weak economy hurts the poor more than taxes on income they wouldn't have if they were unemployed.

Basically, when you tax personal and corporate income, what you're doing is adding costs to production. This makes it more expensive to produce in our country, and actually gives foreign companies an advantage against American companies in America! (as well as elsewhere) Since we have so many imports, a sales tax actually raises money when people buy both foreign and domestic products, but you can never levy an income tax on foreign labor. As for it being regressive, we could create a system such so that only the first x_ amount of purchases would be taxed, either with accounts or with a credit. Not ideal, but still better for us than an income tax and enough to shut sissies up.

Income taxes should be as flat as possible, w/o all the loopholes and advantages we have. If we had a flat income tax, we could fund the pre-2008 goverment with a 19-20% tax rate on all income, and nothing else (no SS, medicare taxes, etc.). A flat tax would be beneficial because the IRS wouldn't need to be so large, freeing up billions in expenditures, and because the roughly 1% of US workers who are accountants or auditors would mostly become obsolete. This is (on the tax side) an unproductive profession, we only need so many because our tax system is so f***ed up no one can understand it, and they make up 1%.

If we had a 10% income tax, a 10% corporate tax, a 10% sales tax, a 10% capital gains tax, 50% tax on narcotics, and a 10% inheritance tax (on inheritances received by the individual over a certain large amount, such as $5mil fixed to inflation), we'd make our economy more productive, more competitive, and be better able to start paying down the debt.

- - - Updated - - -

yes Roy, we get it, no one can ever disagree with you and be rationale. You're so smart.

 

Well, the state is useful for mediating interpersonal conflicts of interest but to do so needs resources with which to fill that role. Money is attractive to gather in this case, for it can be exchanged for whatever other resources are needed by the state, as opposed to having it conscript folks into service and confiscate goods directly from businesses and consumers.

Taxing land makes little sense to me. The number of units of it a person owns is not a good indicator of their ability to pay, nor is it progressive in nature. People who own farms, ranches, factories, large retail stores, apartment buildings, and so on will pass on the cost of taxation to customers who will then in turn foot the bills out of their respective incomes in a relatively regressive fashion. As for having a more broadly defined property tax, how can we cheaply and efficiently calculate how much the material assets owned by each person are worth in terms of dollar amounts? There is also the problem of people getting priced out of homes that have stayed in their families for generations as property values rise over time, and conservation-minded individuals getting priced out of acreage because the land is not being thoroughly developed and heavily utilized so as to make its ownership fruitful to the owner(s).

I suppose sales taxes could be made a decent alternative to the income tax, in comparison, but the impression I get is that poorer folk spend a much higher percentage of their money than affluent folk, which in practice would mean that the state most heavily taxes those for whom money is of the greatest marginal utility while most lightly taxing those for whom the marginal utility of money is least. Aside from that seeming unfair to me on a fundamental level, I think such a policy would undercut social mobility by making it harder for people at the lower levels of income to save up a hearty portion of their incomes and plan for the future... in effect reinforcing the phenomenon some refer to as the "culture of poverty."

The negative income tax would appeal to me if not for my instance on being compassionate enough to guarantee every individual in society enough money to survive, whereas heavily focusing on capital gains or corporate taxation seem likely to detrimentally affect economic performance by discouraging investment and driving down wages, the former to the effect of slowing growth and the latter to a once again regressive sapping of money disproportionately from less- than-affluent segments of society to the state. The VAT, sales tax, wealth tax, and pay-as-you-go schemes for using state goods and services sound needlessly complicated and time-consuming for folks to calculate and comply with in practice.

For their parts, tariffs and duties needlessly erect trade barriers and encourage nationalistic economic behavior, both of which I consider very undesirable.

Of course, these opinions are just that. Likewise for whether the state should exist at all or in trying to defend a position that there should be no government. When push comes to shove we all appear to be using imperfect mental capabilities and imperfect supplies of information to solve problems and make judgements about what is right or wrong and true or false. If you have an argument of your own to make about who should be taxed how much, and why, I'll gladly hear you out and take that position into serious consideration. Otherwise, the income tax strikes me as being a happy compromise of simplicity versus ability to pay. I'm no expert on economics either way and surely have more to learn.

 

That is because you haven't taken the time to study the benefits of land value taxation. One of the great benefits of taxing land is that land is fixed in supply. So taxing land, even to the lands full rental value, will not create scarcity.

Forget the “number of units owned” because that is not what land value taxation is based on.

Land value taxation is based on the “value” of the land which is owned, and a person who owns $10 million of land by value can definitely afford to pay a large tax bill – if he doesn't have the cash on hand, then he can always sell some of his land holdings, and next year his tax bill will be less.

This is false. Land value taxes cannot be passed to consumers or tenants, nor can it reduce the wages of labor. This is because as land value taxes increase, the purchase prices of land decreases. So while the tax cost of being a landowner will increase substantially, the entry price of becoming a landowner drops proportionally. Land value taxation reduces the cost of buying land. That drastic reduction in the cost of buying land brings in exactly enough competitors to prevent the landowner from passing the cost of the tax to consumers. If you can't understand why land value taxes would reduce the cost of buying land then you can read the following:

 

I think there should be only one single tax in all the land: federal excise. All other forms of taxation should disappear and taxes should be paid at point of purchase. Basically, any time money changes hands for any reason (excluding legitimate gifts under a certain threshold), the tax would be applied. The rate would be set to fund the necessary and appropriate functions of government and nothing more.We can reasonably debate what that is exactly. I would also not allow government to borrow except in truly adverse circumstances, and only if there is a clear plan to repayment. The revenues collected would then be split between the federal government and the states, each state receiving a bloc of funds in proportion to its number of congressional districts. CA would get the most, while Wyoming, Rhode Island, North Dakota, etc.. would get the least. And as this is the only taxing mechanism, there are no more backroom deals... no more pork. Every citizen contributes and equal share of their commerce to the common treasury, and every citizens revceives and equal share of the benefit. The states would, however, have complete autonomy in the disposition of their funds, providing the expenditures are constitutional.

Taxing income is the wrong approach. Taxing wealth is the wrong approach. Taxing real property is the wrong approach. Transaction-based taxation is the right approach because the whole system really exists to support commercial infrastructure in the first place, and to me taxing the transactions part and parcel to that infrastructure is natural, logical, and fair.

 

It is a proven fact that efficient government spending increases land values by the amount of the spending or more. So why is it "fair" to tax the guy who flips hamburgers for a living, based on his consumption, in order to give it to government, who will spend on services and infrastructure that will only make some landowner richer. Why should I pay a consumption tax that will be spent by government on a new roadway that will make some other landowner into an instant millionaire?

Taxing people based on their production or consumption in order to provide government services and infrastructure that will make landowners richer is not “natural, logical, and fair” it is extortion.

 

I believe providing for the general welfare implies providing for the general prosperity, and that all public policies should have a positive multiplier effect to be considered an investment in the general welfare.

 

Taxation is the cost of living in a civilized society. The burger-flipper enjoys the same protections of that civilization as the evil rich guy.

 

I believe he is referring to the marginal utility of income regarding taxation. A dollar in tax to a person who makes eight dollars an hour is much more of burden to that person than someone who pays a similar dollar in tax, but makes over 100 dollars an hour. Why should the least wealthy be more heavily burdened with their taxes?

 

It doesn't have to be that way. By simply changing a few laws, taxation could be made into the cost of holding government issued and enforced privileges. People who hold privileges are receiving extra protections from government, by definition. Since they are receiving extraordinary protections they should pay for the special benefits they receive.

No the evil rich guy is holding government issued and enforced privileges, which afford him extraordinary protections, usually at the cost of ordinary peoples natural rights.

What you are claiming could only be true in a system where privileges are abolished or their full advantages are taxed away. In any system where privilege exists the privileged are receiving more from government than the ordinary citizen, and more than they are paying for in taxes.

 

I believe wartime tax rates, even for a War on Drugs will end our elected representatives penchant for mediocre public policies that are merely responses to political passions of the moment, instead of careful planning for the general welfare and common defense.

 

I still like my mathematical solution: we derive X as the average yearly income the average American worker makes in a year. If you make 5X, you're taxed more. 10X, 20X 50X, 100X and finally 365X. Is everyone happy with that?

 

I believe we should not confide in the sincerity of the right over any protestations regarding progressive taxes on incomes. The wealthier are taxed at the rate they are "worth" under our form of Capitalism.

 

But the burger flipper already pays the landowner full market value for those protections. Tax his income or consumption, and he is paying for them twice so that the landowner can pocket one of the payments in return for exactly nothing.

 

Not sure I understand your point. Can you explain what you mean that the burger flipper is paying the landowner for protections?

- - - Updated - - -

What purpose would this serve?

 

That is only because you are trying not to understand it:

See? No one has suggested taxing land by unit area. Taxing land means taxing its VALUE. It is an ad valorem tax, like sales tax or income tax.

The value of it that they own is an excellent indicator of their ability to pay: it is precisely the value of the subsidy they can expect to pocket for doing nothing.

False. It is the most progressive form of taxation available, because unlike other taxes, its burden cannot be shifted off the landowner. This is a fact of economics that has been known for 200 years.

False. A tax on land value cannot be passed on to employees, consumers, suppliers, or anyone else. It is borne exclusively by the landowner. This is a fact of economics that has been known for 200 years, and is not seriously disputed by any competent economist. It is also the only real reason we do not already have land value taxation: landowners know they cannot avoid it, and consequently will not permit it.

A computer program can calculate land value quite accurately, and very, very cheaply.

That's called the market stimulating more efficient allocation. Funny how apologists for privilege are all for the market, except when it declines to give them something for nothing.

With land value taxation, the free market would ensure that the highest-value sites were thoroughly utilized, taking the pressure off low-value sites, thus allowing conservation-minded individuals to hold their rural acreage out of use at minimal cost, and eliminating the current pressure to develop low-value land that is less suitable for development than high-value land being held vacant for speculation.

You either favor free markets and efficient allocation or you don't. You don't. Simple.

It is hellaciously, proverbially complex, and has no strong relation to ability to pay... as proved by the fact that the super-duper uber-rich pay a LOWER true, effective rate of income tax than the merely rich.

geofree and I are doing what we can.

 

The burger flipper has to live somewhere near his job. What he has to pay the landowner for use of the land he lives on is determined by the services and infrastructure government provides and the opportunities and amenities the community provides at that location. The burger flipper is paying the landowner full market value for these things, but the landowner is not providing them. Government and the community are. So if you require the burger flipper to pay taxes to fund these things, he is paying for them twice so that the landowner can pocket one of the payments in return for exactly nothing. Land value measures the size of the welfare subsidy giveaway the landowner can expect to receive by charging the burger flipper for the things the burger flipper's taxes just paid for.

 

I've already explained why your system is worthless and indefensible: it does not come close to fulfilling either of the two most fundamental and widely accepted principles of sound taxation policy.

 

Please pardon my lack of insight on this issue - I am often slow to pick up on concepts that are so unfamiliar and foreign within the context of my prior experiences and understanding of the world around me.


[MENTION=13235]geofree[/MENTION]:

You raise several interesting points that pique my curiosity. You mention the tax would be based on the value of land owned. How would we calculate the land’s value, given the relativity of value from one person to the next? Would it just be whatever the owner initially paid for it, adjusted for inflation, or something else? I am also a bit confused concerning why the costs of the tax wouldn’t be passed on to employees or consumers in the case of agriculture, industry, and commerce – this in spite of your explanation of how a land tax would lower barriers to market entry, make land cheaper to purchase, and not transfer any burden to purchasers of land – i.e., no matter how expensive the land tax is, wouldn’t the owner generate the revenue needed to pay the tax by charging customers more for goods and services rendered at their place of business or by more modestly compensating their employees? If that makes a business uncompetitive it would simply encourage the owner(s) to relocate to somewhere where the tax is less expensive, but they would nonetheless continue to take that cost out of others’ pockets rather than let it diminish their own profit margins, ya?

I ask because I would like to better understand, mind you, not out of cynicism toward the concept.


[MENTION=13382]Roy L[/MENTION]:

With all due respect, you do not know who I am and are poorly qualified to be telling me why I do or do not know much about this particular topic.

That being said, how does a land tax act in a highly progressive manner and reflect ability to pay, when - to use a hypothetical – a farmer may own half a million dollars’ worth of land and a lot of capital needed to run their operations but only generate a modest $20,000 to $30,000 of net gain each year on which to live while an individual who nets over a million dollars each year could largely (though not entirely, due to indirect effects of the tax) avoid paying altogether by renting an apartment and operating their business on a small, relatively low-value parcel of land? I haven’t entirely been able to wrap my head around your line of thought yet - the reasoning you are using is not intuitively obvious to me – and I would appreciate it if you could elaborate, so as to help me dispel this concern. For now the overall impact of this tax still looks similar to that of the sales tax.

In regards to computers calculating land values at low cost and great accuracy, what criteria would be used and how would these not be any more susceptible than other taxes from being warped by special interests to reduce the costs of tax to the most privileged of landowners to those owners of land who are least privileged? I realize this is most likely due to my lack of expertise in the field of economics, but I do not yet grasp how taxation of land is in any way preferable to the income tax scheme I prefer now unless one considers land holdings a better gauge of how much capital one is likely to own than income. Perhaps it is because I live in a rural area, but all the rich folk I know do their business and reside on parcels of land of lesser value than the working and middle class farmers and ranchers I know who reside well outside of city limits. On the other hand, maybe if vast organizations ran all farming and ranching operations courtesy of land taxation and market forces working in conjunction with one another the costs would be distributed more justifiably?

On a related note I agree that you’ve exposed a residual, senselessly protectionist sentiment in my point of view when it comes to people getting priced out of homes. After some rumination on the matter I have decided to completely cede that point and embrace the market’s destructive potential in increasing the efficiency of allocation in this instance. Given the potentially nasty environmental impacts of such reallocation, however, if land taxes were implemented on the sort of scale being suggested here I would be in favor of the state buying out and subsequently refusing to sell vast expanses of land so as to keep them off the market and prevent the anthropocentrism of private actors from ravaging the land without regard for the interests of future generations and other forms of life.

In regards to your criticism of income taxation as it pertains to ability to pay, I agree given the current circumstances but strive for the establishment of social and political conditions that would render those points hollow. Of course, that does open up a lot of possibilities for other forms of taxation to be experimented with in the meanwhile, which is in part why I am curious about the alternatives being discussed here.


Aside from that, one of Bow to the Robots’ points earlier on the thread got me thinking a bit, as well. If only landowners directly paid tax, and the costs of paying it were covered by diffusely spreading out changes in prices throughout society, wouldn’t the People become a bit detached from associating the “size” of their government from the quantity of resources that must be paid for financing its operations? If so, I wonder whether it would be a good or bad thing in the long run - with potential either for an entitlement society that thinks it can have the land tax raised however much it wants to get more “free” social benefits, or more optimistically a culture where that detachment from being highly aware of the costs allows individuals to be less biased in their appraisals of what roles the state should have and what costs are acceptable for it to fulfill them.