Posted on 07/10/2014 5:40:08 AM PDT by 1rudeboy
July 1 might go down in history as the beginning of the end of the comprehensive, progressive income tax. A progressive income tax, in which the government attempts to tax all labor income and capital income, such as interest, dividends and capital gains more than once, cannot help becoming so complex that it eventually dies of its own weight. This is particularly true when the government attempts to tax the worldwide income of its “tax persons” rather than the income located in its own territory. The complexity is caused by the never-ending attempt to define what income is and what should be exempt (loopholes).
Press reports now state that the U.S. tax code is more than 77,000 pages and growing at a rapid rate. [] When laws are too complex and increasingly subjective in their interpretation, it inevitably leads to corruption. All but the willfully blind now understand that the IRS has both become corrupt and incompetent.
On July 1, the IRS extended its reach to perhaps 100,000 foreign financial institutions and millions of other non-Americans who receive or make payments to Americans. This global power grab was the logical extension of the effort to tax the worldwide income of all Americans, which requires the IRS to know about all payments to and from the United States and which financial institutions are involved in the transmittal and holding of accounts. The paperwork is unending and incomprehensible. (If you think I am overstating the case, download the new “W-8BREN-E” tax form from IRS.gov, which certain foreign recipients of U.S. payments are required to complete. Even tax lawyers tell me that it is nearly impossible to fill out the form without perjuring oneself, owing to the form’s endless ambiguity and lack of clarity.)
(Excerpt) Read more at washingtontimes.com ...
“Our military costs should be cut to a level that would allow us to defend the US from attacks but with enough room to allow purchase of developments for future needs.”
The military budget is a fairly small percentage of Federal spending. Entitlements are the big problem, and it’s a tough sell to cut them.
Ths article assumes that more efficient governance and better economic conditions for the masses are a desired end result for the kakistocrats.
Really?
That is very unfair to small states and will never pass.I read something similar where the Fed taxes the states, instead of individuals and it was based on a percentage of the state's GDP, instead of apportioned according to congressmen.
The state's would individually decide how to collect the revenue to pay their fed tax bill. It would render a market driven taxing environment. The states with the better tax scheme would see an influx of residents and business, whereas the states with an atrocious tax scheme would drive taxpayers away. The result would be that the states seeing an influx of taxpayers & business would realize a growth in GDP and the Fed's percentage would generate more revenue as well.
I don't know if that would generate enough revenue to fund the Fed - perhaps the Fed could learn to live within it's means (That's a joke, folks!). But I do like the idea of a market-driven approach to taxes. Let the states compete against each other --AND-- any taxing disagreements would be between the state and the Fed, which are far more equal terms than the Fed against joe citizen all by his lonesome.
“It is and never was...”
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I see this kind of phrase quite often now, in my view it is a contradiction. Do you actually mean, “It is NOT and never HAS BEEN”?
Absolutely false. A regressive tax is one where the average tax rate falls as income rises. If you plot taxes on the vertical axis and income on the horizontal axis, a regressive tax must have a positive intercept on the vertical axis. (The slope of a line from the origin to a point on the tax function measures the average tax rate.) A progressive tax rate must have an intercept on the horizontal axis. A true flat tax like I want to see, with no prebate, has the linear tax function that passes through the origin with a slope of .17 using Friedman's number, which means it has a constant average tax rate and, hence, cannot be regressive or progressive.
My problem with the prebate is that Congress would get to decide how it is determined and I don't trust them with such a decision. It will become political, just like it is now. Obozo bitches that the rich fat cats take advantage of tax loop holes. Really? Who the hell does he think wrote the tax code? Congress put those holes there with full knowledge of the political gains to be made for themselves by their existence. No, set a flat tax, teach the misinformed it's not regressive, and mail your tax form in on a postcard.
What a minute. How many companies have bottom line return over 17%? Maybe Goldman Sachs, but not your local grocery store.
Suppose a grocery store sells $10M of stuff. They have expenses of $9M. What's their income? $10M or $1M? If $10M, they have to pay $1.7M in tax, which is greater than their expected income as calculated today.
If a business cannot deduct expenses, this becomes just a sales tax, and not an income tax at all as far as business is concerned.
I do get it. The 1040EZ is simple because wage income is simple. Business 'income' is never simple, unless you define income = gross receipts, which nobody does when talking about income tax.
“My problem with the prebate is that Congress would get to decide how it is determined and I don’t trust them with such a decision. It will become political, just like it is now.”
Congress could mess with anything, including a flat tax. “17% is not sufficiently funding the entitlement programs, we are raising it to 25%...no, make that 30%.”
“Obozo bitches that the rich fat cats take advantage of tax loop holes. Really? Who the hell does he think wrote the tax code? Congress put those holes there with full knowledge of the political gains to be made for themselves by their existence.”
It’s the Golden Rule - “Those who have the gold make the rules.” It’s pretty much the way things have always worked, and it’s highly unlikely to change.
“No, set a flat tax, teach the misinformed it’s not regressive, and mail your tax form in on a postcard.”
It is more regressive, in that poor people spend a much higher percentage of their income on necessities. They can much less afford sending a full 17% of their income to the government. What you’re proposing would instantly send millions of people into poverty, and will never fly. Sorry about that.
You’d better learn to love the Fair Tax, which has the added advantage of eliminating IRS snooping into anyone’s life. Your proposal doesn’t do that.
Sounds fine to me — I’m moving to FL.
Actually, Milton Friedman favored a negative income tax so his preferred tax function was linear with a negative vertical intercept. This, of course, makes the tax system “progressive” (the average tax rate rises with income) but much simpler than “progressive” tax system with nonlinear tax functions.
Most flat (income) tax systems I have read about over the years eliminate the corporate income tax altogether. In those schemes, income taxes are levied on individuals only, and that includes “business” income distributed in the form of salaries, capital gains, profits, bonuses, or dividends - all taxed at the same (flat) rate. Retained business income is not taxed until it is distributed to an individual.
You’re confusing gross sales with net income. Of course businesses would be allow to deduct operating expenses from gross revenues. The law would recognize the rules as set down by the National Accounting Standards Board. Taxes would be paid on net income.
That's the attitude that got us into this mess. My message is start changing or lose your job.
That is likely true, but it has nothing to do with the regressivity of a tax. If you're unhappy with your income relative to what you can buy, do something to make yourself more productive and worth more in the market. When I hear someone bitch that they've been making minimum wage for 8 years, that says a lot less about their wage than it does about their motivation to improve themselves. We've tried the "give them a fish" for almost 50 years now and things are worse, not better. Can't afford to go to college or a trade school? Join the military...perhaps the best and most under-utilized educational institution in the world.
I lived on $190/month while I was in grad school and my high school friends were driving Corvettes. But, by investing in myself, my life style hop-scotched theirs after 5 years of grad school. Too many people make stupid decisions early in their life and then expect the rest of us to pay for that decision through our taxes. It's the wrong message to send to young kids.
Actually, I was lucky enough to have dinner on two occasions with Friedman. His original position was a flat tax passing through the origin. When he started advising Reagan, Reagan told him that, politically, that would never fly, which is when he conceded to the negative intercept. It also allowed Reagan to say that he was still keeping the progressive tax structure.
Friedman proposed a negative income tax in Chapter XII of Capitalism & Freedom, published in 1962. In that chapter, however, he does not tie the NIT to a flat tax but allows that the subsidy (negative tax) rate could be “graduated just as the tax rates above the exemption are.”
I’d have to check, but in his Free To Choose documentary, I believe you will find that he changed from the NIT to a flat tax, and a big part of that was because he believed it would remove some of the politics from setting taxes.
“That is likely true, but it has nothing to do with the regressivity of a tax. If you’re unhappy with your income relative to what you can buy, do something to make yourself more productive and worth more in the market. When I hear someone bitch that they’ve been making minimum wage for 8 years, that says a lot less about their wage than it does about their motivation to improve themselves. We’ve tried the “give them a fish” for almost 50 years now and things are worse, not better.”
There will still be some people that, for whatever reason, are near the poverty line. Furthermore, this is not “giving” them anything, it is not taking as much away.
“Can’t afford to go to college or a trade school? Join the military...perhaps the best and most under-utilized educational institution in the world.”
It will remain under-utilized for quite a while, as it downsizes after the recent wars. They aren’t even letting existing personnel reenlist in most cases. They are only taking the cream of the crop as far as new recruits go.
“I lived on $190/month while I was in grad school and my high school friends were driving Corvettes. But, by investing in myself, my life style hop-scotched theirs after 5 years of grad school. Too many people make stupid decisions early in their life and then expect the rest of us to pay for that decision through our taxes. It’s the wrong message to send to young kids.”
Taking less money from people is not making you pay for anything.
Regardless, a Fair Tax like arrangement (consumption tax) is a far better idea than a flat income tax. Such a flat tax would still needing oversight from the IRS for one thing.
Any tax is going to need some oversight, it’s just substantially less than the current system. I would rather have the Fair Tax than the current system, but still prefer a flat tax. The prebate will bother me as long as politicians get to set it.
Under the current system is it absolutely taking away from me. At the present time, 51% of the people have net paychecks from the gov’t and entitlements is the largest component. The top 10% of income earners pay 71% of the Federal Tax bill. Try telling them that nothing is being taken away from them. Obozo talks about “paying their fair share”. I agree...the rich need a tax break, and doing so would do more for job creation than almost anything else. How many of you were hired by a poor person? The vast majority of poor people are so because of poor choices, especially when it comes to staying in school. I don’t mind helping them over a rough spot, but 99 weeks? Citibank had job openings and actually had respondents who asked if they could start in 4 months because that’s when their unemployment benefits ran out.
There will always be some people who cannot work for various reasons and I realize they need to be taken care of. However, our current system goes overboard. Come on...free cell phones? I prefer the German system where, if you can fog a mirror, you show up for work cleaning toilets or whatever in public buildings. You earn a gov’t welfare check. It’s surprising how efficient people become at finding new work under such a system.
Dr, Rahn is wrong, of course, in advocating for a flat income tax. The FairTax (http://www.fairtax.org) is a MUCH better solution!
He is, however, to be commended: the fact that such a heavy Inside-the-Beltway-hitter has brought the subject up is worthy of note.
He makes several great points in favor of abolishing the current system — his mistake is in advocating for a similar, though simpler, system which keeps most of the evil parts of the present code intact. The only thing that really changes with the flat income tax is the rate, and just how long do you think that it will stay low and flat?
To find out how to help us replace the income tax with the FairTax and abolish the IRS, please see http://www.fairtax.org.
FairTax bump!
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