The American tax system.

LeadMagnet

Platinum Member
Mar 26, 2003
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The American tax system.

Right now the American tax system is a huge complicated mess that target the meek masses, for all our international readers that don?t know the federal tax system is based on how much a person makes, so the more money you make the greater percentage of your pay is taken in taxes; for instance someone making $30,000 a year would pay ~20% in federal taxes, and someone making $90,000 would pay ~45%. Now this May sound fair but in reality it is not taxing the real money makers in this country (corporations and millionaires) that get paid by stock options. To help pay for this little war George W. Bush had the IRS hire and additional 10,000 agents to milk the masses.

So what could be better? How about a national sales tax of 20% instead of an income tax. We let essecinal food, clothing and medicine be tax free. Perhaps even low rent and education.

This way a poor person making less than $20,000 a year would taking public transportation to work, and living with Spittlebug in the ghetto would pay almost no taxes. Except when they go out to restaurant to eat, buy $100 pair of sneakers, or go see the town prostitute (oh yes that would be legal and taxable).

A middle income person making $65,000 a year living in a $100,000 condo driving a $20,000 car would pay his fair share.

And a high income person making $150,000 a year living in a $500,000 house driving a $50,000 SUV would pay a butt load of taxes when ever they spent money on the non-essincials.

A rich person or corporation would pay not on their income but every time they spent money on that $15,000 umbrella holder or that $6000 shower curtain.

We would save billions in getting rid of the IRS alone !!!
 

Ornery

Lifer
Oct 9, 1999
20,020
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"...not taxing the real money makers in this country (corporations and millionaires) that get paid by stock options."

The progressive tax doesn't even seem fair to me for starters. And don't the "real money makers" pay taxes on their stock options when they exercise them?

I bet the "real money makers" would be happy to have a flat tax or national sales tax instead of the current progressive tax.
 

CPA

Elite Member
Nov 19, 2001
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Your idea is good, but your argument stinks.

I have always liked the idea of taxing spending instead of production, but not for the reasons you indicate.

As Ornery stated, stock options are taxed at 28% when exercised. You can't benefit from an option until you exercise it and when you do you pay taxes on them. Believe me, I know, I have done it several times, and I am far from rich.

Secondly, maybe Bush authorized 10k more IRS agents to collect the more than $280 Billion owed by taxpayers?

And finally, you would not get rid of the IRS if you went this route. Who is going to monitor the collection of the sales tax? If it's the states then you will monitor the states?
 

ConclamoLudus

Senior member
Jan 16, 2003
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I like the sound of a flat tax, does anyone have an argument against it? I have to admit I don't know a lot about it but if everyone pays the same percentage, isn't it fair to all concerned? I'd love it if someone could shed more light on it and tell me the disadvantages to it...
 
Oct 16, 1999
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A federal sales tax (as opposed to income) will absolutely kill small businesses and really screw the middle-class. Especially one as high as you are proposing.
 

rahvin

Elite Member
Oct 10, 1999
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Originally posted by: ConclamoLudus
I like the sound of a flat tax, does anyone have an argument against it? I have to admit I don't know a lot about it but if everyone pays the same percentage, isn't it fair to all concerned? I'd love it if someone could shed more light on it and tell me the disadvantages to it...
A flat tax will shift tax burden from the upper middle class and upper class to the poor and lower middle classes. It will make YOU pay more taxes.

A national sales tax would kill consumption and destroy our economy. People would stop consuming, layoffs would occur, people would spend even less, more layoffs. Very very ugly.
 

ConclamoLudus

Senior member
Jan 16, 2003
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Originally posted by: rahvin
Originally posted by: ConclamoLudus
I like the sound of a flat tax, does anyone have an argument against it? I have to admit I don't know a lot about it but if everyone pays the same percentage, isn't it fair to all concerned? I'd love it if someone could shed more light on it and tell me the disadvantages to it...
A flat tax will shift tax burden from the upper middle class and upper class to the poor and lower middle classes. It will make YOU pay more taxes.

A national sales tax would kill consumption and destroy our economy. People would stop consuming, layoffs would occur, people would spend even less, more layoffs. Very very ugly.
But everyone pays the same percentage of their income. Do you mean shifting the burden or evening out the burden?
 
Oct 16, 1999
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Originally posted by: ConclamoLudus
Originally posted by: rahvin
Originally posted by: ConclamoLudus
I like the sound of a flat tax, does anyone have an argument against it? I have to admit I don't know a lot about it but if everyone pays the same percentage, isn't it fair to all concerned? I'd love it if someone could shed more light on it and tell me the disadvantages to it...
A flat tax will shift tax burden from the upper middle class and upper class to the poor and lower middle classes. It will make YOU pay more taxes.

A national sales tax would kill consumption and destroy our economy. People would stop consuming, layoffs would occur, people would spend even less, more layoffs. Very very ugly.
But everyone pays the same percentage of their income. Do you mean shifting the burden or evening out the burden?
No, everyone will be paying the same percentage of their spending, not income, while losing all tax benefits from owning your own business, writing off property taxes, mortgage interest, etc.
 

ConclamoLudus

Senior member
Jan 16, 2003
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What about a flat tax on income? Say...20% (probably not enough), if you make 10,000 per year you pay 2,000. If you make 1,000,000 per year you pay $200,000. Would this be fair? Of course I know its not that simple though.
 
Oct 16, 1999
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Originally posted by: ConclamoLudus
What about a flat tax on income? Say...20% (probably not enough), if you make 10,000 per year you pay 2,000. If you make 1,000,000 per year you pay $200,000. Would this be fair? Of course I know its not that simple though.
I think a flat tax would be fair, probably around 15% with the first 20K tax free. But write-offs will still need to be in there (the legit ones not only help individuals, but also help the economy), so I'm not sure if it would simplify things all that much. But I would also be for getting rid of capitol gains (tax it as income), inheritence tax, and all those other extraneous federal taxes. I'd like to see social security fazed out as well, but that's sort of a different topic.
 

ConclamoLudus

Senior member
Jan 16, 2003
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Originally posted by: Gonad the Barbarian
Originally posted by: ConclamoLudus
What about a flat tax on income? Say...20% (probably not enough), if you make 10,000 per year you pay 2,000. If you make 1,000,000 per year you pay $200,000. Would this be fair? Of course I know its not that simple though.
I think a flat tax would be fair, probably around 15% with the first 20K tax free. But write-offs will still need to be in there (the legit ones not only help individuals, but also help the economy), so I'm not sure if it would simplify things all that much. But I would also be for getting rid of capitol gains (tax it as income), inheritence tax, and all those other extraneous federal taxes. I'd like to see social security fazed out as well, but that's sort of a different topic.
That's the flat tax I'm talking about. The problem is what percentage is going to cover the checks that the governemnt writes. :)
 
Oct 16, 1999
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Originally posted by: ConclamoLudus
Originally posted by: Gonad the Barbarian
Originally posted by: ConclamoLudus
What about a flat tax on income? Say...20% (probably not enough), if you make 10,000 per year you pay 2,000. If you make 1,000,000 per year you pay $200,000. Would this be fair? Of course I know its not that simple though.
I think a flat tax would be fair, probably around 15% with the first 20K tax free. But write-offs will still need to be in there (the legit ones not only help individuals, but also help the economy), so I'm not sure if it would simplify things all that much. But I would also be for getting rid of capitol gains (tax it as income), inheritence tax, and all those other extraneous federal taxes. I'd like to see social security fazed out as well, but that's sort of a different topic.
That's the flat tax I'm talking about. The problem is what percentage is going to cover the checks that the governemnt writes. :)
The federal government really needs to cut back on its spending. The amount of tax revenue should really dictate its spending, not the other way around. The states are a different story though.
 

dullard

Elite Member
May 21, 2001
24,185
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There were a few incorrect statements (or at least misleading) in your post.
1) No one making any amount of money pays 45% in income taxes. The highest rate is 38.6%.
2) We would not save anything noticible by getting rid of the IRS because we still need the IRS to make sure everyone pays their sales tax fairly...
3) There is one major problem with the sales tax. Suppose I make $10,000,000 this year and buy everything I need. Then suppose next year the sales tax come into effect. I again make $10,000,000. What will I pay in taxes? $0. Why? Since I will put all my money in the bank, invest it, or fly to foreign lands and buy my stuff there and bring it back. I'll never have to pay American sales tax. Looks like your plan will be a great boon to the rich. With the rich not paying taxes anymore, the poor and middle class will be stuck paying for the taxes the rich don't pay anymore. That means that the government won't be able to afford to make things like food, clothing, and medice tax free. So the poor (who spend every cent they earn) will pay tax on every cent. The rich who don't spend every cent will get by tax free on much of their income. Is that fair?


As for some of the posts in this thread, our system is in a way already fair. Everyone in America gets their first chunk of income tax free (the poor, the middle class, even Bill Gates). Then everyone in America pays the same 10% on the next chunk of income (the poor, the middle class, and the rich). Then everyone in America pays 15% on the next chunk, etc. The rich pay the same low rate on their first chunk of income that the poor pay. So looking at it that way it is fair.

As for flat taxes, the main problem is that ~95% of people will end up paying more in tax than they do now, and ~5% of the richest of the rich will pay less. That may be "fair" in your opinion but are you willing to pay more in taxes (assuming you are in that 95%) top get that?
 

JellyBaby

Diamond Member
Apr 21, 2000
9,159
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As for flat taxes, the main problem is that ~95% of people will end up paying more in tax than they do now, and ~5% of the richest of the rich will pay less.
Unless spending was reduced at the same time.
 

sandorski

No Lifer
Oct 10, 1999
69,418
4,796
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Originally posted by: rahvin
Originally posted by: ConclamoLudus
I like the sound of a flat tax, does anyone have an argument against it? I have to admit I don't know a lot about it but if everyone pays the same percentage, isn't it fair to all concerned? I'd love it if someone could shed more light on it and tell me the disadvantages to it...
A flat tax will shift tax burden from the upper middle class and upper class to the poor and lower middle classes. It will make YOU pay more taxes.

A national sales tax would kill consumption and destroy our economy. People would stop consuming, layoffs would occur, people would spend even less, more layoffs. Very very ugly.
Yes, I agree on both accounts. The 2nd point not totally, but at 20% a sales tax would have a catastrophic affect, especially on the poor/lower income segment of society.

A Defense of Progressive Taxation

Unfair! A burden to the Rich! These are the cries against Progressive Taxation, but is this true?

I don't know how long the US has had Progressive Taxation, but I assume it has been in effect for decades. During that time, have the Rich become Poorer? Have the Poor become Rich? No, in fact the trend is quite the opposite, the Rich are getting Richer and the Poor Poorer. [Conan reference]What in the World?[/Conan refernce]

Progressive Taxation was not an attempt to Re-Distribute wealth in some Socialistic fashion, it was to Distribute Tax Burden in a way that wouldn't be over burdensome on the Poor, yet also not over burdensome on the Rich. It seems to have worked very well in many ways, unless you are Poor, but as far as Taxation is concerned the Poor benefit as much as the Rich. Let me explain further: The current levels of Taxation have largely removed Tax Burden from the Poor and shifted it to the Rich, however, the Tax Burden on the Rich has not overwhelmed the Rich, in fact as has been shown many times over the Rich are still getting Richer.

In my mind, this situation begs the question, "Why is Taxation such a big issue?" . The Rhetoric doesn't fit the (admitted)Reality, yet the issue persists as if it was a "do or die" situation.

Politics? Vote buying? Could this be the real reason, a simple dislike of paying taxes? A seeing of a segment of the population with a lesser or non Tax Burden and retorting, "If they don't have to, why should I?"

2 thoughts made by other persons of significance:

1) "of whom much is given, much is expected"
2) "there is only 1 thing worse than a sore loser, a sore winner."
 

luckiestone

Junior Member
Aug 28, 2000
11
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There is some misconceptions here to clear up:
1) There could never be a national sales tax because although it has a lot of appeal to the masses it would be a catastrophe. It would create a large and unruly black market, much larger than we have now. Because the poor and middle class spend a larger percentage of their income on essentials the tax burden would fall to them. The rich once they had their wealth would never pay taxes in effect. Essentially this would create a super oligarchy of the very rich and keep them rich. This is what George Washington and Thomas Jefferson didn't want.
2) There is also the concept of a consumption tax. This is what the Bush administration has been trying to push. The idea is that what ever money you don't consume on food, lodging, utilities and other essentials you invest in the stock or bond market. Only the money you consume is taxed the invested amount is not. Again this falls on its face because the poor and middle class will consume a larger percent of their incomes. Again creating a super oligarchy. If this worked so well then every country would be emulating the Japanese model which is what this is. As we know Japan is in its 10th year of reccession.
3)A flat tax is just our tax system with less deductions and loopholes. I am all for it and I am all for simplification of the tax system. The people who want to trash the current system and install something else usually have an agenda and are not our friends. It really doesn't matter what the federal system is anyway because of the various loopholes and deductions you can basically pay the same amount every year. If you want to worry about taxes start worrying about your state. That is where the big changes are. The states will be asking for more as the feds ask for less.
 

Moonbeam

Elite Member
Nov 24, 1999
69,674
5,147
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We have always been best off as a nation when we progressively heavily taxed the rich. It's good for us and it's good for them. I mean it's good for them and it's good for you.
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
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Ok lets eliminate all income tax...
Then apply a VAT to goods and services at a progressive rate.
What I mean is:
a $100,000 Auto picks up 25%, a $20,000 picks up 10%, and you could alter based on pollution compliance etc.
Travel, Merchandise etc... would pick up whatever rational tax is appropriate.
Food would be free of tax as would medicines and health care to a point.. Single room hospital would be taxed but multi occupant would be free...
Stock xfer would be taxed etc

At the end of the day.. the richest who tend to purchase the more expensive would be taxed higher than the poor folks etc..

It would work... just need a lot of micro economic look see and rate calcs
 

B00ne

Platinum Member
May 21, 2001
2,168
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Originally posted by: Gonad the Barbarian
A federal sales tax (as opposed to income) will absolutely kill small businesses and really screw the middle-class. Especially one as high as you are proposing.
How is that? Our sales tax is 15% and small businesses are the basis of our economy (.de)
Sweden is doing quite well too with 25% sales tax - dunno how important small business are over there though but my guess is same as here....

Btw what is wrong with a progressive tax? A) more money -> more responsibility

B) The higher u tax the poor -> to middle income the more u will hurt the economy, because they spend (have to) ALL the money they earn each month, taxing rich ppl higher will not hurt them and not the economy cause they will not spend it anyway (guess why car manufactuerer come up with these ultra expensive cars now - certainly NOT because the rich ppl are doing their share of converting their income into goods thus producing growth/employment
 

Aceshigh

Platinum Member
Aug 22, 2002
2,529
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Hell, my state and local sales tax here in the Houston area is already 10%.

I wouldn't mind it being a little bit higher if we got rid of the income tax. As it is now we get the worst of both worlds. They take a chunk out of my income and my purchases.
 

przero

Platinum Member
Dec 30, 2000
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Cost of government divided by the number of citizens equals the fair amount of tax each person should pay.
 

B00ne

Platinum Member
May 21, 2001
2,168
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Originally posted by: przero
Cost of government divided by the number of citizens equals the fair amount of tax each person should pay.

Yeah right, and all the ppl that couldnt pay that amount then transition to "property od the government" or what?
 

Linflas

Lifer
Jan 30, 2001
15,392
78
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The problem with the current system is that it is far removed from what the main purpose of it should be: to raise sufficient cash to pay for the costs of government. Instead what has happened is that the tax code has been used to promote everyones little utopian idea of how we should live and behave. Don't like smoking? Lets use the tax code to change the behavior. Oops that hurts tobacco farmers so lets provide them with tax breaks and subsidies to lessen the effect. One of the most ingrained is the home mortgage deduction. We want people to own homes so lets build into the tax code incentives to own homes. The only real way to fix this mess in my humble opinion is to get back to ther concept that the purpose of taxes is to pay for the cost of government and not to be used as an instrument of social change.

The reason the average person is not upset about the current rate of taxation is because in most cases they really do not realize just how much of their income is devoted to it when all methods of tax collection are considered. Instead people focus on tiny pieces of it like the sales tax rate, various personal property tax schemes, local real estate taxes, the federal income tax etc. In addition involuntary withholding for income taxes tends to hide just how much is taken from ones paycheck. Just think of how many people you personally know that brag about how big a check they are getting back from their tax overpayment. If instead they had to sit down and write out checks to the Feds and state when tax day came for the total tax owed you know people would be in the streets looking for politicians to pummel. When you consider the total percentage of your income that is devoted to paying all forms of tax it is stunning.

If I could enact just one thing to change our tax system it would be the elimination of the withholding system. Yes it would require people to actually understand their finances and manage their money but the country managed to do this just fine until WWII when the original "voluntary" withholding was introduced. Knowing that it would take time for people to learn and become accustomed to paying their taxes I would provide for a transition period where all monies withheld would be deposited to an interest bearing account under my control against which money could only be removed for the April 15 tax payment. It would force people to stop looking at their income as just the take home amount on their paycheck and understand just how much tax each of us pays.
 

CPA

Elite Member
Nov 19, 2001
30,322
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Originally posted by: Gonad the Barbarian
Originally posted by: ConclamoLudus
What about a flat tax on income? Say...20% (probably not enough), if you make 10,000 per year you pay 2,000. If you make 1,000,000 per year you pay $200,000. Would this be fair? Of course I know its not that simple though.
I think a flat tax would be fair, probably around 15% with the first 20K tax free. But write-offs will still need to be in there (the legit ones not only help individuals, but also help the economy), so I'm not sure if it would simplify things all that much. But I would also be for getting rid of capitol gains (tax it as income), inheritence tax, and all those other extraneous federal taxes. I'd like to see social security fazed out as well, but that's sort of a different topic.
That is not a flat tax! When you exempt someone and/or include write-offs you still have a progressive tax structure. The rate may be the same but the effective rates will be different.

 

CPA

Elite Member
Nov 19, 2001
30,322
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Originally posted by: Aceshigh
Hell, my state and local sales tax here in the Houston area is already 10%.

I wouldn't mind it being a little bit higher if we got rid of the income tax. As it is now we get the worst of both worlds. They take a chunk out of my income and my purchases.

Get ready for it to go up and to pay it on all items (currently many things are exempt), if the current legislation in the Texas Senate gets passed by the house. This is the current idea to help ease the property tax burden on us Texans. Interestingly, not much has gone into thought on how to reduce spending.

 

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