Conquer Club

Have you recovered from your Tax Day hangover yet? It usually takes a few days before the headache of complying with 161 pages of IRS instructions goes away. Not to make it worse, but that’s triple the number of pages in 1985 and four times more than in 1975. That made it worse, didn’t it?

Despite all your hard work filing – Americans spend about 7.3 billion hours per year complying with all the IRS requirements – the United States still faces a budget deficit that is $1.3 trillion. President Obama and Democrats argue the answer to this is to raise taxes on the rich. Republicans disagree, but only about the raising the rate part.

That is what passes for a tax debate in Washington these days. Neither side wants to confront the reality that the only way to return a sense of sanity to the tax code is by scrapping the thing altogether. In it’s place? A tax code that is simple, low, fair, and honest. In other words, we need a flat tax that greatly eases the burden of compliance and stimulates the economy.

But how would that work?

Step 1: Scrap the code. Entirely. It’s not as impossible as it might sound. Even Obama’s own Bipartisan Deficit Commission, the so-called Simpson-Bowles Commission, called for tax reform that would lower rates and do away with many of the deductions and loopholes currently infecting the code. Not surprisingly, Obama ignored it.

Step 2: Establish a single, flat rate on personal and business income. Again, this isn’t as fantastic as it might sound. The key is in the process. You’ve probably heard that Warren Buffett pays a lower tax rate than his secretary. Let’s just assume this is true. Billionaires like Buffett, and even millionaires like Nancy Pelosi and Mitt Romney, can afford an army of tax lawyers to comb every word in the 3.6-million-word tax code looking for their deductions and loopholes. Can you afford such an army?

By eliminating every single deduction, credit, penalty, and loophole, we can erase the tax code’s inherent unfairness, which only benefits the Buffetts, Pelosis, and Romneys. Not only will this raise revenues, it will ensnare the tax cheats, expanding the nation’s taxable base. Next, you lower the rates considerably, doing away with brackets, until we have a single flat tax rate. In one popular flat tax proposal, a family of four would have the first $33,800 of its income tax free; any amount above this would be taxed at 17 percent – for everyone. No deductions, no loopholes.

Step 3: Do the same thing with corporate taxes. Right now, the U.S. has the highest corporate tax rate in the developed world. Even Obama has suggested it needs to go down. Like the individual flat tax, with the business flat tax income would be taxed once and only once. Businesses would calculate total revenue, subtract total expenses, and pay a flat tax on that amount.

Step 4: File your taxes on a postcard.

Step 5: Use all the time and money you’ve saved in the full pursuit of life, liberty and happiness.

That’s what a simple, low, fair, and honest tax code would look like. Many accuse the Tea Party of simply wanting lower taxes. We do, but lower rates are just part of fundamental tax reform. Many accuse the Tea Party of favoring the wealthy. These people have obviously never been to a Tea Party rally before. In fact, what the Tea Party wants is fairness – and not the faux class warfare “fairness” espoused by the Occupy Wall Street crowd.

Although the economic benefits of tax reform are important, the passion of grassroots activists is driven primarily by a set of simple values: Treat everyone the same as everyone else; don’t punish success; and simplicity equals transparency. Americans should know that there isn’t a better deal to be had if you can afford a lobbyist or a lawyer.

The reason Congress made 4,400 legislative changes to the tax code between 2000 and 2010 wasn’t to ensure that the U.S. Treasury was fat and full. It was because the tax code has become the plaything of Washington politicians, to be stuffed with as many little favors for select interests as possible.

It’s reforming that central unfairness that lies at the heart of the Tea Party Tax Code: Simple, low, fair, honest, and, most of all, flat.

I think you lost me on this being a serious attempt at reforming the tax code of the wealthiest nation on earth with point 4.

On a postcard.

Silliness, as always, from the Tea Party. If you can't write it on a sign, or a postcard, then it isn't a Tea Party policy.

If you look at tax rates throughout US history (at least since 1940 until today) you see something very interesting. No matter what the tax code, how complicated or simple, no matter what the tax rate, high like in the 40's, 70's, or low like in the late 80's, 90's, the government always takes the same amount. About 16-18% of GDP. Always. Never more, never less. Always between 16-18% of GDP.

The best way to increase revenue is to increase the GDP pie. The taxes can be whatever, but to increase revenue then increase the GDP.

patches70 wrote:If you look at tax rates throughout US history (at least since 1940 until today) you see something very interesting. No matter what the tax code, how complicated or simple, no matter what the tax rate, high like in the 40's, 70's, or low like in the late 80's, 90's, the government always takes the same amount. About 16-18% of GDP. Always. Never more, never less. Always between 16-18% of GDP.

The best way to increase revenue is to increase the GDP pie. The taxes can be whatever, but to increase revenue then increase the GDP.

[youtube]ucoP4-06O7M/youtube]

How?

Not so much actually.

The only tax-code that you could realistically fit into such a small volume would be some kind of flat-rate (or "flat tax") proposal (see: Hong Kong). The problem with such systems is that, while simple, they are inherently regressive and hit the poorest members of the tax-paying band hardest (as those on lower incomes have a lower ratio of essential-earnings to disposable-earnings). Sure, the rich love them because they save time and money, and because they can claim that their system must be fair as everyone pays the same percentage (which sounds reasonable at a simplistic first glance). But in reality, when you actually look at the effects such a scheme would have on various income-groups, the fact is that flat-rate regimes only serve to make life for the very rich easier, life for those at the low-end of the taxable population very difficult, and they provide an active disincentive for those who are non-taxable to go get a job and become part of the low-end of the tax-paying spectrum.

Basically, the flat-tax system isn't much better than a poll-tax... and there's a good reason that only Hong-Kong uses it.

Sure, you want to simplify tax-law... that's a laudable goal. But the truth is that it's a difficult thing to administrate fairly, and when examining the choice of two possible evils, I'm afraid that I opt for a bureaucracy that wastes a bit of time and money, rather than an oversimplistic system that makes the poor poorer, and the rich richer.

Neoteny wrote:Not so much actually.

The only tax-code that you could realistically fit into such a small volume would be some kind of flat-rate (or "flat tax") proposal (see: Hong Kong). The problem with such systems is that, while simple, they are inherently regressive and hit the poorest members of the tax-paying band hardest (as those on lower incomes have a lower ratio of essential-earnings to disposable-earnings). Sure, the rich love them because they save time and money, and because they can claim that their system must be fair as everyone pays the same percentage (which sounds reasonable at a simplistic first glance). But in reality, when you actually look at the effects such a scheme would have on various income-groups, the fact is that flat-rate regimes only serve to make life for the very rich easier, life for those at the low-end of the taxable population very difficult, and they provide an active disincentive for those who are non-taxable to go get a job and become part of the low-end of the tax-paying spectrum.

Basically, the flat-tax system isn't much better than a poll-tax... and there's a good reason that only Hong-Kong uses it.

Sure, you want to simplify tax-law... that's a laudable goal. But the truth is that it's a difficult thing to administrate fairly, and when examining the choice of two possible evils, I'm afraid that I opt for a bureaucracy that wastes a bit of time and money, rather than an oversimplistic system that makes the poor poorer, and the rich richer.

Actually, its the simplest thing possible. Everyone is treated equally. One might even invoke the concept of equality. Everyone is treated exactly the same...no special favors, no abuse, no corruption, no loopholes, no credits, no tax breaks, no games, no headaches, no tax cheats, no using the tax system as a weapon to punish your enemies (works both ways).

We have 2 options. Either focus on taking more of other peoples money, or focus on creating more jobs and more tax payers.

Ask not what your country can do for you, but what you can do for your country. That is an attitude that is sorely missed these days and absolutely due for a comeback.

Phatscotty wrote:

Neoteny wrote:Not so much actually.

The only tax-code that you could realistically fit into such a small volume would be some kind of flat-rate (or "flat tax") proposal (see: Hong Kong). The problem with such systems is that, while simple, they are inherently regressive and hit the poorest members of the tax-paying band hardest (as those on lower incomes have a lower ratio of essential-earnings to disposable-earnings). Sure, the rich love them because they save time and money, and because they can claim that their system must be fair as everyone pays the same percentage (which sounds reasonable at a simplistic first glance). But in reality, when you actually look at the effects such a scheme would have on various income-groups, the fact is that flat-rate regimes only serve to make life for the very rich easier, life for those at the low-end of the taxable population very difficult, and they provide an active disincentive for those who are non-taxable to go get a job and become part of the low-end of the tax-paying spectrum.

Basically, the flat-tax system isn't much better than a poll-tax... and there's a good reason that only Hong-Kong uses it.

Sure, you want to simplify tax-law... that's a laudable goal. But the truth is that it's a difficult thing to administrate fairly, and when examining the choice of two possible evils, I'm afraid that I opt for a bureaucracy that wastes a bit of time and money, rather than an oversimplistic system that makes the poor poorer, and the rich richer.

Actually, its the simplest thing possible. Everyone is treated equally. One might even invoke the concept of equality. Everyone is treated exactly the same...no special favors, no abuse, no corruption, no loopholes, no credits, no tax breaks, no games, no headaches, no tax cheats, no using the tax system as a weapon to punish your enemies (works both ways).

So, a Communist style paradise? A Utopia?

Symmetry wrote:

Phatscotty wrote:

Neoteny wrote:Not so much actually.

The only tax-code that you could realistically fit into such a small volume would be some kind of flat-rate (or "flat tax") proposal (see: Hong Kong). The problem with such systems is that, while simple, they are inherently regressive and hit the poorest members of the tax-paying band hardest (as those on lower incomes have a lower ratio of essential-earnings to disposable-earnings). Sure, the rich love them because they save time and money, and because they can claim that their system must be fair as everyone pays the same percentage (which sounds reasonable at a simplistic first glance). But in reality, when you actually look at the effects such a scheme would have on various income-groups, the fact is that flat-rate regimes only serve to make life for the very rich easier, life for those at the low-end of the taxable population very difficult, and they provide an active disincentive for those who are non-taxable to go get a job and become part of the low-end of the tax-paying spectrum.

Basically, the flat-tax system isn't much better than a poll-tax... and there's a good reason that only Hong-Kong uses it.

Sure, you want to simplify tax-law... that's a laudable goal. But the truth is that it's a difficult thing to administrate fairly, and when examining the choice of two possible evils, I'm afraid that I opt for a bureaucracy that wastes a bit of time and money, rather than an oversimplistic system that makes the poor poorer, and the rich richer.

Actually, its the simplest thing possible. Everyone is treated equally. One might even invoke the concept of equality. Everyone is treated exactly the same...no special favors, no abuse, no corruption, no loopholes, no credits, no tax breaks, no games, no headaches, no tax cheats, no using the tax system as a weapon to punish your enemies (works both ways).

So, a Communist style paradise? A Utopia?

Meh, or we can just stick with.......a......flat.......tax.......

Which... will...never...happen

Symmetry wrote:Which... will...never...happen

Tell me, oh Brit, why will that never happen in America?

Phatscotty wrote:

Symmetry wrote:Which... will...never...happen

Tell me, oh Brit, why will that never happen in America?

A flat tax? Cause you're not really that interested in it as a nation.

@ Neoteny, why not exempt the first $20,000?


[Regarding OP]

1) It depends on the type of flat tax and what exactly is to be taxed.

2) It's a story about incentives. If you threaten the future streams of income for tax professionals and politicians, nearly all of them will likely react negatively, and if they have the power, they will prevent a flat-tax from occurring---or the politicians could manipulate it so that the rules of the game for them aren't drastically changed.

3) Voters who are aware of this could potentially influence the politicians so that they would implement a flat tax of some sort; however, political platforms are (A) package deals, there's (B) concentrated benefits and dispersed costs, and (C) the collective action problem.

(A) means that a voter can't simply vote for a flat-tax. It has to go through the state-controlled process of politics, which will blend promises into one candidate per each jurisdiction (municipal, county, State, federal). So, as a voter, you don't vote on a flat-tax. You vote for an array of political promises--some of which you may not like. This method fails to reflect actual voter preferences because your political preferences go through middlemen.

(B) Concentrated benefits and dispersed costs. Since a flat-tax has the most negative effect on tax professionals, they have a strong incentive to group-up and lobby in order to implement more favorable policies. The concentrated benefits of doing so far outweighs the costs because the costs are mainly borne by taxpayers. (In other words, the lobbying group gets benefits on the cheap).

(C) Taxpayers, who may stand to significantly gain from a certain flat-tax, amount to such a large size that organizing to lobby is much more cost-prohibitive. These are called collective action problems.


Yeah, long post is kind a long, but that's the jist behind some of the main problems with implementing pretty much any public policy.

Symmetry wrote:

Phatscotty wrote:

Symmetry wrote:Which... will...never...happen

Tell me, oh Brit, why will that never happen in America?

A flat tax? Cause you're not really that interested in it as a nation.

Even after the historic election results of 2010? You might at least admit we are more interested now than we were before? (why a Brit is so interested....idk)

Phatscotty wrote:

Symmetry wrote:

Phatscotty wrote:

Symmetry wrote:Which... will...never...happen

Tell me, oh Brit, why will that never happen in America?

A flat tax? Cause you're not really that interested in it as a nation.

Even after the historic election results of 2010? You might at least admit we are more interested now than we were before... (why am I asking a Brit this lol)

[img]http://mittromneycentral.com/uploads/midterm-election-results-2010.jpg/img]

Mittromneycentral.com? Meh, at least we know where you're getting your facts from now.

Is Romney going to introduce a flat tax?

Is Romney Tea Party now? I've lost track of who is and who isn't. If the Tea Party is about flat tax, and hasn't been completely co-opted by the GOP, why are you looking at the GOP candidate for resources?

And for a candidate that isn't for a flat tax? And as far as I can tell, might actually increase expenditure in the long run.

Is it because I'm British that I don't see why your argument might be sane?

Symmetry wrote:

Phatscotty wrote:

Symmetry wrote:

Phatscotty wrote:

Symmetry wrote:Which... will...never...happen

Tell me, oh Brit, why will that never happen in America?

A flat tax? Cause you're not really that interested in it as a nation.

Even after the historic election results of 2010? You might at least admit we are more interested now than we were before...

Mittromneycentral.com? Meh, at least we know where you're getting your facts from now.

Is Romney going to introduce a flat tax?

DODGE KINGGGGG!

A map is a map. who the F cares where it comes from. Oh, only someone who is dodging questions.

To answer your question, you're not interested in a flat tax as a nation even after 2010.

Symmetry wrote:To answer your question, you're not interested in a flat tax as a nation even after 2010.

Thanks for clearing that up and speaking for America Symm!

you are a very special person

Phatscotty wrote:

Symmetry wrote:To answer your question, you're not interested in a flat tax as a nation even after 2010.

Thanks for clearing that up and speaking for America Symm!

you are a very special person

That I am.

Symmetry wrote:

Phatscotty wrote:

Symmetry wrote:To answer your question, you're not interested in a flat tax as a nation even after 2010.

Thanks for clearing that up and speaking for America Symm!

you are a very special person

That I am.

America is not a progressive country. We are quite the opposite actually. The resistance against progressive policies like our system of taxation is growing larger everyday, not shrinking.

It is a fact we are moving closer to tax reform. Everyday the 4th Great Awakening in America continues to expand. If you were here, you would be able to see it. I can see the change here. I can smell it, feel it. It's in the air. Once the Gadsden has been waved, it's on, and it's irreversible.

Liberty will reign once again in America, and nothing some dude in Britain says is going to change that, but we still love you nonetheless. ♥

Americans are getting it together and we will unite very soon, because there are far more of us that realize a house divided against itself cannot stand.

Scotty, is Adam Smith a progressive?

BigBallinStalin wrote:@ Neoteny, why not exempt the first $20,000?

It's better than nothing (and let's not kid ourselves, tax cuts for the poor is not exactly on the tea party platform). But there are so many situations where exceptions might need to be made. If a family of four is relying on a single 25000 income, they might need all the income they can get. I'm no tax expert though. I just copypastaed something Dancing Mustard wrote years ago that directly counters the "Tea Party" tax code. A flat tax seems, to my uneducated opinion, like it will be anything but simple to apply, and only fair if your definition of "fair" has less to do with allowing the majority of citizens to maximize "what they do with their money" and more with maintaining the status quo for the rich. Nobody likes fucking with their taxes, but our current shitty system benefits most people to some degree, while the flat tax causes more problems than it solves. In my uneducated opinion, of course.

Plus, like you mentioned, how would hundreds of thousands of unemployed tax attorneys affect the economy?

GreecePwns wrote:Scotty, is Adam Smith a progressive?

I think Smith passed on before Progressivism ever became a party.

Well why call our system of taxation a progressive policy when it is Adam Smith himself who proposed such a system?



According to your contribution in another thread, Adam Smith is a communist.

GreecePwns wrote:Well why call our system of taxation a progressive policy when it is Adam Smith himself who proposed such a system?



According to your contribution in another thread, Adam Smith is a communist.

anyone who thinks rich people should pay taxes is a communist? Pretty sure I didnt say that, and I am sure I do not believe that.

Also, the context....there was not even an income tax at the time that was supposedly said, nor was there Communism. The picture uses the word "contribute". Would you care to explore if you think Adam Smith mean "force money from people at gunpoint/by law"?

I think you have to drop some serious context to make the claim he is a communist. Valiant effort though.