A bit more outside the box thoughts / rants on taxation

[RollingWave]

First to note that I did major in public fiance (albeit admittedly I wasn't much of a student in College), so I'm fairly well aware of most of the academic argument and backgrounds on a lot of the different school of thoughts on these subject, am reasonably trained in accounting and have some hands on experience in running accounts for companies, but I have been generally depressed by such arguments often stick far more to ideology and often try to find facts to force the argument.



But outside of that, I think one of the more perplexing argument I keep hearing (both here, in the US, and also elsewhere including where I live) tend to center around Flat Taxes. the supporters argue as if it's some sort of Utopian solution that both all but eliminate complex Tax codes and uphold morale high ground of fairness and not punishing success. here's my gripe with both of these argument.

1. The complexity of tax and tax evasion on income in general have always been about DEFINING income. assuming similar difficulty , then marginal rates hardly matter at all. your just running a fixed calculation over the same number, a flat rate does nothing to address the problem of income definition for non fixed wage income. Similarly, this problem is only compounded in terms of Commercial income as you have the added complexity of defining cost, anyone who's ever been anywhere close to a accounting book should know that this is hardly a black and white strait forward matter these days (or any days.)


2. That flat tax somehow represent some sort of improved fairness is dubious. it still will make more successful people pay more, the only real difference is setting different arbitrary lines that does the math differently. If the argument is that because individuals have the same rights and thus should bare the same burden (which isn't an unreasonable morale argument), then why shouldn't you be purposing an old fashioned head tax where each individual LITERALLY pays the same money? aka you and (insert random famous billionaire name here) both pay 100 bucks a year, because you know, both of you only have the same 1 vote and same legal rights.



If we're truly going to argue the morality of fairness and equal rights on taxation, I purpose the complete removal of income tax for head tax, each adult pays a fixed sum, children / disabled a reduced fixed sum, people with status that may in some way effect their rights (politician, public workers, military etc) may potentially be charged at a different sum. change corporate tax in a similar way, tax based on fixed bases, possibly set different levels of cooperation and tax based on that and also effects what they can or can't do. (for example, being listed , run foreign branches, or even operate in multiple states etc..)

This actually WILL remove most of the complexity in taxation, since then all definition are based on clear tangible stuff, it will also make tax income completely predictable in most cases. The problem of course is that it's gonna reduce total income quite dramatically for obvious reasons. Since the bar need to be set at what the poorest folks can reasonably be expected to pay.


Now this is extreme of course, but from the logical POV of a lot of the taxation argument I'm hearing, I'm mildly amused at why this isn't brought up by the self-righteous advocate of "not punishing success" crowd.

[Chris]

Great post.

I favor flat tax.

It simplifies the tax code, levels it out a bit so everyone pays a "fair" share--though I doubt fair can be defined--and eliminates loopholes. This ought to mean if nothing else that a business need not hire an army of accountants and lawyers to deal with taxes.

The flat tax I favor is the Fair Tax, a consumption tax, that would shift incentives away from earning a living and toward saving. It would as well shift some power to the people inasmuch as the amount pain would be seen rather than hidden in pay deductions and, moreover, the tax rate would be transparent to voters and the effects of tax rate increases would be seen immediately.

[KC]

Great post.

I favor flat tax.

It simplifies the tax code, levels it out a bit so everyone pays a "fair" share--though I doubt fair can be defined--and eliminates loopholes. This ought to mean if nothing else that a business need not hire an army of accountants and lawyers to deal with taxes.

The flat tax I favor is the Fair Tax, a consumption tax, that would shift incentives away from earning a living and toward saving. It would as well shift some power to the people inasmuch as the amount pain would be seen rather than hidden in pay deductions and, moreover, the tax rate would be transparent to voters and the effects of tax rate increases would be seen immediately.

One possible criticism of a consumption tax is the possibility of over-taxing products and services the way individuals are over taxed currently. Many employers pay their employees under the table to avoid payroll taxes and in order to pay them less. Would a fair tax on consumption shift more products to be sold in black markets or in some way to avoid taxation?

BTW I'm most playing Devil's advocate, since I think that a fair tax on consumption is preferable to income taxes, but I think that the idea isn't perfect.

[Peter1469]

Yes, a consumption tax could bolster the black market. I still favor the FAIR tax.

[KC]

Yes, a consumption tax could bolster the black market. I still favor the FAIR tax.

Me too. Another possible criticism of the Fair Tax, however, is that it could take away a source of revenue used by a lot of states. For example, in Oregon consumers pay no sales tax. How many people would move to states like Oregon to avoid being hit by a double whammy every time they shop for a product or service?

Already I know many people who do their shopping in Wisconsin to avoid paying Illinois' punishing sales tax rates. Illinois would become too expensive to live in for many and the state legislature would be forced between either cut sales tax rates or decreasing the base. Either way it would lead to less revenue.

[Peter1469]

I would imagine that states would move to a consumption tax if the feds did.

[Deadwood]

First to note that I did major in public fiance (albeit admittedly I wasn't much of a student in College), so I'm fairly well aware of most of the academic argument and backgrounds on a lot of the different school of thoughts on these subject, am reasonably trained in accounting and have some hands on experience in running accounts for companies, but I have been generally depressed by such arguments often stick far more to ideology and often try to find facts to force the argument.



But outside of that, I think one of the more perplexing argument I keep hearing (both here, in the US, and also elsewhere including where I live) tend to center around Flat Taxes. the supporters argue as if it's some sort of Utopian solution that both all but eliminate complex Tax codes and uphold morale high ground of fairness and not punishing success. here's my gripe with both of these argument.

1. The complexity of tax and tax evasion on income in general have always been about DEFINING income. assuming similar difficulty , then marginal rates hardly matter at all. your just running a fixed calculation over the same number, a flat rate does nothing to address the problem of income definition for non fixed wage income. Similarly, this problem is only compounded in terms of Commercial income as you have the added complexity of defining cost, anyone who's ever been anywhere close to a accounting book should know that this is hardly a black and white strait forward matter these days (or any days.)


2. That flat tax somehow represent some sort of improved fairness is dubious. it still will make more successful people pay more, the only real difference is setting different arbitrary lines that does the math differently. If the argument is that because individuals have the same rights and thus should bare the same burden (which isn't an unreasonable morale argument), then why shouldn't you be purposing an old fashioned head tax where each individual LITERALLY pays the same money? aka you and (insert random famous billionaire name here) both pay 100 bucks a year, because you know, both of you only have the same 1 vote and same legal rights.



If we're truly going to argue the morality of fairness and equal rights on taxation, I purpose the complete removal of income tax for head tax, each adult pays a fixed sum, children / disabled a reduced fixed sum, people with status that may in some way effect their rights (politician, public workers, military etc) may potentially be charged at a different sum. change corporate tax in a similar way, tax based on fixed bases, possibly set different levels of cooperation and tax based on that and also effects what they can or can't do. (for example, being listed , run foreign branches, or even operate in multiple states etc..)

This actually WILL remove most of the complexity in taxation, since then all definition are based on clear tangible stuff, it will also make tax income completely predictable in most cases. The problem of course is that it's gonna reduce total income quite dramatically for obvious reasons. Since the bar need to be set at what the poorest folks can reasonably be expected to pay.


Now this is extreme of course, but from the logical POV of a lot of the taxation argument I'm hearing, I'm mildly amused at why this isn't brought up by the self-righteous advocate of "not punishing success" crowd.



Yeah, all that's been said as much as 20 years ago...

And it's all good reasoning.

Now, here's why it will NEVER happen:

Politicians WANT and NEED an amendable tax code so they can manipulate votes. Just like Obama has won re-election on a promise to get those greedy rich fuckers and MAKE THEM PAY!

And then the conservatives come back into power and lower them again.

Without an amendable tax structure they don't have much to play with other than raising the base which would be political suicide.
You do know that everyone whom supports higher taxes supports higher taxes on you...

[Chris]

One possible criticism of a consumption tax is the possibility of over-taxing products and services the way individuals are over taxed currently. Many employers pay their employees under the table to avoid payroll taxes and in order to pay them less. Would a fair tax on consumption shift more products to be sold in black markets or in some way to avoid taxation?

BTW I'm most playing Devil's advocate, since I think that a fair tax on consumption is preferable to income taxes, but I think that the idea isn't perfect.

Good point, the answer is no, it wouldn't correct an existing problem where people hide from taxes.. The more oppressive government is in over taxing its people the more that is likely to happen. In fact, because the tax rate would be more transparent it would be even more likely to happen, until the people voted the oppressors out for representatives who would lower the tax rate.

[Chris]

Without an amendable tax structure they don't have much to play with other than raising the base which would be political suicide.

Exactly. A flat/fair tax would be too transparent for most politicians to advocate it.