What is the ideal taxation scheme?

[Integral]

But roads aren't pure public goods, and user fees have their place in financing road maintenance.

Also, empirically, there have been many lighthouses that were privately owned and operated, financed by user fees.

 

[Cutlass]

Ok, first, many people who discuss taxes fail to make distinctions between what taxes for what government. I'm not so familiar with the governmental organizations outside the US. Within the US all people are subject to taxes from at least 3 different governments, and sometimes 4. These governments have different abilities to tax, and follow different patterns.

Currently the US federal government gets most of its revenue from the income tax, payroll tax, and various business taxes. But also a complicated collection of other sources such as fees, inheritance taxes, and tariffs. The states gain most of their revenues from income taxes and sales taxes. With every state designing its own mix. They also have business taxes and fees and miscellaneous ways of raising cash. County and local governments most commonly rely on the property tax, but some also have an income tax and fees and fines can be a major source of revenue.

Now also consider that very few people who advocate a flat tax really mean it. It depends on what is being taxed. A "flat tax" which is not on all income from all sources is not actually a flat tax, and is actually designed to allow upper income people to evade the flat part.

That said, I'm most concerned with US federal taxes: (I'll exclude all the miscellaneous as too complex to get into. )

Business taxes:
This can be extremely complicated because the accounting rules concerning what businesses can and cannot be taxed on are extremely complex. However, to simplify, I would have business paying a base rate of 36% on all profits. But I would modify that by saying that for each increase in its domestic investment above an assumed 4% base increase, the tax rate is decreased by 4%. So a company that increased it's net capital stock by 5% would pay a rate of 32% ect. Investment would not include buildings, the purchase of financial securities, mergers or acquisitions, or inventory. I'm targeting capital equipment, R&D, intellectual property, and human capital. And exclusively domestically.

For the Payroll tax I would make a small increase in the retirement age, but also fund health care out of it more than currently. I would raise the maximum limit that people are required to pay it on to $1mill.

For the income tax I would a progressive tax with only a few brackets. Income will be defined as all income from all sources. Wages, bonuses, interest, dividends, capital gains, inheritance (a person can receive a lifetime $2million in estate gifts, every other transfer is subject to the income tax) :

Annual income: Rate:
$0-$20,000 0%
$20,001 - $100,000 15%
$100,001 - $500,000 25%
$500,001 and up, whatever rate it takes to balance the budget assuming a 5% unemployment rate. Further I would have a surtax placed on the highest bracket that is determined by national net new investment. At a 12% increase in net new investment, excluding buildings, 0% surtax. At 11% a 3% surtax would be added. At 0% increase a 33% surtax would be added.

 

[Berzerker]

If it's a public good, than a user fee will not correctly charge people who receive the good what they should pay. You misunderstood him.

I said I supported user fees and Bill said this:

Hooray for free riders!

Now he's saying user fees exclude those who dont pay, ie free riders. Just let him speak for himself or you'll be swallowed up by the hole he's digging.

Name a liberal who wants to do that? Liberals understand TANSTAAFL. User fees are the wrong way to pay for a public good. They still have to be paid for.

Why ask me, go ask Bill. He said

As for being a liberal, last time I checked, I'm not the one calling for taxes to be abolished for public goods.

Make any sense to you? Sounds like he thinks liberals want to abolish taxes for public goods. Is that what you think too?

 

[Bill3000]

so why are you telling me user fees are free riding?

Now he's saying user fees exclude those who dont pay, ie free riders. Just let him speak for himself or you'll be swallowed up by the hole he's digging.

No, I'm not saying that user fees are free riding, just that they can't work for public goods because the point of a user fee is obviously enough to exclude the person from a good if he does not pay the fee. However, by definition, public goods are non-excludable; defense, police, firefighters, etc (how are you going to have user fees for something like national defense? Police do more things than report incidents, and firefighters fight fires for more than simply your own house being burned down). Also people derive benefit even if they don't directly use the service themselves (again, all three listed are examples)

I wasn't saying that user fees were free riders themselves; just that they are insufficient in properly funding public goods; as a result, free riding would remain. As for gas taxes, those are just taxes on gas; that's not a user fee. They can be considered pigovian taxes because they discourage driving. A user fee would be like paying a road toll, if you're still going with roads, but having a toll road for every single road created would be a wee bit cumbersome.

Make any sense to you? Sounds like he thinks liberals want to abolish taxes for public goods. Is that what you think too?

No, I'm a liberal; I was just refuting that I support free riders. You got it mixed up.

 

[Berzerker]

No, I'm not saying that user fees are free riding

Here is what you said when I supported user fees

Hooray for free riders!

just that they can't work for public goods because the point of a user fee is obviously enough to exclude the person from a good if he does not pay the fee.

That aint even true, roads paid for by user fees work quite well for even the people who dont drive on them. If my neighbors and I hire a cop for protection, that benefits people who live nearby but dont pay the cop's salary.

However, by definition, public goods are non-excludable; defense, police, firefighters, etc (how are you going to have user fees for something like national defense?

We pay taxes now for the military, why does that exclude a user fee? And people aint gonna refuse a user fee or tax for a military just because someone else aint paying the tax. If my neighbor aint helping to pay the local sheriff's salary, that doesn't mean the rest of us who are will fire the sheriff.

I wasn't saying that user fees were free riders themselves; just that they are insufficient in properly funding public goods; as a result, free riding would remain.

Free riding exists in every damn system under the sun, user fees are the least free rider friendly.

As for gas taxes, those are just taxes on gas; that's not a user fee. They can be considered pigovian taxes because they discourage driving. A user fee would be like paying a road toll, if you're still going with roads, but having a toll road for every single road created would be a wee bit cumbersome.

Gas taxes are a user fee - I pay a tax at the pump to drive my car. I do not pay that tax if its for my tractor which I use on my land. Toll roads are another form of user fee, I prefer the gas tax. But I use toll roads too for the convenience.

No, I'm a liberal; I was just refuting that I support free riders. You got it mixed up.

I know you're a liberal, I said so and then you seemed to deny it. Shall I quote you again? And you do support free riders, thats what liberalism is about - making some people (the "rich") pay so that others ride free.

 

[Perfection]

There is none. Everything is completely dependent on the context of individual societies.

 

[a_propagandist]

Since Integral is in here, I'd like to reference my proposal that i mentioned before in here by him. What do you think of a progressive FairTax based on the price of the item? Say, 35% for an expensive TV and 5% for fruit?

 

[Ecofarm]

Well, it's not ideal but it's a big improvement:

The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.

The FairTax Act (HR 25, S 296) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

The FairTax:

Enables workers to keep their entire paychecks
Enables retirees to keep their entire pensions
Refunds in advance the tax on purchases of basic necessities
Allows American products to compete fairly
Brings transparency and accountability to tax policy
Ensures Social Security and Medicare funding
Closes all loopholes and brings fairness to taxation
Abolishes the IRS

We offer a library of information throughout this Web site about the features and benefits of the FairTax plan. Please explore!

http://www.fairtax.org/site/PageServer?pagename=about_main

 

[Cutlass]

Fair tax has been completely debunked.

 

[Ecofarm]

fwiw The website lists the criticisms of the plan and the sponsor's responses. It's a pretty decent presentation of the concerns and arguments.

A few senators and like 50 representatives sponsor the Act, so it's not completely outer space.

 

[uppi]

How much money do you guys make, that you're all for this flat tax scheme? I understand that the very poor and the very rich would profit, but in a revenue neutral scheme someone has to suffer and you can guess who that might be.

 

[Princeps]

Property ownership is not aggression, because the person OWNS it, due to mixing his labour(due to self ownership) which belongs to him(due to self ownership), with the subject of it.

It is enforced through force. Private property is clearly an innitiation of force: if a man claims a part of land and stops everyone from entering it or enjoying its fruits, he is engaging in coercive restriction of other people's liberties. Mixing labor nonsense has nothing to do with it. It doesn't determine ownership nor should it.

Theft is aggression because the would-be thief isnt the just owner of the property due to not being its homesteader, or voluntary trade(doesnt violate nap).

Again, no. Property is PURELY a matter of opinion and/or law. Theft is defined as the illegal taking of property of others: its definition of assumes the existence of a political legal system that defines property in the first place through a political process. Libertarians believe that some unalterable universal natural law, conveniently shaped to precisely fit their ideological tenets, determines what is property. This is obviously false.

Property is coercive, because, let's suppose one said "I'll shoot you if you don't give me your money". That is a coercive thing to say. But suppose one said that "I'll shoot you if you access my lands and eat my fruits because that's my natural right." The second statement contains a threat of aggression and it is restrictive of liberty, because it assumes that the consent of the Person B is not needed for the arrengement, just because some god or natural rights doctrine says so. It is private tyranny imposed without consent.

 

[Cutlass]

How much money do you guys make, that you're all for this flat tax scheme? I understand that the very poor and the very rich would profit, but in a revenue neutral scheme someone has to suffer and you can guess who that might be.

If a flat tax were, you know, actually flat (with an exception for the poor) than the rich would pay more than they do now. I haven't seen an actual proposal for how that would work. The federal nature of the US system would make it damned near impossible. But a lot of people who have argued for a flat tax in the past have no intention of allowing an actual flat tax. They often exclude pesky little things like interest, dividends, and capital gains. Or, to put it another way, the majority of the personal income of the very rich.

 

[JollyRoger]

Well, it's not ideal but it's a big improvement:



http://www.fairtax.org/site/PageServer?pagename=about_main

I don't think a regressive tax that would discourage new products and create black markets is an improvement.

 

[Cutlass]

I don't think a regressive tax that would discourage new products and create black markets is an improvement.

It's a lot like Forbes's version of the flat tax: So long as he doesn't have to pay it he thinks it's fair.

 

[JollyRoger]

It's a lot like Forbes's version of the flat tax: So long as he doesn't have to pay it he thinks it's fair.

Yeah, that Forbes plan was great:

Wages: taxed
Capital Gains: not taxed
Dividends: not taxed
Inheritances: not taxed

Not a bad set up for a guy living off the capital gains and dividends from the wealth he inherited from daddy. Nonworking nobility have it rough. Only wage serfs should be taxed.

 

[a_propagandist]

Property ownership is not aggression, because the person OWNS it, due to mixing his labour(due to self ownership) which belongs to him(due to self ownership), with the subject of it. Theft is aggression because the would-be thief isnt the just owner of the property due to not being its homesteader, or voluntary trade(doesnt violate nap).

Also:

If a thief steals a watch from you and then sells it to another person, does the buyer legally possess that watch? Or should it still be yours? Knowing you, I think you probably believe that the watch is still rightfully and legally yours. Only that an act of theft/aggression has changed the circumstances.

What if the thief steals your watch and then sells it to someone who sells it to someone else who sells it? Let that continue on for 100 transactions. Legally, do you believe that the last guy who buys the stolen watch possesses it? Or should it still be yours?

Now, suppose hypothetically you live in California and live in the suburbs. Well, the house (more specifically land) you hypothetically own, you bought from the previous inhabitant. But go farther back in history, you'll see that it's land won from the Spanish by force/aggression/theft(you could say). And farther back, the Spanish stole the land from the Native Americans. Now, I ask you, in this hypothetical situation, would you still be the rightful owner of the land? Because all land (the factor of production) has been taken by force.

 

[uppi]

If a flat tax were, you know, actually flat (with an exception for the poor) than the rich would pay more than they do now. I haven't seen an actual proposal for how that would work. The federal nature of the US system would make it damned near impossible. But a lot of people who have argued for a flat tax in the past have no intention of allowing an actual flat tax. They often exclude pesky little things like interest, dividends, and capital gains. Or, to put it another way, the majority of the personal income of the very rich.

I have no idea, how the US tax system really works. But if your income mostly taxable now, and you're in the highest tax bracket, then it would seem to me that, unless the flat tax is even higher than that, you would profit from that.

But if you then start to exclude most of the income of the very rich, then the burden on the middle class gets even heavier.

But I am wondering: This Fair Tax proposal would mean that those below the poverty limit would "pay" a negative effective tax rate. How can this even be proposed in the USA without being decried as Socialism! and Communist!!! ?

 

[Ecofarm]

But I am wondering: This Fair Tax proposal would mean that those below the poverty limit would "pay" a negative effective tax rate. How can this even be proposed in the USA without being decried as Socialism! and Communist!!! ?

That's true; yet, people claim it is regressive.

 

[Earthling]

Now, suppose hypothetically you live in California and live in the suburbs. Well, the house (more specifically land) you hypothetically own, you bought from the previous inhabitant. But go farther back in history, you'll see that it's land won from the Spanish by force/aggression/theft(you could say). And farther back, the Spanish stole the land from the Native Americans. Now, I ask you, in this hypothetical situation, would you still be the rightful owner of the land? Because all land (the factor of production) has been taken by force.

No, no, no, he lives, or ideally wants to live on his privately owned asteroid separate from all other sentient life, thus he claims whatever he wants belongs to him. It's called I1V14F49 xarthaz.

That's true; yet, people claim it is regressive.

No, the "Flat-Tax-With-Loopholes" as Cutlass aptly described, is regressive.