In addition to believing that sanity needs to be restored in government through a cutting of the military budget and the welfare budget as well, I believe our taxation scheme needs to be drastically altered.
First and foremost, the income tax! This post will be a bit US-centric, naturally.
http://en.wikipedia.org/wiki/Rate_schedule_(federal_income_tax)
I'll put that link there to show the current income tax situation in the United States, for quick reference.
First and foremost, those ugly absolute values need to be removed. They could be seen as regressive, plus they make tax calculation somewhat more complicated. Reduce the taxation scheme entirely to percentages of income(that naturally will have to fluctuate with things such as inflation, of course).
With those numbers removed, there are still two income tax subjects that need covering:
a) The Brackets
I believe the brackets - provided there's a progressive tax, of course - should be shuffled to be even numbers, especially ending in zeros, to make things simpler. I think the amount covered in each bracket should be increased, thus resulting in a net tax cut for the majority of people, and the tax stays constant for those already on top.
So, for example, replace those ugly six brackets with these:
1. 0 - 50,000
2. 50,001 - 500,000
3. 500,001+
Much simpler, plus for the vast majority of people, income taxes are cut due to the shift upwards.
b) the Rates
Now this is where I become more open-ended. I am an advocate of a flat tax, a progressive tax, AND a Negative Income Tax as a means of financing the government. The Flat Tax and Negative Income Tax do not need discussion here, as they do not have different "rates", but a single flat rate.
These numbers are arbitrary, of course, and could be negotiated. But just to give an idea...
1. 0 - 50,000 : 1%
2. 50,001 - 500,000 : 5%
3. 500,001+ : 10%
In essence, everybody wins under a system such as this, due to taxes being cut for everybody, and the majority of people being moved into a lower tax bracket. Of course, given the realities of politics, such a simple system is not likely to exist. But, this is about IDEAL taxation systems, after all.
My main proposal with brackets is this: Do not lump a person who makes a few hundred thousand a year in with Warren Buffet. Call it personal bias, but I'll give my father as an example.
Our family grew up in borderline-poverty, having to leech off our grandparents to pay the bills. My father never accepted a single dime from the government, and as time went on, he moved his way up until he became a regional manager at a local business. He eventually resigned due to his ambition, becoming a small business owner. That business makes about 750,000 dollars a year, and he takes home about 200,000 or so of it himself. Due to the current taxation scheme, he loses about half of it all. Thankfully, the whammy of state taxes is not imposed upon us thanks to being in Nevada. But with only a net income of 100,000+, that money is easily gobbled up by medical bills, the mortgage and other assorted expenses. There are times where we have to scrape the bottom of the barrel to get by, and it's all because of the insanity imposed upon us by both sides of the aisle's agendas.
So in all honesty, given how many small business owners - and even some large business owners too - rose up from desperate circumstances and lived out the American dream, should we really punish them from their success? And rhetoric aside, should the small business owners, who are the brick and mortar of the American economy - making up about 60% of it's business if I recall correctly - be punished as harshly as those at the top?
This is one reason why I'm more of a supporter of a flat tax, as it doesn't punish people for being successful, be it by personal virtue or manipulation of the system.
And, to quiet the left-leaning types, I support the Negative Income Tax to merge the benefit and taxation systems, thus allowing the wealthy and poor to both prosper. Now just to get the imbeciles on Capitol Hill to actually do something. The only problem with the Negative Income Tax is it might squeeze the middle class, and thus it's implementation would have to be done very carefully.
On to the other parts of this grand trainwreck we call the taxation system...
Inheritance taxation. I am a firm believer in a progressive inheritance tax. The main reason being, people who become rich worked for their money, while those who were born into it DID NOT. All liquid assets should be subject to enormous taxation the larger they get. Of course, as explained in other threads I've made, I believe a handsome amount can still be exempted. Say, 1,000,000 dollars for the spouse and every child. But everything over that will see the cut of the government's blade. Of course, the wealthy have the choice of donating the non-exempted amounts to charity, in which case the government will NOT be able to touch them. A post-mortem tax deduction, if you will. It also serves as an incentive to spend money while alive, thus keeping large amounts of cash flowing through the economy, likely producing a net benefit.
Now that the "people worked for their money" (or not) argument has been solidified, on to the other things...
A sales tax. The sales tax is certainly an interesting way to generate revenue, being that it taxes economic activity and purchases rather than production. It can also be used to try and deter people from harmful or unhealthy substances through 'sin taxation.' Some of the most radical - not saying that in a bad way - thinkers believe the income tax should be outright abolished and replaced with a national sales tax.
So all in all, I'm a supporter of the sales tax. It also offers a tad more choice to people in terms of paying it(as they can choose to buy the product it's attached to), whereas income taxation is more forced upon a person as they choose to be productive. The only issue is it is regressive, and thus healthy food, medicine, clothing and simple housing should be exempt from it, to ensure that society's least fortunate are not punished.
Tariffs and duties. I used to be a supporter of these, but I became a free trader thanks to discussions with other posters. Keeping tariffs low - with the benefit of diversifying income and adding a bit of cash to the government bucket - isn't too bad for me. But turning to outright protectionism is. Lower prices are generally a consequence of better efficiency(or lack of economic development on the part of the producer, whichever), and so they should not be punished. A better way to protect industries such as automobile manufacturers - in my opinion - is to gradually cut taxes and tell them to either emulate their rivals or face the wrath of the free market. Free trading will produce a better overall benefit, as it nurtures competition between countries as well as within them.
The only issue is that as trade barriers are demolished, there's a chance less moral businessmen will exploit those in undeveloped countries, as shown by simple things such as outsourcing. However, I'm not quite sure if it is "exploitation", given how the wages - which are small to us - might be relatively large in the area they go to. Observe how migrant workers often agree to work for less, not only because of their - general - humility, but also due to the fact what's little to us is a lot to them. They're a sad reflection on the culture of privelege that has developed in the First World.
But anyway, my point is, is that so long as the wage is still good relative to the worker's location, I see no issues with the outsourcing, as free trade helps us all in the end. Sure a few people might go bankrupt in the homeland, but given time, it is for the greater good that other nations develop, improving the quality of life they enjoy, while also giving us more competitors and markets. We all benefit in the end. The greater, long-term good is better than the lesser, short-term good.
Land taxation. Whether one is a Georgist or not, placing high taxes on land - beyond a certain amount of it, to shield the poor from regressive effects - seems like a good idea. It reduces an individual's excesses, and even moreso when licenses and fees are used with regards to natural resources and development of the land. A good, Georgian-esque tax can help guarantee an affluent individual makes the most use of their land, squeezing every penny they can out of it, improving efficiency. It also aids the environmental movement, by preserving natural landscapes here and there from being bought up by those who would not use them.
As an example of how much revenue land taxation can generate, one can look at Hong Kong.
As a component of land taxation, there is a natural resource taxation scheme. One should not be able to own a natural resource - an oil deposit, mineral deposit, freshwater source, etc. - unless they pay a fee for it. This fee guarantees that individual's right to monopolise the resource and prevent access by others to it. On top of this fee for owning the resource, there should be an additional fee for not developing/using the resource; oil or gold that sits in the ground, for example, doesn't help the economy any, when it could be flowing into the market as raw materials, as well as providing jobs in the mining industry.
I probably left some things out, but I can tackle those later. Those are the major things.
