A Bipartisan Plan for Tax Fairness by Sens. Ron Wyden and Judd Gregg

[GuitarDaddy]

To me it only makes sense to make the first 35% of capital gains tax free if the period of long term capital gains is expanded to 18 months to two years instead of 6 months. This way you have more investment in business and those that are the highest earners that live off their investments will actually pay a higher effective rate if withdrawn early.

I would also think that if you expanded LTCGs to 18 or more months, the stock/securities markets wouldn't fluctuate as rapidly and be a bit more stable. Investors would hesitate on bad economic news, therefore not dumping stocks/securities into the market because of the potential tax hit they would incur. Just my opinion though, I could be wrong.

I agree changing the requirement to 18-24 would make it more fair, and I would propose putting a cap on the amount of CG's excluded. Like exlude the first 35% up to a million, capping the maximum exclusion at $350k

 

[ElFenix]

From the text, it looks as if this is significantly more regressive than the current tax system, for unmarried people. 35% starts at 70k per year? Fuck that.

for unmarried people with no kids and no house with solely wage income, it's $70K + the new standard deduction of $15K + their personal exemption of $3650 (looks like that number didn't change)

so we're really talking nearly 90K before 35% kicks in.

Well I thought the tax rate on CG was 15% now, so this would be in effect a tax hike for them. Not really bringing it to a fair tax rate like I would prefer, but would you prefer no tax hike, or a less than fair tax hike?

And I haven't found that this actually raises the CG tax rate, I am really not clear on that at all, it might actually be a tax cut for CG.

yeah amazing how people don't see that its trading a lower rate for a shorter period.

though i'd prefer elimination of all corporate taxes and tax the gains as regular income to the shareholders. but good luck explaining that to the granola types.

 

[daishi5]

I agree changing the requirement to 18-24 would make it more fair, and I would propose putting a cap on the amount of CG's excluded. Like exlude the first 35% up to a million, capping the maximum exclusion at $350k

Yeah, a cap seems much more reasonable, as it protects the investments for retirement from the tax, but those who have enough in the system to live off the returns pay on their income.

 

[theeedude]

They should also eliminate mortgage interest deduction. There is no reason for government to be subsidizing homeowners.

 

[GroundedSailor]

Great proposal for those who live off their capital (stock traders and the like) versus people who work for a living. A road we have gone down far too much already. I mean, what possible benefit does society gain from counting as LONG term capital gains something held six months? That's going to achieve the purported goal of investing in business-who could possibly utter that nonsense with a straight face?

The corporate tax rate statement is highly misleading, as the US gives far more exemptions and discounts to corporations than nearly all other developed countries. Look up what percentage of income taxes (or their equivalent) are actually paid by our largest corporations before crying crocidile tears for them.

Same old, same old. I'm surprised Judd was able to bamboozle a nominal Democrat into this.

True - US corps effectively pay a lot less than other countries.

I would be OK lowering the corp taxes to 24% provided 1) remove all exemptions except for the first 5 years of any business & 2) increase the capital gains tax to the same rate - except for retirees and exemption that to capped to, say $250K or so of income.

 

[piasabird]

Why do you need a tax bracket? Just have one percentage for everyone with no exemptions? How rich people stay rich is by using tax shelters. You can be paying 35% tax rate, and then some rich guy with 10 billion in the stock market only pays 15% on dividends.

 

[DietDrThunder]

They should also eliminate mortgage interest deduction. There is no reason for government to be subsidizing homeowners.

I wonder how many US citizens even get to use the mortgage interest deduction? With the Standard Deduction being 11,400 this year, if I hadn't bought a new car in 2009, my mortgage interest, local property taxes, and state and local sales taxes wouldn't have been enough to take anything but the standard deduction. Looking at 2010, since I won't be buying a new car, I know I'll be taking the standard deduction.

 

[ElFenix]

Why do you need a tax bracket? Just have one percentage for everyone with no exemptions? How rich people stay rich is by using tax shelters. You can be paying 35% tax rate, and then some rich guy with 10 billion in the stock market only pays 15% on dividends.

those dividends were (theoretically) already taxed at the corporation level, of which he is an owner. double taxation is the rationale behind long term cap gains rates being lower than normal income. eliminate corporate taxation altogether and you eliminate that rationale.

 

[piasabird]

Here is my biggest complaint:

More and more companies and Corps want a discount or an exclusion on paying taxes. The reason this is bad is that if you own a house in an area where there is an exclusion then you the homeowner or property owner have to pay more tax to make up the difference. So what I think should happen is that on the federal and state tax if a company did not have to pay the tax they should have to include that same sum as income or payment-in-kind. It should have to be declared as income and taxed as such. In this way a company or Corps would not make any money by relocating to another location where they can get a tax free deal. This creates a more fair and equitable chance of getting companies to locate in your area. The goal should be to lower tax rates for all, not just the Corporate elite.

 

[piasabird]

If you were donating a fair and even Tithe that standard itemization number would be easily reachable. I think sometimes I have given tithes and charitable donations in excess of $8,000. Sometimes I wish I could do more. If you add in the Property tax and the interest on the house loan and what not it is easy to go higher than that.

Have you robbed God and your fellow man?

Tithe = 10% of Gross.
Gross is higher than taxable income normally.

Mr Buffet said he pays less tax based on a percentage of income than his secretary.

 

[DietDrThunder]

If you were donating a fair and even Tithe that standard itemization number would be easily reachable. I think sometimes I have given tithes and charitable donations in excess of $8,000. Sometimes I wish I could do more. If you add in the Property tax and the interest on the house loan and what not it is easy to go higher than that.

Have you robbed God and your fellow man?

Tithe = 10% of Gross.
Gross is higher than taxable income normally.

Mr Buffet said he pays less tax based on a percentage of income than his secretary.

With the area school districts being so pethetic, and having private education ($16,000+ a year) taking a huge chunk out of our family budget, the "Tithe" begins at home.

 

[werepossum]

Why do you need a tax bracket? Just have one percentage for everyone with no exemptions? How rich people stay rich is by using tax shelters. You can be paying 35% tax rate, and then some rich guy with 10 billion in the stock market only pays 15% on dividends.

We've reached the point that our tax needs would crush investment were that rate applied. That's why I like the FairTax. Everyone pays the same rate, but only on what they spend. If you buy something new, the exact same tax rate is applied on American-made goods as on Chinese-made goods, eliminating part of the advantage of goods made in cheap labor markets. Rich people would pay based on what they spend and their savings would be available for investment. There would be no tax shelters. Wanna buy a house? Help yourself, but your apartment-dwelling neighbor isn't going to pick up part of your share. Buy a large house you can barely afford or buy a small house and invest the remainder, it's your choice. No longer would government pick winners and losers through the tax code. No longer would rich people shelter income. No longer would investment income be treated differently from wages. No longer would those at or below the poverty line pay ANY federal taxes (if you are working poor then payroll taxes hit hard.)

 

[ayabe]

I've never heard a version of the FairTax/FlatTax that wasn't 100% regressive and a huge punishment to the middle/ lower classes. This is why seeing those bumper stickers on 25 year old rusted Ford Tempo's just make me want to cry.

Want to accelerate the wage/wealth gap by unprecedented proportions? Vote for the FairTax! Yehaawwww!

 

[HumblePie]

If you were donating a fair and even Tithe that standard itemization number would be easily reachable. I think sometimes I have given tithes and charitable donations in excess of $8,000. Sometimes I wish I could do more. If you add in the Property tax and the interest on the house loan and what not it is easy to go higher than that.

Have you robbed God and your fellow man?

Tithe = 10% of Gross.
Gross is higher than taxable income normally.

Mr Buffet said he pays less tax based on a percentage of income than his secretary.

Personally, I think tax breaks and exemptions are bad all around. Take for your example, it does two things. Fosters the idea of Church and State together, and breeds ways to manipulate the system.

By tithing that much for deductions on your tax, you lower your taxable income as well. So the government gives you a break for being part of a religion. Problem comes when people donate to a church and they work there and get the money mostly back in the end. Seen it happen at less reputable places. It also happens often.

I knew a guy for example that I worked with who bought a million dollar home with cash. He bought it with the express intention of donating it to a church with the stipulation he was the manager of the asset. Meaning he oversaw how the church "handled" the property until the day he dies. This makes the property now owned by a religious affiliation and as such is not taxable property. He basically gets to live in the house for life. True, the house is property of the church and when he dies he can't pass on that asset to his kids. However, he doesn't care because he knows of other ways to provide plenty for his kids.

It's shit like this which is why exemptions are bad in my book.

Three brackets is also good but move the 35% up to 150K for singles. Make any form of "income" or "gains" for the year taxable. If you earn or get money in anyway shape or form that raises your net worth then it needs to be taxed. Don't care what you do with that money, it needs to be taxed.

Keeps things simple and fair in my book.

 

[Anarchist420]

Why do you need a tax bracket? Just have one percentage for everyone with no exemptions? How rich people stay rich is by using tax shelters. You can be paying 35% tax rate, and then some rich guy with 10 billion in the stock market only pays 15% on dividends.

Agreed; David Rockefeller gets off pretty easily the way the system is.

I've never heard a version of the FairTax/FlatTax that wasn't 100% regressive and a huge punishment to the middle/ lower classes. This is why seeing those bumper stickers on 25 year old rusted Ford Tempo's just make me want to cry.

Want to accelerate the wage/wealth gap by unprecedented proportions? Vote for the FairTax! Yehaawwww!

BS about the flat tax being regressive. If you have a flat tax of 17% and don't tax the first 32k+deductions for health insurance and dependents, a lot of people don't pay taxes. Under the current system someone who makes 32k pays $4.8k.

Many peoples' taxes will go way up due to this proposal including small business owners. If this goes through, I'm going to be pissed. 35% of 90k is ridiculous. Right now, someone who is married and makes 100k only pays 25% of it.

 

[HumblePie]

We've reached the point that our tax needs would crush investment were that rate applied. That's why I like the FairTax. Everyone pays the same rate, but only on what they spend. If you buy something new, the exact same tax rate is applied on American-made goods as on Chinese-made goods, eliminating part of the advantage of goods made in cheap labor markets. Rich people would pay based on what they spend and their savings would be available for investment. There would be no tax shelters. Wanna buy a house? Help yourself, but your apartment-dwelling neighbor isn't going to pick up part of your share. Buy a large house you can barely afford or buy a small house and invest the remainder, it's your choice. No longer would government pick winners and losers through the tax code. No longer would rich people shelter income. No longer would investment income be treated differently from wages. No longer would those at or below the poverty line pay ANY federal taxes (if you are working poor then payroll taxes hit hard.)

werepossom... where to begin!

First off, there is logic that seems to make sense in your post but doesn't. The problem is that you believe the poor pay income/payroll taxes. The thing is, if you make less than 20K a year, then you really aren't taxed at all. After standard deductions, there really is little more than social security being removed. However, a flat sale tax on everything HURTS the poor worse than the rich. Already told you this. The rich spend a much smaller percentage of their income than the poor do.

Any poor person that is making 20K a year for example I guarantee is spending all 20K just to live. That means that person is being taxed on 100% of their income!!! A rich person making say 500K a year may spend say 100K once they have a house, car, kids are in college, and so forth. The rest of the money just goes to investments to make more money. They do not need to spend all that much at all. They are then only taxed on a fifth or less of their income unlike a poor person.

Let me ask you this.. is being taxed on 100% income versus 20% of your income fair?

 

[werepossum]

werepossom... where to being!

First off, there is logic that seems to make sense in your post but doesn't. The problem is that you believe the poor pay income/payroll taxes. The thing is, if you make less than 20K a year, then you really aren't taxed at all. After standard deductions, there really is little more than social security being removed. However, a flat sale tax on everything HURTS the poor worse than the rich. Already told you this. The rich spend a much smaller percentage of their income than the poor do.

Any poor person that is making 20K a year for example I guarantee is spending all 20K just to live. That means that person is being taxed on 100% of their income!!! A rich person making say 500K a year may spend say 100K once they have a house, car, kids are in college, and so forth. The rest of the money just goes to investments to make more money. They do not need to spend all that much at all. They are then only taxed on a fifth or less of their income unlike a poor person.

Let me ask you this.. is being taxed on 100% income versus 20% of your income fair?

Social Security, Medicare, & Medicaid are payroll taxes. People at or below poverty level don't pay federal income tax, but do pay payroll taxes at the same rate as everyone else. A flat sales tax would be best for the economy, but would be devastating on the poor and thus a non-starter politically. Therefore the FairTax prebates every head of household each month the cost of the tax at the poverty level. Make less than poverty level? You get a net gain each month. Make exactly the poverty level? You pay exactly zero federal taxes - of any sort - because the prebate equals what you spend on the tax. If you manage to save anything, it's tax free. If you die, whatever you leave to your heirs is tax free - you don't have to be a sophisticated multimillionaire with a lawyer to set up trust funds and shelters. The more you earn, the more progressive the tax becomes, but it rapidly becomes quite shallow. This is good because a steeply progressive tax impedes growth by reducing reward without changing risk.

It also rewards responsible behavior. Spend all your income, get taxed on all your income. Save some and you do so tax free.

I also think being taxed on what you spend is completely fair. Why should the federal government have first dibs on my income? The government getting to take its share of my income off the top puts me in the position of being non-free, chattel, with the government as my owner and free to take whatever portion of my income it decides, leaving me to live on the remainder.

As for rich people saving more, I certainly hope so. If I wish to start a business, I'll need to borrow from that money because I don't have enough capital of my own. The alternatives would be to have almost no new businesses (at least only rich people could start them) or to have the government provide the capital. Ever looked at the things government funds? Like the idea of a bureaucrat deciding whether to fund your bakery or your neighbor's floating castle factory?

 

[thraashman]

Social Security, Medicare, & Medicaid are payroll taxes. People at or below poverty level don't pay federal income tax, but do pay payroll taxes at the same rate as everyone else. A flat sales tax would be best for the economy, but would be devastating on the poor and thus a non-starter politically. Therefore the FairTax prebates every head of household each month the cost of the tax at the poverty level. Make less than poverty level? You get a net gain each month. Make exactly the poverty level? You pay exactly zero federal taxes - of any sort - because the prebate equals what you spend on the tax. If you manage to save anything, it's tax free. If you die, whatever you leave to your heirs is tax free - you don't have to be a sophisticated multimillionaire with a lawyer to set up trust funds and shelters. The more you earn, the more progressive the tax becomes, but it rapidly becomes quite shallow. This is good because a steeply progressive tax impedes growth by reducing reward without changing risk.

It also rewards responsible behavior. Spend all your income, get taxed on all your income. Save some and you do so tax free.

I also think being taxed on what you spend is completely fair. Why should the federal government have first dibs on my income? The government getting to take its share of my income off the top puts me in the position of being non-free, chattel, with the government as my owner and free to take whatever portion of my income it decides, leaving me to live on the remainder.

As for rich people saving more, I certainly hope so. If I wish to start a business, I'll need to borrow from that money because I don't have enough capital of my own. The alternatives would be to have almost no new businesses (at least only rich people could start them) or to have the government provide the capital. Ever looked at the things government funds? Like the idea of a bureaucrat deciding whether to fund your bakery or your neighbor's floating castle factory?

Well a good starting argument is that if the government weren't in place, then the company that pays you wouldn't be able to safely operate, you wouldn't be able to drive to work, you wouldn't be protected from crime by police on your way to work, the entire fucking infrastructure that allows you to work wouldn't be in place. THAT'S why.

Also, based on HumblePie's scenario of a person making $20k having to spend $20k, and a person who makes $500k only having to spend $100k. Well let's say it's a 20% flat sales tax, then that person who makes $20k is paying a 20% tax. But the person who makes $500k is effectively paying a 4% tax.

Also, anything that discourages consumerism is by its nature bad, a large sales tax does that. People by their nature don't think "oh, I make more because I don't pay income tax, so that extra 20% isn't a bad thing for this purchase". No, they think "I'd buy this, but that extra 20% sales tax adds on makes it too much for me". In addition what do you do about things like eBay and Craigslist? People don't pay sales tax on there. You've effectively made a large black market economicaly viable.

I've looked into it before, and a flat sales tax is anything but Fair and one of the dumbest ideas anyone has ever come up with for reforming the tax system.

 

[werepossum]

Well a good starting argument is that if the government weren't in place, then the company that pays you wouldn't be able to safely operate, you wouldn't be able to drive to work, you wouldn't be protected from crime by police on your way to work, the entire fucking infrastructure that allows you to work wouldn't be in place. THAT'S why.

Also, based on HumblePie's scenario of a person making $20k having to spend $20k, and a person who makes $500k only having to spend $100k. Well let's say it's a 20% flat sales tax, then that person who makes $20k is paying a 20% tax. But the person who makes $500k is effectively paying a 4% tax.

Also, anything that discourages consumerism is by its nature bad, a large sales tax does that. People by their nature don't think "oh, I make more because I don't pay income tax, so that extra 20% isn't a bad thing for this purchase". No, they think "I'd buy this, but that extra 20% sales tax adds on makes it too much for me". In addition what do you do about things like eBay and Craigslist? People don't pay sales tax on there. You've effectively made a large black market economicaly viable.

I've looked into it before, and a flat sales tax is anything but Fair and one of the dumbest ideas anyone has ever come up with for reforming the tax system.

Well, it's a fact of life that some people don't mind being sheep as long as they aren't sheared any more often than the other sheep. Nothing I can do about that.

 

[Deeko]

for unmarried people with no kids and no house with solely wage income, it's $70K + the new standard deduction of $15K + their personal exemption of $3650 (looks like that number didn't change)

so we're really talking nearly 90K before 35% kicks in.

Yea, and right now 90k for an individual earner puts you just about the threshhold of 28%. That's a pretty hefty hike. Its worse for married couples. It hits 35% @ 105k income - what's that come to, about 130k in actual combined income? Right now married couples don't even hit 28% until 137.

The "lower-upper-middle class" or however you want to classify them - would be stung by this.

 

[Slew Foot]

Tax all income the same, no deductions for anything. Done.

 

[ElFenix]

Yea, and right now 90k for an individual earner puts you just about the threshhold of 28%. That's a pretty hefty hike. Its worse for married couples. It hits 35% @ 105k income - what's that come to, about 130k in actual combined income? Right now married couples don't even hit 28% until 137.

The "lower-upper-middle class" or however you want to classify them - would be stung by this.

at 90K wage income this bill would be a tax cut of over $2,000.
at 100k wage income this bill would be a cut over nearly $1,400.
it does cross over by the time you reach $125,000 by a couple hundred bucks.

Tax all income the same, no deductions for anything. Done.

deductions are often necessary to determine what income is.

 

[HumblePie]

Well a good starting argument is that if the government weren't in place, then the company that pays you wouldn't be able to safely operate, you wouldn't be able to drive to work, you wouldn't be protected from crime by police on your way to work, the entire fucking infrastructure that allows you to work wouldn't be in place. THAT'S why.

Also, based on HumblePie's scenario of a person making $20k having to spend $20k, and a person who makes $500k only having to spend $100k. Well let's say it's a 20% flat sales tax, then that person who makes $20k is paying a 20% tax. But the person who makes $500k is effectively paying a 4% tax.

Also, anything that discourages consumerism is by its nature bad, a large sales tax does that. People by their nature don't think "oh, I make more because I don't pay income tax, so that extra 20% isn't a bad thing for this purchase". No, they think "I'd buy this, but that extra 20% sales tax adds on makes it too much for me". In addition what do you do about things like eBay and Craigslist? People don't pay sales tax on there. You've effectively made a large black market economicaly viable.

I've looked into it before, and a flat sales tax is anything but Fair and one of the dumbest ideas anyone has ever come up with for reforming the tax system.

Correct. Also, employers are required by law to report payroll. The government has a much easier job of tracking taxes that way. By making things highly taxed from a sales perspective, you effectively start creating black markets. It will create criminal organizations as people will always look to pay the least. A huge tax spike on sales will make more people prone to pirating goods. If you don't believe that will happen, history has told us every time that it has. Here and abroad.

Used goods will also be a bigger market and sellers of new goods will find they have a tougher time bringing goods to market. It stifles business growth as consumers find alternative ways to avoid sales taxes. Again, a sales tax would not be good for the economy and is not "fair" in any sense of the word. Even with rebates for sales tax given back.

Speaking of which, that makes things even harder for the poor if they want to get a rebate back. Now they HAVE to keep all receipts to prove expenditures along with proof of earnings to get a rebate back for sales taxes if they are poor enough. Do you know how much of an administrative nightmare that would be? Do you really think the poor, or those living on the streets, have methods of good file keeping? Most are poor for reason.

 

[Deeko]

at 90K wage income this bill would be a tax cut of over $2,000.

Sorry I left that part out - 90k is a similar tax bracket line between the two. After which point the new brackets start taxing at a significantly higher rate. It doesn't take long before the new system starts taxing more than the old.

I'm not saying the new system isn't without its merits - just that 70k/105k seems too low to be starting the 35% bracket.

 

[ElFenix]

Sorry I left that part out - 90k is a similar tax bracket line between the two. After which point the new brackets start taxing at a significantly higher rate. It doesn't take long before the new system starts taxing more than the old.

I'm not saying the new system isn't without its merits - just that 70k/105k seems too low to be starting the 35% bracket.

crossover point looks like 120. i'm not going to worry much about single individuals with 125K/year incomes. get married and suddenly you're back to a tax cut (of over $4500)