For discussion

[yuppiejr]

Originally posted by: Craig234
Those figures were not income. They were capital gains. Most people's income is from wages and subject to the income tax on wages. The 'federal sales tax' is a joke, IMO.

Well, keep in mind that per my original post I am not of the opinion that you can slice and dice "classes" of income in order to tax them separately - 50k is 50k regardless of investment versus wage income.

I'd be interested in why you think the 'federal sales tax' is a joke - normally you offer relatively complex responses so I find this "x is a joke" and run response surprising.


In my opinion and observation, a federal sales tax replacing all other federal taxes has the following benefits:

Vastly easier to administer than tiered income / deduction system of today, reducing the need for a significant government organization (the IRS) which means lower administrative overhead and better use of tax dollars.

Collection method already exists in most POS / business systems based on the proven and successful state sales tax model that's been used for years in this country.

Exclusion methods also already exist in sales tax software to support states like MN that do NOT tax "essential" items like food and clothing and certain household goods which should remove the "sting" from low income earners who do not pay taxes under the current system.

Elimination of corporate tax (which would presumably be made up for in the overall federal sales tax to cover the shortfall) would result in lower costs and lower prices to consumers and business on goods/services purchased.

"Fairly" lumps the greatest tax burden on those with the greatest means who spend the most money. Allows individuals to grow wealth tax free and then pay-in when investment income is spent on other investments or goods.

 

[Craig234]

Originally posted by: PokerGuy

Originally posted by: ironwing

Originally posted by: Craig234

As I've said many times, I am strongly in favor of a significant Estate Tax for the wealthy.

Oh, I'd tax the holy hell out of large estates, returning the tax to the 50% rate. Also, when I say capital gains should be taxed like other income I also mean that SS/medicare taxes should also be paid on it.

Ah yes, socialism and irrational class envy rear their ugly heads again. Some people just can't stand the thought of others having something they don't, so instead of going out and trying to earn what they want, they'd rather have the government step in redistribute the wealth. :roll:

Ah yes, idiocy, ignorance and the unfamiliarity with basic terms such as how estate taxes are not socialism rear their ugly head again.

And the old but popular lie attacking most Americans who want balance for 'jealousy'. Despicable.

Trying to tax something before any benefit is actually realized is absurd. It's conceptually fundamentally flawed, and mechanically very difficult to implement.

Tell it to my property tax collector.

 

[Craig234]

Originally posted by: yuppiejr

Originally posted by: Craig234
Those figures were not income. They were capital gains. Most people's income is from wages and subject to the income tax on wages. The 'federal sales tax' is a joke, IMO.

Well, keep in mind that per my original post I am not of the opinion that you can slice and dice "classes" of income in order to tax them separately - 50k is 50k regardless of investment versus wage income.

I'd be interested in why you think the 'federal sales tax' is a joke - normally you offer relatively complex responses so I find this "x is a joke" and run response surprising.

I'm very pleased by your comments, insofar as that I was aware when posting of the choice between a lengthier explanation and the short comment I made, but the fact that you have noticed it's unusual for me to post such a brief comment is nice to see. I'll explain why.

One reason was that I have posted longer explanations on the national sales tax repeatedly, and didn't want to just repeat them. A second reason is that in the realm of discussion, there are ways that radical ideas become 'mainstream', and mainstream ideas become 'radical'. Take an idea that's 'radical', do a talk show where 3 of 5 guests argue for it, and viewers tend to suddenly see it as 'one of two sides', even if they disagree with it.

These are what I'd sort of call the 'boundaries' of the political culture. People seem sort of predisposed to have the 'left', the 'right', and the fringes. But the issues that fall within those categories radically varies over time and culture. A right-winger in the USSR had little in common with a right-winger in the US.

Anyway, the comment in part was to keep the 'national sales tax' as a 'radical, fringe, unworkable' idea not in the mainstream for discussion - which I think is the case, though I recogjnize that since some take it more seriously, a combination of that message and discussing the merits is helpful. Pne final reason is that I am not sure I can do justice currently on why it's such a bad idea and hate to post an incomplete case. But thanks again for noticing the less than substantive reply.

In my opinion and observation, a federal sales tax replacing all other federal taxes has the following benefits:

Vastly easier to administer than tiered income / deduction system of today, reducing the need for a significant government organization (the IRS) which means lower administrative overhead and better use of tax dollars.

Collection method already exists in most POS / business systems based on the proven and successful state sales tax model that's been used for years in this country.

Exclusion methods also already exist in sales tax software to support states like MN that do NOT tax "essential" items like food and clothing and certain household goods which should remove the "sting" from low income earners who do not pay taxes under the current system.

I think 'easy to administer' is vastly overrated. Sure, I like it too, like everyone else, but I think it pales in comparison to the impact of the actual tax policy.

In fact I'd go so far as to say that it's a trojan horse in which the advocates for such terrible tax ideas they can't get passed on their own merit, tries to sneak them in.

"DON'T YOU HATE THE COMPLEX TAX SYSTEM? (LOTS OF ANECDOTES) SO VOTE FOR THE ALTERNATIVE! (and don't read this small print what the new plan does)."

Elimination of corporate tax (which would presumably be made up for in the overall federal sales tax to cover the shortfall) would result in lower costs and lower prices to consumers and business on goods/services purchased.

Common sense would suggest that if the national sales tax is revenue neutral, then in the best case, consumers would not pay one cent less for products because of the shift.

"Fairly" lumps the greatest tax burden on those with the greatest means who spend the most money. Allows individuals to grow wealth tax free and then pay-in when investment income is spent on other investments or goods.

That's not the case. People do not purchase goods and services proportional to their incomes. People who make less spend far higher proportions of their incomes.

Once again let me mention the metaphors of most people having money as a river, and the wealthy having money in the form of a lake.

The wealthy spend a trivial proportion of their incomes on goods and services compared to most peopole - the national sales tax *is advocated by those trying to benefit the wealthy*.

Really, look at any serious study - not one from a bought and paid-for right-wing think tank (read right-wing propaganda machine) - on the actual effects the tax would have.

The tax, I suspect, would have to be so high, that it would create a cycle of discouraging consumption, which would force increasing the rate to make up for the reduced sales, which woudl further reduce consumption, and so on, and throwing in the recession/depression from all the reduced consumption as a free bonus with the policy.

The predictions on what the tax rate would have to be do two things: one is not to account for the decrease in consulmption and the effects, and the other is to dishonestly represent the percentage by changing how they define it. Normal people would say that if you pay 25 cents tax on a one dollar purchae for a total of $1.25, that's a 25% sales tax - 25% of the one dollar price. But the sales tax advocates say it's a 20% tax - 20% of the final $1.25 price, to make the rate look lower than it is.

I think the actual effect would also be to simply reduce the amount of taxes collected as the only way out of the cycle I mentioned - which is the goal all along of advocates.

So, I really do think it's 'a joke', in that it's the most transparent sort of trojan horse to cause huge problems by trying to trick people with bright shiny things like 'simplicity'.

I think our current tax system, for all its flaws, corruption, and room for simplification, is the best system, with some corrections, than any of the radical new taxes I see suggested.

But hey, why don't the so-called conservatives revert to the tax our nation used for nearly all federal revenue from its founding until the 20th century passage of the income tax:

Tariffs. That would have the benefit of protecting American jobs as well.

Edit: one more good reason for the one liner response is that I got caught up in the post above and badly burned four nice pieces of bacon, an economic policy with 100% loss.

 

[Fern]

Originally posted by: Craig234

Trying to tax something before any benefit is actually realized is absurd. It's conceptually fundamentally flawed, and mechanically very difficult to implement.

Tell it to my property tax collector.

Property tax and income tax are radically different in concept, theory, purpose and implementation. So bad analogy.

Property tax is far more similar to your wealth tax proposal, although significantly different in ways I won't go into here (suffice it to simply say it has to do with the matching of the taxpayer and benefits received. You get a direct benefit, and Constitutionally mandated, from the property taxes you pay.)

You are correct in that estate tax has nothing to do with socialism.

I strongly support the return of the estate tax (it's been completely freakin gutted by Congress - too many loopholes).

In the earlier years of this country's tax theory, we held income taxes low so those who were productive could benefit from the fruits of their efforts. Then upon death we'd hammer them with estate taxes. Back then no one had any sympathy for dynasties. And I still don't.

Fern

 

[Craig234]

Originally posted by: Fern

Originally posted by: Craig234

Trying to tax something before any benefit is actually realized is absurd. It's conceptually fundamentally flawed, and mechanically very difficult to implement.

Tell it to my property tax collector.

Property tax and income tax are radically different in concept, theory, purpose and implementation. So bad analogy.

I think you umisread something. Income tax had nothing to do with the quoted text you responded to, either in my post or the person I quoted.

I didn't compare it to income tax at all. I responded to the text you accurately quoted (thanks) saying you can't have any tax of something before its gains are realized.

I was providing an example of a tax he said you can't have (referring to some increased taxation on unrealized capital gains), we have.

You are correct in that estate tax has nothing to do with socialism.

I strongly support the return of the estate tax (it's been completely freakin gutted by Congress - too many loopholes).

In the earlier years of this country's tax theory, we held income taxes low so those who were productive could benefit from the fruits of their efforts. Then upon death we'd hammer them with estate taxes. Back then no one had any sympathy for dynasties. And I still don't.

Fern[/quote]

You are campaigning to be my favorite - ok, least unfavorite - conservative, it seems

 

[daishi5]

I am interested in why you believe we should tax investments while they are still invested rather than when they are removed.

Investments that are not converted back to some form of cash are "mostly" worthless, in that they cannot be spent. (I thought of a few things while I was writing this, but I will just add them to the end.) You must first convert your investment back, and at that point it is very easy to tax them as income, just take what they sell the investment for minus what they paid and tax that as income.

A second benefit to taxing the investment as it is converted back to cash is that normally a person goes up in income brackets as he gets older, until he retires. This means that someone who cashes out investments for non-retirement reasons would be taxed at close to the maximum level on the investment income. This is not iron-clad, but I believe that in most situations this higher tax rate would hit the wealthy who convert investments to cash for increases in their income, but would avoid taxing normal citizens who pull out their cash after they have retired and dropped several income brackets.

The only problem I could see with this, is if somehow it became enough of an advantage to use investments as proxies for cash, such as giving someone 1000 shares of XYZ for a new yacht, or transfering the shares to the baby and then converting them under his name because the baby has no other income. Such tax evasion methods might require more oversight, but that would have to come after taking some time to see just how crafty accountants can be.

 

[Craig234]

Originally posted by: daishi5
I am interested in why you believe we should tax investments while they are still invested rather than when they are removed.

Investments that are not converted back to some form of cash are "mostly" worthless, in that they cannot be spent. (I thought of a few things while I was writing this, but I will just add them to the end.) You must first convert your investment back, and at that point it is very easy to tax them as income, just take what they sell the investment for minus what they paid and tax that as income.

A second benefit to taxing the investment as it is converted back to cash is that normally a person goes up in income brackets as he gets older, until he retires. This means that someone who cashes out investments for non-retirement reasons would be taxed at close to the maximum level on the investment income. This is not iron-clad, but I believe that in most situations this higher tax rate would hit the wealthy who convert investments to cash for increases in their income, but would avoid taxing normal citizens who pull out their cash after they have retired and dropped several income brackets.

The only problem I could see with this, is if somehow it became enough of an advantage to use investments as proxies for cash, such as giving someone 1000 shares of XYZ for a new yacht, or transfering the shares to the baby and then converting them under his name because the baby has no other income. Such tax evasion methods might require more oversight, but that would have to come after taking some time to see just how crafty accountants can be.

If you're extremely weatlhy, I'll use the metaphor for the third time in two days, your money is like a lake, while for most it's like a river flowing in and out. Most of your money just sits static, accumulating, the amount you use for anything is a trifle in comparison to the lake accumulating.

While workers have to pay tax on all their wage income, so they have post-tax money every year to try to save a sliver of for investing - and the lower end of them put much of it into annualy taxable interest-bearing accounts - they're fighitng an uphill battle to save and accululate. Not you - you leave most of your money invested for years, and decades, where it can have fortunes of unrealized gains working for you pre-tax, without the government getting a cent of it all that time. It's a very unequal system, in your favor.

If an employee could tell his wage payer - if he could afford to and it were legal - to not pay him for 20 years and let the money accumulate pre-tax, he'd make a lot more.

But he can't do that. You can. This is why the whole debate about income taxes is sort of a joke, because the very wealthy aren't about paychecks and wages. Charts that break things out by wage income are greatly misrepresenting the story of what's happening with wealth.

So, the reason I am looking for a way to tax some capital investment pre-tax is because I think things are quite unbalanced, and it would help our nation to adjust that.

 

[JD50]

Originally posted by: Craig234

If an employee could tell his wage payer - if he could afford to and it were legal - to not pay him for 20 years and let the money accumulate pre-tax, he'd make a lot more.

I thought of something like that too, but I like to call it a "401k".

 

[daishi5]

Originally posted by: Craig234

Originally posted by: daishi5
I am interested in why you believe we should tax investments while they are still invested rather than when they are removed.

Investments that are not converted back to some form of cash are "mostly" worthless, in that they cannot be spent. (I thought of a few things while I was writing this, but I will just add them to the end.) You must first convert your investment back, and at that point it is very easy to tax them as income, just take what they sell the investment for minus what they paid and tax that as income.

A second benefit to taxing the investment as it is converted back to cash is that normally a person goes up in income brackets as he gets older, until he retires. This means that someone who cashes out investments for non-retirement reasons would be taxed at close to the maximum level on the investment income. This is not iron-clad, but I believe that in most situations this higher tax rate would hit the wealthy who convert investments to cash for increases in their income, but would avoid taxing normal citizens who pull out their cash after they have retired and dropped several income brackets.

The only problem I could see with this, is if somehow it became enough of an advantage to use investments as proxies for cash, such as giving someone 1000 shares of XYZ for a new yacht, or transfering the shares to the baby and then converting them under his name because the baby has no other income. Such tax evasion methods might require more oversight, but that would have to come after taking some time to see just how crafty accountants can be.

If you're extremely weatlhy, I'll use the metaphor for the third time in two days, your money is like a lake, while for most it's like a river flowing in and out. Most of your money just sits static, accumulating, the amount you use for anything is a trifle in comparison to the lake accumulating.

While workers have to pay tax on all their wage income, so they have post-tax money every year to try to save a sliver of for investing - and the lower end of them put much of it into annualy taxable interest-bearing accounts - they're fighitng an uphill battle to save and accululate. Not you - you leave most of your money invested for years, and decades, where it can have fortunes of unrealized gains working for you pre-tax, without the government getting a cent of it all that time. It's a very unequal system, in your favor.

If an employee could tell his wage payer - if he could afford to and it were legal - to not pay him for 20 years and let the money accumulate pre-tax, he'd make a lot more.

But he can't do that. You can. This is why the whole debate about income taxes is sort of a joke, because the very wealthy aren't about paychecks and wages. Charts that break things out by wage income are greatly misrepresenting the story of what's happening with wealth.

So, the reason I am looking for a way to tax some capital investment pre-tax is because I think things are quite unbalanced, and it would help our nation to adjust that.

But investments that are not cashed out are not like a lake in your scenario, because it cannot be used in its present form. What you are taxing in your scenario is potential income. They could remove their money from its investment form, at which point it becomes actual income that can be spent. This is different from things like money market and bank accounts where you earn actual income that is reported and taxed.

When you pay property taxes on your house, you are paying a fixed tax based on its value, NOT based on its increase in value. In other words, that is not a tax based on your investment income from your house, its a wealth tax on your standing capital. What you are suggesting is that every year someone come by your house, take a look at all your possessions and tax you based on what you could sell them for at that point in time.

I think that is my big disagreement with you, the money in investments is not actual income, its just potential income that has yet to be realized, imagine enron stock pre collapse. You would tax that person on each years gain, and then when it disappeared, he would get no compensation for what he lost, you would have taxed him on no income, and the losses he would claim would not be enough to recover what you taxed him.

 

[Jhhnn]

Meh. I'm not really sure why there's this popular notion that we need to reduce taxes when Americans pay the lowest rates in the first world, particularly Americans at the very top of the heap. We expect, demand, the same sort and level of services and infrastructure as other first world populations, so it's unreasonable to think we should pay substantially less to have them. Call that "entitlements" if you want, but having safe streets, clean water, honest courts, wholesome food, a generally healthy population and etc. are "entitlements" I'll gladly help to finance.

I'll agree that we should get more out of our tax dolllars, but the only way that'll happen is if we seriously reconsider how we allocate them. And we need to remember that the sins of the past will be with us for a very long time in the form of debt maintenance. Every dollar borrowed in the past earns interest for those who lent them to our govt.

And I think that the lake vs river analogy is somewhat apt wrt wealth and income, but contend that, in many respects, it's already too late to change much of that dynamic. Changes in the tax code beginning in the Reagan era have seen to that, quite as intended by those who proposed them. The answer lies in progressive taxation of both income and capital gains, with much stiffer rates at the high end than currently enjoyed by those at the tippy-top. I'm sure that the wingers will gnash their teeth and foam at the mouth, rave incoherently at the notion, but wealthy people need income to support their lifestyles, too, and that's the key to preventing further concentration of wealth, income and power into the hands of a very few. Combine that with strong loophole-free estate and gift taxes to maintain opportunity for everybody, not just the inheritors of those who successfuly exploited the opportunities presented to them... We also need to redefine what constitutes a "charitable organization", denying that status to those who are nothing more than propaganda organs of the donors...

Few middle class people understand that our lifestyles and those of our descendants are under attack from the top down, that controlling the accumulation of wealth into the hands of a very few is self defense more than anything else. We hold certain notions related to our frontier heritage, notions that are self destructive in a world of limited resources and near infinite demand. Nothing is truly free, not even rightwing bullshit- the hidden pricetag for that should be much more apparent than it is, given that it has failed to deliver as promised.

 

[Fern]

Originally posted by: daishi5
-snip-
The only problem I could see with this, is if somehow it became enough of an advantage to use investments as proxies for cash, such as giving someone 1000 shares of XYZ for a new yacht, or transfering the shares to the baby and then converting them under his name because the baby has no other income. Such tax evasion methods might require more oversight, but that would have to come after taking some time to see just how crafty accountants can be.

Those scenarios are both already covered under current tax laws.

Swapping stock (or any other property for that matter) for a yacht is already taxable.

The baby's income would have to be taxed at the higher rate of the parents.

Fern

 

[daishi5]

Originally posted by: Fern

Originally posted by: daishi5
-snip-
The only problem I could see with this, is if somehow it became enough of an advantage to use investments as proxies for cash, such as giving someone 1000 shares of XYZ for a new yacht, or transfering the shares to the baby and then converting them under his name because the baby has no other income. Such tax evasion methods might require more oversight, but that would have to come after taking some time to see just how crafty accountants can be.

Those scenarios are both already covered under current tax laws.

Swapping stock (or any other property for that matter) for a yacht is already taxable.

The baby's income would have to be taxed at the higher rate of the parents.

Fern

Thank you, I have never actually dug into any tax laws yet, those are next semester or later, I may go insane.

 

[Craig234]

Originally posted by: JD50

Originally posted by: Craig234

If an employee could tell his wage payer - if he could afford to and it were legal - to not pay him for 20 years and let the money accumulate pre-tax, he'd make a lot more.

I thought of something like that too, but I like to call it a "401k".

Exactly, but note how 401(k)'s are limited to about 15K a year (by law, even if people could afford more, which most can't)? The wealthy get the same benefits for vast sums.

 

[Craig234]

Originally posted by: daishi5

But investments that are not cashed out are not like a lake in your scenario, because it cannot be used in its present form. What you are taxing in your scenario is potential income. They could remove their money from its investment form, at which point it becomes actual income that can be spent. This is different from things like money market and bank accounts where you earn actual income that is reported and taxed.

The benefits are *very* real, in that while the investments are not in the form of cash at that moment, who cares, when they are increasing, on average, in *real terms* that can be converted to cash? What's really the difference at the end of the day whether you have $10,000,000 in green pieces of paper, or a bank statement, or capital investments, other than the 'risk' for the capital investment, which is not really much of a risk at all if you don't want it to be, while it gets the high returns, and is pretty safe when diversifed over time?

The money is very 'real'. I don't see any disadvantages to the capital investment why it should get such preferential policies.

When you pay property taxes on your house, you are paying a fixed tax based on its value, NOT based on its increase in value. In other words, that is not a tax based on your investment income from your house, its a wealth tax on your standing capital. What you are suggesting is that every year someone come by your house, take a look at all your possessions and tax you based on what you could sell them for at that point in time.

For many or most, the value of their house well exceeds the value of its contents, so that it doesn't make much difference; they are in effect paying a 'wealth tax' already.

I think that is my big disagreement with you, the money in investments is not actual income, its just potential income that has yet to be realized, imagine enron stock pre collapse. You would tax that person on each years gain, and then when it disappeared, he would get no compensation for what he lost, you would have taxed him on no income, and the losses he would claim would not be enough to recover what you taxed him.

You seem to be myopic on this 'actual income' issue. You're missing the forest for the trees, the billion dollar lakes of investments for the lake grass of $50K pay annually.

Do you even notice how instead of arguing the core issue you're having to grasp for the extreme exception of Enron to *try* to make your point, and even then I think don't?

Let's say you had Enron stock for 10 years before the crash - if my number from thin air of 0.25% annually is used, you would have paid a total of 2.5% for the decade, while all the Enron workers paid tax on all their income, every year. That 2.5% to slightly balance things would be the least of your concern when Enron crashed.

But of course, you are highly likely to actually profit from your investment. Over x years, not sure the exact number, people in diversified investments have always profited.

Investments are sort of like a casino with terrible odds, but you're the house. You can still lose, but odds are you're going to do quite nicely on average.

And let's not forget the benefits. The last time we shifted taxes up, the American middle class was greatly strengthened.

Some here object to the idea of lowering anyone's taxes with our debt - the point was not to address that but to show how those who say they want tax cuts could get them.

I'd lean towards using the money for debt reduction myself, but that's another issue.