My solution to the broken American tax system

[RightIsWrong]

The whiners and apologists of the left claim that a progressive tax structure is the only fair way to make sure that the rich are paying their share while the whiners and apologists of the right claim that a flat tax structure is the only fair way to make sure that the rich are aren't paying their share and for everyone else.

Why not have a hybrid system of a progressive flat tax?

Have a simple, no deductions for anyone, no refund for anyone system? The premise is pretty simple.

$0 - $100,000 pay a 5% flat rate for money earned in that range
$100,001 - $150,000 pay 10% flat rate for moneys earned in that range
$150,001 - $200,000 pay a 15% flat rate for moneys earned in that range
$200,001 - ∞ pay a 20% flat rate for moneys earned in that range

All money earned as a result of capital gains would also be taxed at the 20% flat rate

This would eliminate the need for about 75% of the IRS workforce, eliminate the need for a great majority of the commercial space that is used for IRS offices and greatly simplify the entire tax code.

Gone would be loopholes and refunds for those that are already paying almost nothing to begin with and the rich could no longer claim that they are paying the lions share because their effective tax rate would never be more than 20% (and in actuality, could never even touch 20% b/c they would pay less than that on the first $200k).

The left keep the progressive system so that the poorer section of the population aren't sacrificing the ability to be able to pay for necessities and the right finally get their wet dream of a flat tax.

It would result in more money in the average person's paycheck (instead of loaning the government 25% out of each paycheck and then hoping to get some back at the beginning of the next year) and it would greatly reduce the complexity of determining how much money will be available to generate the next year's budget.

Corporations would also get a "break" by being charged a flat rate of 25% on all profits, no exceptions, no deductions, no credits and no more being able to make $6B dollars in profit and receive a $2B tax refund from the federal government (I'm talking to you GE!).

What say you?

 

[Jaskalas]

What say you?

Removing all tax breaks, loopholes, and credits, absolutely.

But that is how the government gets to treat others unequally. You think they'd vote to surrender that power? They still want to dole out cash to good little boys and girls like at GE. Democrats want tax credits for their friends, Republicans want tax credits for their friends. In this, the expanse of government power, the leadership of both parties are united and we are a minority. The majority of our ruling class will not vote against its own interests.

 

[Matt1970]

Holy Tax Cut Batman!!

 

[wuliheron]

Ready, 22, 65, 28, 40, 79, hut, hut, hike!

Taxes are about survival dude, not arbitrary numbers you pull out of your ass or personal views of what would be "ideal" or "fair" or more "efficient". Hell, a Model-T Ford is cheap, efficient, easy to repair, and lasts forever. It also only does 35 miles per hour and bounces like a bucking bronco.

 

[MotF Bane]

Removing all tax breaks, loopholes, and credits, absolutely.

But that is how the government gets to treat others unequally. You think they'd vote to surrender that power? They still want to dole out cash to good little boys and girls like at GE. Democrats want tax credits for their friends, Republicans want tax credits for their friends. In this, the expanse of government power, the leadership of both parties are united and we are a minority. The majority of our ruling class will not vote against its own interests.

This. The current system has segments that work for various interest groups, who then complain about the breaks for the other groups, because only their special treatment is right. The politicians are happy, the companies are happy, the interest groups are happy, the rich are happy, and everybody else gets fucked.

 

[MotF Bane]

Ready, 22, 65, 28, 40, 79, hut, hut, hike!

Taxes are about survival dude, not arbitrary numbers you pull out of your ass or personal views of what would be "ideal" or "fair" or more "efficient". Hell, a Model-T Ford is cheap, efficient, easy to repair, and lasts forever. It also only does 35 miles per hour and bounces like a bucking bronco.

Okay, then consider the substance of the idea, but replace his suggested numbers of 5/10/15/20 with other numbers.

Now do you have an objection?

 

[RightIsWrong]

Ready, 22, 65, 28, 40, 79, hut, hut, hike!

Taxes are about survival dude, not arbitrary numbers you pull out of your ass or personal views of what would be "ideal" or "fair" or more "efficient". Hell, a Model-T Ford is cheap, efficient, easy to repair, and lasts forever. It also only does 35 miles per hour and bounces like a bucking bronco.

Can you explain how we would not be able to survive?

You seem like you are just "pulling catch phrases out of your ass" and not really giving any reason, logic or validation of your opinion.

The fact of the matter is that a primary reason that we are in such a deficit is that the government can't stop spending and they are completely unaware of what tax revenues will be on a year to year basis. One way to solve this is to keep individuals and companies from finding new ways to circumvent the system and by giving people more of their earnings to spend, hence the lower rate on the bottom end of the spectrum and a top end rate that is more than manageable.

See, the numbers were actually thought about with some reasoning and not just pulled from my arse.

 

[Craig234]

With all due respect:

"There is always an easy solution to every human problem--neat, plausible, and wrong."
H. L. Mencken

One problem with your suggestion is that you aren't addressing the underlying problem, of the political corruption causing the problem in the first place.

It's like the Jews coming up with a plan for fairness to submit to the Nazi government, they don't get it.

Your plan has no advantage over a purely progressive system, including 'social engineering', except that that flexibility is abused by the political corruption.

But that political corruption would also prevent a 'good system' you come up with from being adopted - if it could be, then the progressive system could be fixes.

You lose the benefits of good incentives - I don't have much interest in right-wing radical ideologues who disagree - for no good reason.

Any attempts by the government to incent R&D, to incent green energy technology, to incent businesses to reduce costly and harmful pollution, with tax credits - forget it.

Another problem, what about the international corporate issue - companies keeping trillions out of the US economy to prevent any US taxation?

25% of zero is zero.

Charities would see plummeting donations without any deduction.

The 'IRS workforce' cost is a red herring - it's trivial as a cost compared to the size of the budget, and we could use a lot more pursuit of the owed taxes.

Basically, we need to fix political corruption to implement tax fixes, and when we do, the progressive tax system is the best.

ANY fix adopted without fixing the political corruption will be corrupt - i.e., IMO, transfer even more wealth to the most wealthy.

 

[RightIsWrong]

Craig,

With all due respect, you are missing the forest for the trees. I am not attempting to solve the problem of political corruption nor attempting to discuss the feasibility of implementation of the proposal, only the merits of the proposal itself.

I am well aware of the pitfalls that any proposal would face due to the inherent corruption and incompetence attributed to both parties and openly acknowledge such. That is why I only addressed the tax code and not the methods that would need to be employed to get this or any other proposal actually instituted.

 

[Gonad the Barbarian]

Solving the problems with our tax structure starts with at minimum adding brackets above $250K.

 

[Craig234]

Craig,

With all due respect, you are missing the forest for the trees. I am not attempting to solve the problem of political corruption nor attempting to discuss the feasibility of implementation of the proposal, only the merits of the proposal itself.

I am well aware of the pitfalls that any proposal would face due to the inherent corruption and incompetence attributed to both parties and openly acknowledge such. That is why I only addressed the tax code and not the methods that would need to be employed to get this or any other proposal actually instituted.

Actually, I think the metaphor is backwards - the forest I'm not missing is the larger issue of the political corruption dominating any tax plan, while the trees are the plan.

My point was, that looking at your plan, I see you trying to preserve some of the benefits of the progressive system - with brackets - while address the problem of the abuse of tax credits by throwing the baby out with the bathwater, and just getting rid of them, which both has a big harm, and faces the problem getting passed.

That approach to prevent the corruption is like responding to a Congressman having an affair with his staff member by banning Congress members from having staff of the gender they're attracted to. It might work to prevent that specific problem, but has all kinds of harms in preventing opportunity, and preventing Congress people from having the best people.

It might throw out those bad, corrupt 'tax loopholes' - but the corruption will lead to other forms of corruption, just as Congresspeople will find other mistresses.

The nice thing about my analogy is that it's easier to make a decent tax system IF the political corruption is addressed, than to prevent infidelity.

We have a cultural problem. Just as there are countries who have cultures that accept mistresses making it very difficult for any wife to do much about it, we have a culture that has allowed a system corrupted by money, with massive lobbying organizations, recruiting members and staff of Congress when they leave office, billions poured into political campaigns, that corrupt our elections, and it has, and talk of a 'fix' is not going to help much without the barrier to a fix being addressed.

I'm not saying not to discuss the plan - but that I don't see any improvements in your plan but the sort of 'more harm than good' attempts to get around corruption.

That your plan would be modified before it was in place such that it would be even more weighted for the top than the current system.

We don't need to get rid of all tax incentives - just the corruption that makes them giveaways for the rich instead of helping the country.

 

[glenn1]

Solving the problems with our tax structure starts with at minimum adding brackets above $250K.

What's the problem you're trying to solve with this solution, "no higher brackets means I'm unable to tax the shit out of rich people?" There's already the Alternative Minimum Tax which basically accomplishes the same goal of hitting the rich with a higher tax burden, so IMHO your point is moot. Not to mention the OP was discussing fairness and simplicity and you seem to be unable to get beyond class warfare against the wealthy. One could just as easily turn this around to look at the other end of the scale - no one should ever have an income tax liability lower than zero; people not only paying no income tax but getting money back due to refundable Earned Income Tax Credits is complete B.S.

 

[Matt1970]

With all due respect:

Charities would see plummeting donations without any deduction.

That's a good point. Not to mention tax credits for green technologies.

 

[Matt1970]

$0 - $100,000 pay a 5% flat rate for money earned in that range
$100,001 - $150,000 pay 10% flat rate for moneys earned in that range
$150,001 - $200,000 pay a 15% flat rate for moneys earned in that range
$200,001 - ∞ pay a 20% flat rate for moneys earned in that range

I am kind of curious where you come up with those numbers. I am a conservative but by a far-right conservative's standpoint I don't think those percentages would fund the type of government that could pave roads, supply law enforcement and other services we have become accustom to.

 

[Gonad the Barbarian]

What's the problem you're trying to solve with this solution, "no higher brackets means I'm unable to tax the shit out of rich people?" There's already the Alternative Minimum Tax which basically accomplishes the same goal of hitting the rich with a higher tax burden, so IMHO your point is moot. Not to mention the OP was discussing fairness and simplicity and you seem to be unable to get beyond class warfare against the wealthy. One could just as easily turn this around to look at the other end of the scale - no one should ever have an income tax liability lower than zero; people not only paying no income tax but getting money back due to refundable Earned Income Tax Credits is complete B.S.

The problem I'm trying to solve is taxing someone making $250K at the same rate as someone making $25M. I'm not trying to tax the "shit" out of anyone, I'm just trying fix an obviously broken scale. Tax income brackets need to reflect the actual income scale to approach any sort of fairness. But that's the last thing folks like you seem to want.

 

[RightIsWrong]

I am kind of curious where you come up with those numbers. I am a conservative but by a far-right conservative's standpoint I don't think those percentages would fund the type of government that could pave roads, supply law enforcement and other services we have become accustom to.

The numbers were based on what I thought would be fair and equitable to those at the lower end and to the upper end.

Any revenues that are "lost" from a personal tax standpoint, should be offset by the corporate tax structure. Say a family is making $1500/wk combined today, they are essentially bringing home a rough total of $1237 (27.5% go to taxes). Under this proposal, they would increase their net total to $1425.

The additional funds would ultimately end up back into the economy either through spending or through savings. If they are spent, they will be taxed at the corporate level. If they are saved, they will be taxed under the capital gains portion.

Consider that GE made $1.1B in a tax refund last year because of all of the loopholes, you can see that losses from the personal side of the equation can be offset by gains on the corporate side.

 

[wuliheron]

Okay, then consider the substance of the idea, but replace his suggested numbers of 5/10/15/20 with other numbers.

Now do you have an objection?

I most certainly do!

The idea that you can organize 300 million people according to simplistic principles and minimalistic government worked just fine during the middle ages, but not a single modern government has managed it. Personally, I don't find the middle ages attractive as lifestyles go.

 

[wuliheron]

Can you explain how we would not be able to survive?

You seem like you are just "pulling catch phrases out of your ass" and not really giving any reason, logic or validation of your opinion.

The fact of the matter is that a primary reason that we are in such a deficit is that the government can't stop spending and they are completely unaware of what tax revenues will be on a year to year basis. One way to solve this is to keep individuals and companies from finding new ways to circumvent the system and by giving people more of their earnings to spend, hence the lower rate on the bottom end of the spectrum and a top end rate that is more than manageable.

See, the numbers were actually thought about with some reasoning and not just pulled from my arse.

Like I just said, no one has managed to produce a modern high tech civilization based on simple rules and minimalistic government since the middle ages. If it were so easy and so advantageous someone somewhere would have already done it. I no more think it can be done then that we could organize a viable government based on the traditions of a primitive tribe.

 

[charrison]

Have a simple, no deductions for anyone, no refund for anyone system? The premise is pretty simple.

$0 - $100,000 pay a 5% flat rate for money earned in that range

This by itself would decimate the irs as it exists today. That puts >90% of the population into a single tax bracket. I dont think 5% would be high enough to be revenue neutral, but i do approve of the concept.

Lets make taxes simple, low and broad, rather than exempt about 1/2 the population. Everyone needs to pay some tax.

 

[charrison]

Like I just said, no one has managed to produce a modern high tech civilization based on simple rules and minimalistic government since the middle ages. If it were so easy and so advantageous someone somewhere would have already done it. I no more think it can be done then that we could organize a viable government based on the traditions of a primitive tribe.

Beucase you think it is far better to have 1000s of pages of tax code to produce the same amount of revenue that this would? Such a system would leave me paying more, but I would trade it for its simplicity in a second.

 

[RightIsWrong]

Like I just said, no one has managed to produce a modern high tech civilization based on simple rules and minimalistic government since the middle ages. If it were so easy and so advantageous someone somewhere would have already done it. I no more think it can be done then that we could organize a viable government based on the traditions of a primitive tribe.

Just FYI, it wasn't the simplicity of the governing that doomed people during the middle ages, it was those in power making it so complex that the masses were unable to rise above it.

The reason that it isn't done anywhere in today's society isn't because simple can't work, it's because simple limits the power of those at the top. Power is transferred from one privileged group to the next because they are the only ones with the resources to work/game the system the more complex it is.

 

[Craig234]

Just FYI, it wasn't the simplicity of the governing that doomed people during the middle ages, it was those in power making it so complex that the masses were unable to rise above it.

The reason that it isn't done anywhere in today's society isn't because simple can't work, it's because simple limits the power of those at the top. Power is transferred from one privileged group to the next because they are the only ones with the resources to work/game the system the more complex it is.

Simple doesn't limit the power of the people at the top. It doesn't much simpler than a 'flat tax' of say 30% (what's estimated as needed to be revenue neutral), and yet that would be a radical shift of taxes off the top onto those with less. The middle ages weren't about complicated, but simply how power worked. You served the power, period. The power kept enough of a force to ensure you did. And the earlier primitive economies have little in common with today's.

 

[davmat787]

I don't really have an opinion on the OP's suggestion, but it sure is nice to read a post that tries to fix something, rather than just bitch and point fingers at the other team.

 

[wuliheron]

Beucase you think it is far better to have 1000s of pages of tax code to produce the same amount of revenue that this would? Such a system would leave me paying more, but I would trade it for its simplicity in a second.

Go ahead, join a Amazon tribe. I'm sure you'll love the simple life.

 

[wuliheron]

Just FYI, it wasn't the simplicity of the governing that doomed people during the middle ages, it was those in power making it so complex that the masses were unable to rise above it.

The reason that it isn't done anywhere in today's society isn't because simple can't work, it's because simple limits the power of those at the top. Power is transferred from one privileged group to the next because they are the only ones with the resources to work/game the system the more complex it is.

Yeah, yeah, and all it takes to fly is a little fairy dust and positive thoughts.

Get a grip. For the vast majority of humanity's existence people lived in small hunter gatherer groups where just a few simple traditions sufficed. Then we invented agriculture and all hell broke loose and the shit has yet to stop hitting the fan. We inventing writing, mathematics, and computers just to keep it all organized and working half-assed. Now without the slightest evidence you say we can have our cake and eat it too.