Taxation policy

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So basically eliminate all taxes except for the most luxurious products? I doubt very much that you'd be able to reach the previous levels of government income with this system or even come near it. If your goal is to create a neo liberal state then I'm sure this would be a very nice way to proceed but it won't change the fact that this system will benefit those who invest the most, meaning that the greatest benefactors of this system are the rich while the poor suffer most since the government will have to cut down on healthcare and education in order to make up for the reduced government income.

 

I'm all for a flat income tax at the federal & state level. 17% to the feds & 8% to the state. No deductions for anybody, you make $24,000 you pay $6,000 - you make $4,000,000 you pay $1,000,000.
Maybe a small flat sales tax at like 2% - 4%
Get rid of all the others we pay(luxury tax, sin tax, property tax, etc . . .)

 

That's the point, but it's not as wide as you suggest. Clothing is subject to taxes. Restaurant meals are taxed. Most groceries are not taxed, but non essentials, like candy, chips, dips and soda are taxed. There are some taxes on homes at time of purchase, but rent is not taxed. I don't think utilities are taxed, but Cable and Internet access may be taxed (I think they are, but I haven't looked at our bills in those regards).

Only the true basics escape the tax man. Some things that people would claim are needs, like a computer, are taxed.

 

I made my point on redistribution of wealth and taxes here.

 

In reverse order, due to length.

3. Probably depends on the country. In Ireland the rich would make a pretty small proportion of the tax take. There'd be nowhere near the same proportion of very rich as there is in the US though. It's also unheard of for the super rich to remain tax resident, again something that's not necessarily true everwhere.

2. Explained above, sales taxes hit the poor much greater than the rich. The poor pretty much have to spend their entire income, whilst the rich would struggle to do so.

1. It's probably best to split out loopholes from tax breaks. There's plenty of reasons why governments may choose to give tax breaks. There used be a severe shortage of student accomodation in Ireland, which was quickly solved by giving tax relief for new accomodation buildings. These usually seem unfair as it's only the rich who have the money to invest in these schemes and they can reduce their tax rate a lot through careful planning. It's also important that the goverment takes care that they don't extend longer than they are needed and that they have the desired affect. A tax exemption for artistic works ended up applying to U2's earnings and inane biographies by television presenters. These were hardly struggling artists in need of support.

There are of course proper loopholes as well. They arise because people are entitled to have laws set out and to conduct their actions in accordance with these laws. It would cause havoc in the legal system if people could be convicted of breaking laws that weren't enacted at the time. Like Canada we do have a provision to disregard obviously artifical transactions. If there is a commercial reason, which can include seeking to lower the tax payable, then a transaction must be treated as a valid one.

 

But the thing about a Sales tax is that you only pay taxes on what you spend. And even then there aer some things exempt. If you use your money to pay down debts, you aren't paying taxes on that. If you save the money you also don't pay the taxes. Then if you find yourself between jobs, you use that money on tax exempt things, then you still don't pay the taxes...

 

Hopefully everyone agrees that there is a certain tax-burden that a Government has to impose to be able to meet it's commitments (Borrowing and National Debt not-withstanding) The discussion in this thread seems to be about how best to attribute that burden to the public.

I'm happy with a tiered tax system, despite paying the highest band which equates to 41% (Tax and National Insurance) on earnings over £41k (appprox).
There is a cost to basic living - any earning up to this cost of living should be taxed at reduced levels - if at all. If you're not earning this cost of living then the Government should make up the difference but only to a very basic level.
When you've got past this level it gives you a better class of living and you can afford to pay a higher rate of tax - for more expensive items you can afford them, though you may have to save up for a few month or years. At some your wages may progress to the point where you can afford pretty much anything you want to without thinking about it - you don't have to save up for it. As such you can afford a bigger tax burden.

In the UK we don't have this "higher" level of tax for the super-rich, though it has been suggested by people before (usually at about 50%). The problem is that the solution for the super-rich to "avoid" this is to move to a tax-haven and pay even less tax. OK they can only spend a few months a year in the UK, but then they have all the rest of the time to be sunning themselves on an island paradise somewhere. This is a loop-hole that could be closed by saying that earnings in the UK receive tax at UK rates - regardless of where someone lives. The argument is that people might move their business outside of the UK but I find it hard to accept this - afterall they would still be making a proffit in the UK, and not have to go about trying to set up a new market place in a country with different market conditions and competitors.

The proposal at the beginning of the thread is to tax consumption rather than income. I see a few problems with this:

Taxing consumption will heavily penalise families, and the larger the families the higher the penalty. It's probably an over-generalization, but the poor tend to have larger families than the rich.

How would you consider really large purchases - i.e. houses. If you put 40% on the purchase price it's a much bigger jump in costs for the poor than they would be paying currently on a low tax-rate band - I'm guessing this will make the housing market even less affordable than it is now. What about for people renting, does that count as a "purchase"?
Now a thought, from a survey I did on here a while ago, it seemed that most people income went on rent/mortgages (I think it averaged about 40-50%.) I think average "consumable" spending was around 30-40% of income - but I'm working from memory here. This means that to acheive the same level of "tax", a Government would have to be basing their income on that "spend" and ignoring the income someone actually has. I would suggest this would mean VAT would have to be a lot higher than 40% to acheive the same level of taxation.

The other problem will be imports - if you start putting 40% tax on products then buying abroad or even smuggling is likely to increase. This is already seen in the UK to a certain extent with the French "Booze Cruise", but some people now even do their regular shooping in France - the savings in tax more than make up for the cost of the ferry. If the US was to go down this route they'd have to look even more closely at what people bring in - and again I see this benefiting the rich even more - how to you determine if the multi-million pound sparkler on her finger was bought in the USA, or somewhere abroad? Hell, people in the UK do it from the US at the moment because your sales tax (VAT) is so much lower than ours (currently at 17.5%). You can even post yourselves any sales documents so you don't have incriminating information on you when you pass through customs.

You'd also need to consider exports - presumably you wouldn't be able to add the tax on sales abroad as it wouldn't be competitive. In truth I don't know how export duty works normally anyway.

In summary - I don't think you'd end up with a more simple tax system at all, there will always be people saying "but make an exception for this"...

 

What I don't get about you - and free market ideologues and a lot of libertarians generally - is this reality is apparently largely irrelevant because the beauty and purity of theory trumps the own lying eyes.

My point is simply that sometimes government interference does make sense, and a lot of sense. Think of radium pills sold to improve manhood, or tapeworm heads sold to ladies as miracle diet pills. There is a simple reason why they are banned today: The insight that while the market does self-regulate, it might harm a lot of people before doing so. Is this harm an acceptable, inevitable price for self regulation?

Are you indeed so fatalistic to deliver an entire economy to the infinite wisdom of a theorem? A questionable one for that? How well did leaving the fate of the electrical infrastructure of California to the superior wisdom of 'the markets' work? How well did self-regulation and reliance on voluntary 'best-business-practices' help prevent accounting scandals? What about the recent crisis and the absurd valuation of derivatives?

Now there is this wonderful, clean model of the Efficient Markets Hypothesis that states that prices observed in asset markets (for stocks, bonds, foreign exchange and so on), reflect all known information, and provide the best possible estimate of the value of earnings that assets will generate. Like what such a thing like a derivative is truly worth. Information is ever complete - instead friction, uncertainty and incomplete information are the norm. And it isn't just that information is incomplete - it's also so that people are decidedly not like Ayn Rand theorised them to be - driven by rational self-interest. Quite often they are profoundly irrational. Jimmy Caine, the CEO of Bear Stearns, was away at the North American Bridge Championships, where he could not to be reached when Bear Sterns took the dive. That much for rational self interest.

When marvelling about the beauty of the concept of an entirely privatised Wunderland, a free market Garden of Eden, you might be interested in the history of the British East India Company and how and how it ended - with a bailout if you will.

 

Carcaroth, again, taxing the poor through consumption could easily be mitigated or removed entirely by exempting certain things. Let's say all housing purchases under $150,000 are tax exempt. I doubt any poor would be paying that much for a house. Maybe all rented apartments under $1,000/mo are tax exempt. A rich mansion can be taxed without taxing a shack or a slum.