evil, the 16th or the 17th?
"less taxes, Walker Watch: Wisconsin ranked at top in tax cuts in 2014'
Posted on 01/07/2015 7:18:59 AM PST by SeekAndFind
Everyone wants tax reform. At least we pay lip service to the idea that the U.S. economy would be better off with lower rates, a simpler code, and fewer loopholes. Yet something everyone claims to support has proved elusive time and again. Why?
For starters, it's not clear that everyone's idea of tax reform is the same. Corporations want lower statutory rates; they are less enthusiastic when it comes to sacrificing their bought-and-paid-for tax breaks. Liberals want an even more progressive tax code, with higher rates on the wealthy. Conservatives want to reduce anything that looks, smells, or acts like a tax. And libertarians want a flat tax with no deductions and no subsidies for favored industries.
That said, the new year brings hopes for bipartisan agreement on a number of issues, including tax reform. The Republican controlled Congress plans to act quickly on a number of issues in the hopes of scoring some quick wins: the Keystone XL Pipeline; adjustments to the Affordable Care Act, including a repeal of the medical devices tax; infrastructure investment; new trade agreements, which congressional Democrats oppose but President Barack Obama supports; and Iranian sanctions.
As for tax reform—real reform, not tweaks around the edges—I'd advise lowering your expectations. On the corporate side, the U.S. boasts the highest federal income tax rate (35 percent) among developed nations. Lower that rate, and corporations have a lot less incentive to shift profits overseas.
It sounds like a win-win… until you get to the fine print. If corporate tax reform is to pay for itself, certain exemptions and deductions will have to go. That's where the second major hurdle to tax simplification comes in. What is in the national interest is not necessarily in individuals' or businesses' self-interest.
For example, the statutory tax rate is not the same as what corporations pay. (And here you thought GE maintained a 975-person tax department to double-check the math on the corporate return.) In a 2013 report, the General Accounting Office calculated that the effective federal tax rate for profitable U.S. corporations in 2010 was about 13 percent. Throw in foreign, state, and local incomes taxes, and it rises to 17 percent.
Many tax experts doubt the effective rate can be calculated with that degree of accuracy. But for most corporations, the effective rate "is in the 20s and varies greatly from year to year," especially in the wake of losses incurred during the financial crisis and Great Recession, says Martin Sullivan, chief economist at Tax Analysts. What we do know is that "the trend is down as off-shore profit-shifting into tax havens is occurring at an increasing rate," he says.
While tax inversions garnered all the attention last year, largely because of the public disclosure requirement when a U.S. company merges with a foreign entity and incorporates overseas, they represent a small portion of the revenue loss to the U.S. government. "All multi-nationals are doing profit-shifting," Sullivan says.
So lowering the corporate rate makes a good deal of sense in theory. In practice, it's not so clear-cut. If a CEO of a large corporation can exploit tax loopholes to reduce the effective rate to 20 percent, a statutory rate of 25 percent (Republicans' proposed target) or 28 percent (Obama's goal) doesn't maximize shareholder profits.
And that's where the ideal of lower tax rates and minimal loopholes gets mugged by reality. Dave Camp, the former Republican chairman of the House Ways and Means Committee, learned just how tough it is to garner support among his own party and the business community when he introduced his Tax Reform Act of 2014 in February. The cost of lowering the corporate tax rate to a stated 25 percent was, among other things, the elimination of accelerated depreciation, one of the three most costly corporate tax expenditures and something that "would hurt capital formation and manufacturing," Sullivan says.
Some economists question whether accelerated depreciation should be classified as a tax expenditure, defined as any reduction in tax liability as a result of special benefits to particular taxpayers. Labor-intensive firms get to write off employee salaries when they cut payroll checks, says Matt Mitchell, senior research fellow at George Mason University's Mercatus Center. "We shouldn't penalize companies that have to incur capital expenses in order to earn income."
Using individual tax expenditures, which dwarf those available to corporations, to achieve revenue-neutral corporate tax reform is probably a non-starter. Among the costliest tax expenditures, defined as measures that provide tax benefits to particular groups of taxpayers, are: the exclusion of employer-provided health insurance; 401k and other employer plans; and the mortgage interest deduction. Each of these tax breaks has a large, well-funded constituency behind it, willing to fight tooth and nail to maintain its preferential treatment. Sacrifice a tax break for the public good? Let the next fellow do it first.
The argument in favor of a broad tax base with fewer tax preferences is pretty straight-forward: It would increase economic efficiency and transparency; it would reduce the hours devoted to tax compliance and avoidance; and it would be, yes, fairer.
Along the way there would be winners and losers. Unless the public, with its myriad of special interests, is willing to accept short-term pain in exchange for the promised long-term gain of tax reform, the 114th Congress will find its mission impossible.
Why a tax credit for those with no earnings?
There are proposals for a tax credit for everybody. It’s simpler that way - you don’t have to prove your income, which means for a consumption tax (with rebate) that you don’t have to keep any records of your income at all.
Because some can’t abide a non-progressive tax.
And that’s the problem.
You sell me a wagon you don’t use anymore. Is that taxed? Who reports?
Yes. That gives them incentive to vote conservative instead of gibsmedat.
Reduced earnings leads to poverty and economic weakness while reduced consumption leads to savings and to economic strength.When everyone stops buying the product/service you provide, how will that improve your economic conditions and NOT reduce YOUR earnings and lead YOU to poverty?
Whether there should or should not be a regressive tax is a separate issue from the present complexity, compliance cost, intrusiveness and loophole-ridden tax code we have today.
My understanding of the National Retail Sales Tax is that whatever has sales tax today would have the added NRST added to it, such that if there was already a tax reporting requirement for any given transaction prior to the NRST, nothing changes.
Not everyone would stop, and indeed everyone would have more “income” inasmuch as they would no longer have to pay taxes on the income. IOW everyone gets a “raise” upon enactment of the NRST, but goods cost more by a corresponding amount (since the NRST is being proposed as being revenue neutral). In any case, it sure beats having everyone have to pay taxes even if they are trying to save money simply for the fact of earning it, which is far less just.
D.C. isn’t in business for helping it’s in it for the money.
Tax revolt.
Defund the beast.
And we have a WINNER!!
There will no tax reform as long as politicians, of both parties, continue to use the tax code as a way to raise money.
Remember the two major lusts of any politician - personal power and money. Without any money there can be no re-elections hence the lust for personal power goes unquenched.
I doubt we will ever see an organization like AA for politicians to wean them off their uncontrollable lusts.
Nice try but you didn’t answer the question on how YOU would benefit from your pie in the sky plan for everyone else.
Your question presumes something that is not likely to be true. But to answer your question, it means all the time I waste doing taxes I could instead use doing something productive. And so could everyone else.
What’s considered gross income?
It’s easy if you work for someone, what about self employed? Do they get to deduct expenses?
How about landlords? Are they taxed on gross receipts or do they get to deduct expenses?
1) Like...don’t forget the 17th (see #5)
2) IMHO, it’s already illegal, but unenforced by pretzel lawyer logic...the 13th (income taxes are just gradients of slavery)
3) Only if you uncouple the biz from the reams of regulations/etc. to make the U.S. more competitive
4) Like even better. Fair Tax, w/out that stupid pre-bate
5) I’d add, the Fed. bill is proportional to the States, let the State determine how best to pay its part of the bill
1) bingo, and I can see nothing unconstitutional.
...
3) As it stands, are we still not a nation of Laws, not of Men? In this instance, I see no authority to exempt themselves
4) All members of Congress are to be paid by their State respectively. There is no reason for the perks, $$, etc.
I can never decide which is more evil, the 16th or the 17th?
"less taxes, Walker Watch: Wisconsin ranked at top in tax cuts in 2014'
Here is one way we can start. States collect Federal withholdings like an escrow. When Fedzilla starts getting uppity (take amnesty for instance), the state does not release the funds. The states need to hold fedzilla at bay and protect their citizens, “escrow” would be a way to start starving the fed and get it back in line with doing only what it was Constitutionally created to do.
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