Anyone like the negative income tax as a solution to the coutnry's problems? I would tie the tax rate at 25% and the credit value at 20% of median income. I would also abolish: All Income treated the same 0% corporate or business tax all welfare programs, aid to dependent children and families, TANF, etc... Sell all HUD homes to current tenants for $1 Minimum Wage Higher education subsidies, (not loans though) Pell Grants Unemployment Insurance Social Security - although if anyone is interested I have a phase out plan that goes with it Medicare Medicaid etc... All government interference with equality of results gone. Would be a work/disability/age/school requirement, and if people don't trust others to do for themselves maybe a health insurance, retirement (Stock indexes, AAAs, and T Bills only or a mix) and life insurance mandate.
What do you hope to accomplish by this? By abolishing welfare programs, why even have a federal income tax? Why not go back to the way federal govt earned money before the 16th amendment? Why not follow libertarian philosophy that Taxes are theft in general? What would be your economic policy? I'm guessing that you are in the Austrian school of thought. Could your system ever work? would it ever come to corruption and oppression? Could it ever open a door to serfdom or a legal form a slavery by coercion of the proverty doing what they can to survive?
Well I would prefer no federal income tax, but I think that is impractical in today's politics, and people will demand some kind of welfare safety net. I would like to replace the current income tax amendment with this one. I realize it likely impractical to get passed, but more so then they idea of no federal income tax. Big government zombies will cry that corporations are making them slaves if they do not give at least 1/3 of their labor to the government. It doesn't make any logical sense, but I think that is the current reality we live in. That would be the entirety of the economic policy, everyone go from there. No subsidization of any industry. Government would provide for defense, run the legal system and maybe get involved in some infrastructure and negotiating free trade deals. I agree with Austrians on some things, I am probably more of a Friedmanist. By tying it to 1/5th of the median income, (use an average of sources to arrive at the number), and tying the tax rate to 1/4 of income I dont think you will get as many abuses as our system today, which is a mix of nonsensical hodge podge tax policies. I would remove the characterization of different sources of income, remove tuition subsidies for higher education etc...Full on school choice etc.. Any system has the potential for abuse, but a tax system like this has less I think, and abuses will largely be absorbed by efficiency gains since we spend so much money on people whose job it is to spend money.
That wouldn't work unless you also had zero income and corporations don't get negative income treatment.
My expenses (the cost of keeping me alive) would offset much of my income. anything beyond that would go to paying for my intellectual property (my mind) which is owned by an offshore subsidiary.
That is tax fraud, and you can commit it now or under that other system. Business deductions can't be for personal use etc...
This is an idea that Mitlon Friedman talked about. He said, if we are going to have a welfare state, then the way to do it is just give people the cash they need to get out of poverty. Basically he said, get rid of all those government programs, HUD, Medicare, Medicaid, Food Stamps etc etc . . . Instead you decide what amount of money you need to be middle class, and they send people a check to make up the difference. For example . . . Suppose that it is decided that to be middle class you need $10 per hour. You only make $8. Then the government makes up the difference by sending you the $2 an hour. This system can be run by computer. Everyone sends in their income tax returns. The computer then calculates who is not making enough. Then sends them a check. This is an idea that both the left and right can agree on. The left calls it guaranteed minimum income. The right just want to run the welfare state efficiently. I don't understand why both sides don't work together to get this done.
Just have everyone pay a flat 25% tax on everything they purchase, to be collected at the cash register or where ever the transaction is made. The 25% flat tax rate would include all taxes. No more state, local taxes or any other tax. No more deductions for this or that. Moreover, "poor" people on welfare and entitlements would also pay a 25% tax on every thing they buy. As the system is now, "poor" people cannot pay tax even if they want to, and the vast majority of them would love to show their patriotism by paying their fair share in taxes.
That would be a regressive tax and it would be hard for it to get passed and it would lead to inefficiencies soon. Capital equipment would be covered? If so that makes outsourcing very likely. If not then that causes other revenue issues.
Sane as current sales tax of course. But flat rate consumption taxes are a bad idea anyway it causes distortions especially among those people who can afford out of jurisdiction substitute goods
True. And thanks. Also if the tax is collected at the point of sale ... well, that is the "enforcement."
It would be far more equitable, and less distorting to the economy to apply a tiny tax to all transactions rather than a draconian tax applied only to retail transactions. This is because a very large volume of monetary transactions have no relationship to retail transactions at all. Taxation would distinctly favour one sort of transaction over another and distort the economy in a manner that is no different than the current tax system. If the idea is that of a fair and simple system of taxation, taxing all transactions can result in a rate quite a bit lower than a 25% tax applied only to retail transactions. There have been a few studies on a transaction tax and they indicate that a universal tax of between 0.001% and 0.05% on all electronic transactions would be enough to fund all government at all levels, pay off all government debt in a few years and provide substantial surpluses into the foreseeable future. Additionally, such a tax could be collected at the time of transaction and transferred immediately and directly to government accounts by the few firms that facilitate electronic transactions thus relieving all other participants in the economy from any and all concerns about taxes. The only duty of the tax collectors would be to oversee and audit the transaction exchanges.
Lets try to stay on topic, at least on the subjects I care about, I look forward to going off topic in everyone else's posts. The transaction tax you describe would make them less money then Visa makes on a transactions and not at all enough to pay for the country.
[MENTION=62195]johnmayo[/MENTION]: I wonder if it might be a bit more attractive for the governments of each state to give its citizens a pre-bate equal to the average estimated cost of living within each of their respective borders. Either have a flat rate of income tax apply in all states and territories, or instead generate revenue with progressive, marginal income taxes with harmonized tax rates on each of five income brackets - each rate fixed to a quintile of the range of individual incomes earned so the boundaries separating one quintile from the next vary from state to state. The federal government gets revenue from taxing the many states' revenue at one, flat rate before any of it is spent, leaving the rest of the funds for the many states to use. Let other forms of taxation (e.g. sales tax, property tax, VAT) be used at rates set only at the municipal level for financing their own endeavors from one community to the next. The actual rates of tax concerning the state and national governments could be debated in Congress as factions try to settle how much money they need in the budget for which items of importance. From there, the number of existing social programs and layers of welfare I would want to do away with would depend on what form of economy we have and what kind of measures are in place to achieve quality, universal health insurance coverage. There is a high chance of me wanting to do away with the entire liberal workfare regime and replacing it with a single social insurance scheme, or letting each state set up their own, for spreading out costs of risk and guaranteeing access to certain basics such as food, water, healthcare, and - in places with dangerously hot or cold seasons - shelter as well. The initial guarantee of some income is great but not on its own quite enough, in my humble opinion. The preference noted for a pre-bate, by the way, is because I worry that in some of its potential forms a negative income tax could present a disincentive for working on the part of individuals or encourage firms to exploit the system by setting wages as close as they can to nothing so taxpayers end up supporting their workers while all profits are channeled into the hands of the most powerful few and/or the shareholders in many firms. Perhaps I missed something though.
I like this idea to get it started and skip the problems with gap issues from people who are on welfare/social security and then moving to negative income tax. I would keep a tax exemption on people who have paid into social security now and then phase it out over the generations who have paid into it, with today;s 18 year old only able to claim a 2% exemption. So federal income tax would be gone, but a state income tax the same throughout would be in place, but it takes into account the median income there? The only problem I have with that is the retirement shift that occurs in the country. I live in a county for example that is 30% with no federal income, and no one is poor, they are just retirees from up north that go golfing instead of working. Working people here though need to come up with more then the median income, it is skewed downward in many states like this. (Arizona is another, I am in Florida. ) I could see the states making up the difference if they choose between median income and cost of living. This would give the states a good incentive to reduce living costs, something that is often within their power. The effect of the credit makes the tax already progressive I think, a 10k credit means little to a billionaire, much to a 45k earner. Sales and VAT taxes I think are inefficient because they push spending to areas exempt from such taxes. Sometimes that is what people want, (savings instead of consumption), but I tend to think taxes like VATs that can be hidden are abused to drive up prices and hurt cost of living. (Some of the richer countries in Europe with relatively poor PPP are example of this) From there, the number of existing social programs and layers of welfare I would want to do away with would depend on what form of economy we have and what kind of measures are in place to achieve quality, universal health insurance coverage. There is a high chance of me wanting to do away with the entire liberal workfare regime and replacing it with a single social insurance scheme, or letting each state set up their own, for spreading out costs of risk and guaranteeing access to certain basics such as food, water, healthcare, and - in places with dangerously hot or cold seasons - shelter as well. The initial guarantee of some income is great but not on its own quite enough, in my humble opinion. I don't think employers set pay based on what the tax outcome will be, but what the market is setting the prevailing wage at based on demand for the skill. The negative income tax removes all employment taxes too, and offers a much greater incentive to hire, rather then purchase supply. If nothing else, it should mean an automatic 8% raise for everyone, and a tax cut for most workers, while it is a tax hike on most hedge fund managers, small business people get a cut. Since it cuts out a good deal of inefficiency in the transfer process that saved money assuming it is not spent elsewhere is also a tax cut since they are monetizing debt which will one day lead to inflation, already CPI is up 23% since 2004 I want to say? Not too bad though... but still. Since wages are not it is taking its toll.
As it turns out, retail transactions like those processed by Visa are a very small percentage of electronic transactions. There was a study by a pair of well respected economists from Columbia University who gained access to actual data from the largest electronic transaction exchanges who came up with a 0.0002% transaction tax rate. Most of the activity is in stock, bond, commodity, currency trading, and interbank transfers. The only objection was in a Wall Street Journal Editorial which unconvincingly complained that a $50,000 tax on a $1Billion international bank transfer would be so onerous in its stifling of trade that it would bring the entire world economy to a halt. (The brokers who handle such trades make multiples of that.) As yet there is no economists who have disproved, or even questioned their methodology or conclusions. There was later study, based on far less extensive transaction data which concluded a 0.05% transaction tax would accomplish the same thing. A transaction tax is a tax on the velocity of money. It does not tax revenues or profits or incomes but only the money that changes hands every day, which is such an enormous volume that very few people can even believe it, and so dismiss the discovery that a tiny tax on it could entirely fund the government out of hand.
Oh....Ok I see what you are talking about. That is a different idea for sure, I have to check that out. What would that do to prices though? I feel like VATs are hidden ways to tax people because most won't understand how it is affecting them, but I could be wrong.... Would this cause any market distortions, people moving from certain transactions to others to get around it? The taxes would still have to add up to the same revenue, because this doesn't replace a social welfare structure, is that correct? I like the idea of the people getting the benefit of very cheap money paying for a bit of it.
There would be a lot of changes in market behaviour as participants adopt to the removal of current distortions but that would be very temporary. The only way to get around this tax is with cash and that would be way too much of a bother since the tax is so small. For the vast majority of people paying a transactions tax would be a joy, 20 cents on a $100 spent instead of income tax, sales tax, property tax, and every other tax. Who would not enjoy that? The 0.0002% transaction tax rate would generate more revenue than all current taxes at all levels of government combined. It would pay off the national debt within five years, at which time it could be lowered even further. If it was applied worldwide it would pay off all government debts within a decade, stabilize the world financial system, and provide $100s of Billions for long term directed investment in developing nations to improve social conditions and economic prospects.
I have been thinking about it, and I don't see how we would remain as the international reserve currency if that were the case. I think the trick behind all this is it relies on currency exchanges international of dollars to remain at the same level, and I think everyone overseas baking these large balance changes will decide to just abandon the dollar in favor of another currency. Do revenue projections take into account foreign revenue exchanges too? I feel like they would to get that much money at such a low rate... That would be great in theory, but I think foreigners would not like paying our taxes. Demand for dollars would certainly be affected in that case. I also don't like taxes that would change normal interaction between parties looking to avoid it. I agree with the flat tax would of 20% would be better then all the other taxes piled on. Especially if we don't forget those hidden taxes they call regulatory compliance.
Taxes on international transactions would be split, with 1/2 going to each nation. Currency exchanges are a completely different thing. They are national and international markets where currencies are traded, intended to facilitate trade but, since less than 0.0001% of trades on currency exchanges are made for their intended purpose of allowing buyers and sellers of goods to exchange their receipts in foreign currency for local currency, they have become overwhelmingly speculative markets that the imposition of a tiny transaction tax would have temporary, and little effect on. It would have zero effect on the demand for $US. The flat tax of 20% would exclude 90% of all economic activity from taxation and push the tax burden away from those who make the most money. It has to be 20% for everyone to make up for those making all the money paying far less.
Having been invited I will comment. A national consumption tax that replaced all forms of taxation (state and federal) would most certainly require a Constitutional Amendment and it is highly doubtful that the States would ratify such an Amendment so the proposal is fundamentally based upon living in Fantasy Land but I can go there. A consumption tax (i.e. sales tax on the consumption of goods and services collected at the point of consumption) is highly regressive placing a much higher tax burden relative to income for low income individuals than it does on high income individuals. This can be easily demonstrated. A low income individual has to spend all income annually just to live so they are theoretically paying the tax on their gross income. The high income person only spends a fraction of their income to live on and the tax only applies to the money they spend and not on their gross income. If they only spend 1/2 of their income then their effective tax burden relative to income is only 1/2 of what the low income earner makes. The only way there can be relative parity and fairness is if the cost of the tax is not imposed upon the fundamental cost of living required just to live that would include basic food on the table, a basic requirement for a roof over our heads, and other basic expendatures. Based upon the existing "welfare" programs we can estimate these basic coss of living at about $30,000 per year because if a person exploits all of the welfare programs that they can qualify for it would equate to a combined wage/welfare income/benefit of roughly $30,000/yr from what I've read. While the official proverty level is about 1/3rd of this amount (because politicans don't like to admit the actual poverty in American because it makes them look bad) we need to realize that anyone with less than $30,000/yr in income is basically living in poverty and cannot get ahead in America. Every dime they earn basically goes to just surviving from one day to the next. FairTax.org addressed this minimally in their proposal that only addressed federal taxation with a "prebate" but the prebate was too low and wasn't based upon the actual tax burden being imposed. They based their "prebate" upon the "inclusive" tax rate instead of the "exclusive" tax rate and "sales taxes" are an "exclusive" tax added to the cost of the goods or services provided. There is also a failure because not all State revenue and expendatures are the same. North Dakota, with a small population and little infrastructure doesn't have the same tax burden requirement for it's residents than New York that has high density population centers with massive infrastructure or California with it's high population spread out over greater distances that require high infrastructure expendatures. Compare these states to a state like Alaska that actually sends annual royalty payments to the people of the state. There is a huge difference between the revenue needs of different states and a "one-size-fits-all" tax is just as bad as any "one-size-fits-all" government "solution" to a problem. ""One-size-fits-all" solutions never fit all. I would like to read the proposal for Social Security. I have addressed that in my thread on taxation. http://www.politicalforum.com/polit...eliminating-crony-capitalism-taxation-us.html I would also like to see my issues with state taxation addressed. http://www.politicalforum.com/polit...not-paying-fair-share-taxes-state-either.html
It isn't a consumption tax, but it does deal with soc security so i will explai. It better there. Basically it is a flat income tax with a flat tax credit, making it progressive, not regressive. Also treats all income the same, something you usually like.
