Bruce Bartlett: How to really simplify the tax code

[Winehole23]

This week millions of Americans will be rushing to calculate and file their income taxes — and probably cursing whoever invented this confusing, complicated monstrosity.



Many people will spend money on accountants, tax software or storefront tax-preparation services. The cost in terms of time alone runs to the tens of billions of dollars, with billions more spent out of pocket. The aggravation factor is beyond calculation.


Politicians often rail against the complexity of the tax system as the key source of taxpayer frustration. Historically, however, voters have been unwilling to support meaningful simplification efforts and happily put up with complexity if it saves them in taxes. They seem always to fear that “simplification” is some sort of code word for raising their taxes while reducing someone else’s.


Another barrier to simplification is a loss of privacy. In 2003, the Treasury Department put forward a proposal (http://www.treasury.gov/resource-center/tax-policy/Documents/noreturn.pdf) to create a return-free tax system for most taxpayers, as many other countries have. In essence, the Internal Revenue Service would calculate your taxes for you and send you a bill or a refund.

The Treasury proposal went nowhere, for two reasons.
First, reporting of income and tax withholding would have to increase to provide the I.R.S. with the data needed to accurately calculate people’s taxes. But people have been highly resistant to additional withholding; a law requiring it on interest income was enacted in 1982 (http://www.nytimes.com/1982/10/10/business/personal-finance-a-closer-look-at-the-new-tax-law.html) but almost immediately repealed (http://www.nytimes.com/1983/07/28/business/conferees-accord-bars-withholding-of-tax-on-interest.html) after widespread complaints.
The second problem is that the tax system would have to be radically simplified to allow the return-free system to operate.


Radical simplification sounds nice in theory; just wipe the slate clean and start from scratch, many people believe. Two years ago, Alan Simpson and Erskine Bowles, co-chairmen of the National Commission on Fiscal Responsibility and Reform, put forward exactly such a plan.
It would eliminate every single deduction, exclusion and credit in the tax code, which economists call “tax expenditures,” and sharply reduce tax rates to three brackets of 8, 14 and 23 percent.


The current rate structure has six brackets: 10, 15, 25, 28, 33 and 35 percent, with a 39.6 percent bracket scheduled to reappear next year. The Tax Policy Center estimates (http://www.taxpolicycenter.org/UploadedPDF/1001602-TN-How-Large-Are-Tax-Expenditures-2012-Update.pdf) that individual tax expenditures will reduce federal revenues by $942 billion this year, while all tax expenditures, including those on the corporate side, cost $1.3 trillion.


While the Simpson-Bowles proposal continues to intrigue some people, support proved nonexistent when it was finally brought up for a vote on March 28. The entire Simpson-Bowles plan, including huge budget cuts, received only 38 votes (http://clerk.house.gov/evs/2012/roll145.xml) in the House of Representatives. The New York Times reported (http://www.nytimes.com/2012/04/04/us/politics/in-a-budget-plans-defeat-lessons-on-the-difficulty-of-compromise.html) that it was opposed by both conservative and liberal groups for various reasons.


Even if the tax side of Simpson-Bowles had been considered separately, I doubt it would have done any better. Talk is cheap when it comes to eliminating tax expenditures, but when it comes to actually naming specific preferences that would be eliminated, few are willing to step up to the plate.
Politicians hide behind grandiose plans for wiping the slate clean because they know that support for every specific tax expenditure is very high. In practice, saying that one would eliminate all tax expenditures is meaningless, nothing more than a gesture that avoids confrontation with the constituencies supporting tax expenditures.


Perhaps the worst offender, in this regard, is Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee, who promises a sharp reduction in tax rates while still balancing the budget. He says that his tax cuts, which would reduce revenues by $10 trillion over the next decade over current law, according to the Tax Policy Center (http://www.taxpolicycenter.org/numbers/displayatab.cfm?Docid=3301&DocTypeID=5), would be paid for with base-broadening and loophole-closing.
But Mr. Ryan steadfastly refuses to name a single loophole that he would eliminate; he ordered the Congressional Budget Office to assume (http://www.cbo.gov/sites/default/files/cbofiles/attachments/03-20-Ryan_Specified_Paths_2.pdf) that federal revenues would rise to 19 percent of gross domestic product from 15.5 percent by 2030 under his plan.


Mr. Ryan’s political calculation is simple. He knows that taking away the tax exclusion for employer-provided health insurance would greatly increase its cost and probably cause most businesses to drop coverage; repealing the mortgage-interest deduction would raise the cost of housing for homeowners and would very likely cause a further drop in home prices; abolishing the charitable-contributions deduction would decimate churches, universities, museums and every other tax-exempt organization; and rescinding the deduction for state and local taxes would vastly raise the tax burden in most states.


Mr. Ryan knows perfectly well that the most popular tax expenditures will never be repealed but pretends that they all will in order to make his phony-baloney numbers add up. The fact is that the vast bulk of tax expenditures, in dollar terms, are immensely popular and deeply imbedded in the economy and society.


A recent study (http://www.fas.org/sgp/crs/misc/R42435.pdf) by the Congressional Research Service concluded that it would be extraordinarily difficult to get rid of 90 percent of tax expenditures, leaving at most perhaps $100 billion to $150 billion of revenue that could realistically be realized to finance rate reductions.
So how do we get out of this mess? One idea is to do what Gen. Douglas MacArthur did during World War II — bypass enemy strongholds, leaving them isolated and relatively harmless.


Prof. Michael Graetz of Columbia Law School has proposed what I believe is a MacArthur-like solution to tax reform. He would abolish the income tax for the vast bulk of Americans and replace the revenue with a 12.5 percent value-added tax. People would pay their taxes when they buy things and wouldn’t need to worry about keeping records or filing tax returns at all.


The brilliance of the Graetz plan is that no tax expenditures need to be repealed. He would simply give every family a tax exemption of $100,000, which would eliminate the income tax for 90 percent of those now filing returns. For lower-income people who currently have no net income tax burden or who earn an income tax credit, Professor Graetz proposes a rebate (too complex in its details to spell out here).


The current income tax would be retained with a top rate of 20 percent to 25 percent only for those with incomes above $100,000. But many of them already lose important tax preferences because the mortgage-interest deduction is capped for homes worth more than $1 million under current law and the alternative minimum tax already takes away the deduction for state and local taxes for those in high-tax states like New York.


Professor Graetz first laid out his plan in a 2002 Yale Law Journal article (http://yalelawjournal.org/images/pdfs/417.pdf), which was expanded into a book in 2007, “100 Million Unnecessary Returns (http://yalepress.yale.edu/book.asp?isbn=9780300122749).” A popular explanation of his plan appeared in the November/December issue of The American Interest (http://www.the-american-interest.com/article.cfm?piece=1052), and a detailed analysis (http://www.taxpolicycenter.org/UploadedPDF/412489-Using-a-VAT-to-Reform-the-Income-Tax.pdf) by the Tax Policy Center was published in January.


There are many other aspects of the Graetz plan too complex to discuss here. The important thing is the basic idea of avoiding a frontal assault on tax expenditures that is likely to make trench warfare seem tame by comparison and instead just make them irrelevant to the vast majority of Americans.


I think this is a viable proposal that ought to be the starting point for a real debate on tax reform.


http://economix.blogs.nytimes.com/2012/04/10/how-to-really-simplify-the-tax-code/

[LnGrrrR]

Great article. Nice to see another someone call Ryan out on his "plan".

Hm... will the board conservatives here champion Graetz's plan because it would cut out a great deal of government involvement (IRS)? Or will they decry it, because everyone should have to pay "their fair share"? I'm pretty sure I can guess...

[boutons_deux]

The tax system is gamed exactly like the 1% paid for it to be gamed. They'll never let it be changed, unless it's even more in their favor (any and all Repug proposals), and less in the favor of the 99% (any and all Repug proposals).

[coyotes_geek]

Looks to me like Graetz's plan isn't much different than the Neil Boortz Fair Tax, just with an income tax for earnings over $100k lopped on top.

[coyotes_geek]

Bartlett also seems to be missing the point that the real obstacle to tax simplification is politicians. If you take away a politician's ability to hand out preferential tax treatments, what does he have to offer voters and more importantly potential campaign donors?

[Winehole23]

you can't fix politicians but you can come up with policies that make sense. hopefully people get behind it and politicians climb on board.

[TeyshaBlue]

The Graetz plan is interesting in that it addresses what is usually the rallying cry against VAT proposals....they are regressive in nature. With the undisclosed "rebate/refund" targeting low income (my assumption) taxpayers/net credit receivers, he seems to address the regressive nature somewhat. The devil is, as always, in the details.

[boutons_deux]

you can't fix politicians but you can come up with policies that make sense. hopefully people get behind it and politicians climb on board.

Politicians make the laws, regs, policies, not Human-Americans.

The 1% owns the politicians, not the disenfranchised voters.

You fantasize an Ideal America where democracy actually works for Human-Americans.

[Winehole23]

do you ever descend from lofty generalities? please feel free to join the discussion...

[LnGrrrR]

Bartlett also seems to be missing the point that the real obstacle to tax simplification is politicians. If you take away a politician's ability to hand out preferential tax treatments, what does he have to offer voters and more importantly potential campaign donors?

I'm no economist, but it seems like he already referenced that part:


Mr. Ryan knows perfectly well that the most popular tax expenditures will never be repealed but pretends that they all will in order to make his phony-baloney numbers add up. The fact is that the vast bulk of tax expenditures, in dollar terms, are immensely popular and deeply imbedded in the economy and society.




The brilliance of the Graetz plan is that no tax expenditures need to be repealed. He would simply give every family a tax exemption of $100,000, which would eliminate the income tax for 90 percent of those now filing returns.



In essence, you wouldn't eliminate a politician's ability to hand out preferential tax code treatment, but you would nullify the need for it in a great many cases. (Of course, politicians would probably put exemptions on the value-added tax for certain items and we'd end up in the same boat...)

[boutons_deux]

do you ever descend from lofty generalities? please feel free to join the discussion...

I made my points.

I don't get into sterile debates and academic bullshitting.

I'd like to see anybody:

1) come with a tax reform even close to what's proposed above

2) elect ENOUGH (or even one!) politicians that will vote it into law.

3) get it, intact, past the 1%er's lobbyists at the rule-making stage

ain't NEVER gonna happen, for the simple reason I gave above.

[Winehole23]

I made my point.yes you did, Johnny-one-note...

[boutons_deux]

my few, simples notes ring true, your random, academci, bullshit notes ring false.

What's your plan for actually getting Bartlett's or anybody's major tax reform into law?

[Winehole23]

I have no plan for getting tax reform passed. do you?

[TeyshaBlue]

my few, simples notes ring true, your random, academci, bullshit notes ring false.

What's your plan for actually getting Bartlett's or anybody's major tax reform into law?

lol @ true.

banal generalities aren't a substitute for reasoned discussion.

And if discussion isn't your game, what the fuck are you doing on a discussion board? Some weird self-validation trip?

[TeyshaBlue]

It's much easier to maintain utter contempt than to dip into discourse.

[RandomGuy]

At this point I am all for something, ANYTHING.

The tax code is far, far, too complex.

VAT tax, flat tax, whatever works.

The solution in the OP is one I could go for.

[spursncowboys]

Looks to me like Graetz's plan isn't much different than the Neil Boortz Fair Tax, just with an income tax for earnings over $100k lopped on top.

I thought the same thing reading it. I wonder why wh agrees with this but not the fair tax

[Winehole23]

not sure that I ever passed comment on the Boortz fair tax specifically or endorsed this plan, but both are worth discussing -- our system of taxation is pretty much insane.

[SnakeBoy]

At this point I am all for something, ANYTHING.

The tax code is far, far, too complex.

VAT tax, flat tax, whatever works.

The solution in the OP is one I could go for.

Weren't you against Cain's 9-9-9 plan? Which was supposed to be his 1st step towards eliminating the income tax entirely and going to just a sales tax.

[Wild Cobra]

The New York Times reported that it was opposed by both conservative and liberal groups for various reasons.
I'll bet the reason it that it takes power away from congress.

[Winehole23]

Congress would have to pass it for it to become law....

[Wild Cobra]

Great article. Nice to see another someone call Ryan out on his "plan".

Hm... will the board conservatives here champion Graetz's plan because it would cut out a great deal of government involvement (IRS)? Or will they decry it, because everyone should have to pay "their fair share"? I'm pretty sure I can guess...
Hell no.

$100k is way too much. I would love paying thousands less each year, but I strongly believe it would create more people desiring a bigger government since less will be paying for the bigger government.

I will not budge from my argument that we need more tax payers. Not less.

[coyotes_geek]

I'll bet the reason it that it takes power away from congress.

Certainly that, but there were also a bunch of cuts to defense and entitlements that went against red team and blue team's respective playbooks.

[boutons_deux]

Here's why the tax code won't be modified significantly (unless to reduce for the 1% and increase for the 99%)

These guys have $100Ms available to buy the tax policies that protect and enrich themselves

Twenty-Six Major Corporations Paid No Corporate Income Tax for the Last Four Years, Despite Making Billions in Profits


Last year, Citizens for Tax Justice found that 30 major corporations had made billions of dollars in profits whilepaying no federal income tax between 2008 and 2010. Today, CTJ updated that report to reflect the 2011 tax bill of those 30 companies, and 26 of them have still managed to pay absolutely nothing over that four year period:

– 26 of the 30 companies continued to enjoy negative federal income tax rates. That means they still made more money after tax than before tax over the four years!

– Of the remaining four companies, three paid four year effective tax rates of less than 4 percent
(specifically, 0.2%, 2.0% and 3.8%). One company paid a 2008-11 tax rate of 10.9 percent.

– In total, 2008-11 federal income taxes for the 30 companies remained negative, despite $205 billion in pretax U.S. profits. Overall, they enjoyed an average effective federal income tax rate of –3.1 percent over the four years.

Amongst the 30 are corporate titans such as General Electric, Boeing, Verizon, and Mattel. The only four companies that slipped into positive tax territory were DTE Energy, Honeywell, Wells Fargo, and DuPont, with DuPont the only one that paid more than 4 percent over the four years.

Corporate taxes in the U.S., contrary to the constant protestations of conservatives, are at a 40 year low, with many of the most profitable companies paying nothing at all. CTJ noted that “had these 30 companies paid the full 35 percent corporate tax rate over the 2008-11 period, they would have paid $78.3 billion more in federal income taxes.” And this is not a problem that only afflicts the U.S., as the UK found out last week that online retailer Amazon made billions in sales in 2011, while paying nothing in corporate taxes.


http://truth-out.org/news/item/8432-twenty-six-major-corporations-paid-no-corporate-income-tax-for-the-last-four-years-despite-making-billions-in-profits

[SnakeBoy]

Hm... will the board conservatives here champion Graetz's plan because it would cut out a great deal of government involvement (IRS)? Or will they decry it, because everyone should have to pay "their fair share"? I'm pretty sure I can guess...

I'm opposed to a VAT or national sales tax in any form so I guess I'll decry it.

[Winehole23]

in any form?

why wouldn't getting rid of special preferences and ridiculous complexity in the tax code be worth it, in your view?

[Winehole23]

or otherwise, is there some simpler system that meets similar ends without offending your sensibilities?

[SnakeBoy]

in any form?

why wouldn't getting rid of special preferences and ridiculous complexity in the tax code be worth it, in your view?

It would be worth it but we don't need to eliminate the income tax to do that. A national sales tax would be the most regressive form of taxation, is an unreliable source of revenue, and the most difficult to enforce.


or otherwise, is there some simpler system that meets similar ends without offending your sensibilities?

I favor a flat progressive income tax. Just pulling numbers out of the air I'd say the rate should go from about 6% to 25%. No personal exemptions, child credits, mortgage deductions etc. This would make the tax code strictly a form of revenue collection and eliminate using it as an ineffective welfare/social engineering program as it currently is. It would also require our politicians to actually do their jobs and create effective welfare/social programs.

Short term capital gains would be taxed as ordinary income. Long term gains would taxed from 20% down to 5% depending the length of time with >5 yrs tax at the 5% rate. Earnings from dividend payments would be taxed at or near zero.

I'm sure other forms of taxation need to be revamped as well but I don't know enough about them to support any particular changes. Bottom line is I think the tax code should be simpler but a simple tax code just isn't going to work in an economy as large & diverse as ours. And using the tax code for purposes other than revenue collection is the reason our tax code is so screwed up.

[Drachen]

I don't really have a problem with any of that except I am curious, why do the dividends get taxed at a lower rate?

[SnakeBoy]

To encourage long term investing which aids companies in making good long term business decisions rather than just trying to make the next quarter.

I'd also throw in no tax on earned interest on savings for those who don't want to risk there money in the market. Edit That's a non issue unless the Fed changes it's course but that's another topic.

[FuzzyLumpkins]

I don't really have a problem with any of that except I am curious, why do the dividends get taxed at a lower rate?

My grandfather who made a lot of money in the 60s and 70s off the stock market told me that his key to successful investment was looking for good dividend ratios. Its real tangible output from the stock.

He pulled out of the market completely in the 1990s.

There are no more good dividend rations the best you are going to find is 25:1. You have companies like Apple who have conned people into thinking that zero dividends are 'cutting edge.'

What you have left are volatile stocks with no substance beyond consumer confidence and when that bubble bursts there is nothing to stop the free fall.

This time there will probably not be a trillion dollar bailout to save teh banks who do most of the stock inflation.

I am guessing that the idea is to encourage people to find importance in dividends once again and quit the overspeculation that continues to be rampant. Its just not stable.

[SnakeBoy]

^ said it better than me.

[Drachen]

Ok, fair enough, but isn't that just engineering through the tax code again (just not the social/welfare that you railed against).

While I like the explanations, I think it just keeps the doors open to get back to this exact spot.

As was said before we should "require our politicians to actually do their jobs and create effective" ______________

[coyotes_geek]

It would be worth it but we don't need to eliminate the income tax to do that. A national sales tax would be the most regressive form of taxation, is an unreliable source of revenue, and the most difficult to enforce.

Not sure about Graetz's plan, but under Boortz's Fair Tax there is a mechanism to deal with the regressive issue. A "prebate" I believe it is called. Basically the govt would figure the tax that would be paid on the $poverty level and send everyone a check (monthly???) for that amount. Everyone ends up paying the same tax at the register, regardless of income, but those near the poverty line end up getting reimbursed all or most of what they paid. Whether that adequately addresses the regressive nature or not is certainly fair discussion, but it's at least a good faith effort at addressing the problem.

That being said.......


I favor a flat progressive income tax. Just pulling numbers out of the air I'd say the rate should go from about 6% to 25%. No personal exemptions, child credits, mortgage deductions etc. This would make the tax code strictly a form of revenue collection and eliminate using it as an ineffective welfare/social engineering program as it currently is. It would also require our politicians to actually do their jobs and create effective welfare/social programs.

Short term capital gains would be taxed as ordinary income. Long term gains would taxed from 20% down to 5% depending the length of time with >5 yrs tax at the 5% rate. Earnings from dividend payments would be taxed at or near zero.

I'm sure other forms of taxation need to be revamped as well but I don't know enough about them to support any particular changes. Bottom line is I think the tax code should be simpler but a simple tax code just isn't going to work in an economy as large & diverse as ours. And using the tax code for purposes other than revenue collection is the reason our tax code is so screwed up.

......I tend to agree with you that a revamped income tax would be the way to go. I'd take the simplification even further though. If it were up to me, I'd just lump all income together, deduct off the poverty line, multiply by a tax rate and be done with it.

(income - poverty) x (rate) = tax

Maybe add a bracket or two, but otherwise keep it as simple as possible. Income is income, no deductions outside of giving everyone a break up to the poverty line.

[SnakeBoy]

Ok, fair enough, but isn't that just engineering through the tax code again (just not the social/welfare that you railed against).

While I like the explanations, I think it just keeps the doors open to get back to this exact spot.

As was said before we should "require our politicians to actually do their jobs and create effective" ______________

I don't view it as any type of social engineering. I guess having a tax code that promotes a more robust & stable economy could be called a type of engineering.

I'm not railing against social/welfare programs, they are necessary, but doing it through the tax code doesn't result in much benefit. Instead of just telling someone you're poor don't pay taxes it would be of greater benefit to tell tell you still pay taxes like every other american and then offer them any number of assistance programs designed to help them rise out of poverty.

[Drachen]

I don't view it as any type of social engineering. I guess having a tax code that promotes a more robust & stable economy could be called a type of engineering.

I'm not railing against social/welfare programs, they are necessary, but doing it through the tax code doesn't result in much benefit. Instead of just telling someone you're poor don't pay taxes it would be of greater benefit to tell tell you still pay taxes like every other american and then offer them any number of assistance programs designed to help them rise out of poverty.

You achieve your goal by having lower long term gains taxes. If you incentivize dividends then you create a bubble in the large cap sector and starve small growing businesses. Basically, the farm team gets depleted.

[SnakeBoy]

I doubt that would happen but the tax rate could be adjusted if it did.

[boutons_deux]

"you still pay taxes like every other american"

everybody pays REGRESSIVE sales taxes, property taxes (renters through the landlord), SS/medicare, etc, etc.

It's a just another HUGE CONSERVATIVE LIE that "poor people don't pay taxes".

"any number of assistance programs designed to help them rise out of poverty"

Repugs have been/are cutting all such programs that make poverty less punishing (food stamps, housing allowances) and/or offer advancement (Pell grants), while proposing to double the interest of govt education loans. WHILE cutting the taxes on the 1% and UCA.

I can't find it now, but I posted a study for Texas that showed what percentage of total income by quintile was paid in all taxes. The bottom quintile paid a higher percentage than top quintile.

But you guys still want to shift more taxes onto lower quintiles.

[Drachen]

I doubt that would happen but the tax rate could be adjusted if it did.

It's simple investment analysis. You have a growth company, startup, whatever (basically a company that needs its cash to fund its projects).

On the other side you have a company that is established within their industry.

Let's say that for a variety of factors each company represents the same risk to your investment dollar. You would require a lower rate of return to pay you for your risk on the established dividend paying company than you would on the startup/growth company meaning that investment dollars would flow more freely to the former than the latter.

In an effort to stem this tide perhaps the growth company prematurely starts paying dividends. That is money taken away from innovation/research, etc.

[SnakeBoy]

It's simple investment analysis. You have a growth company, startup, whatever (basically a company that needs its cash to fund its projects).

On the other side you have a company that is established within their industry.

Let's say that for a variety of factors each company represents the same risk to your investment dollar. You would require a lower rate of return to pay you for your risk on the established dividend paying company than you would on the startup/growth company meaning that investment dollars would flow more freely to the former than the latter.

In an effort to stem this tide perhaps the growth company prematurely starts paying dividends. That is money taken away from innovation/research, etc.

Well then the tax rate could be higher to keep that from happening if your right. I'm not interested in debating the fine details of a tax code I spent 90 seconds inventing. In fact your arguments are proof of my larger point that a simple tax structure a 5th grader could understand is probably not a good approach.

[Drachen]

Well then the tax rate could be higher to keep that from happening if your right. I'm not interested in debating the fine details of a tax code I spent 90 seconds inventing. In fact your arguments are proof of my larger point that a simple tax structure a 5th grader could understand is probably not a good approach.

Ok, sorry didn't mean to be confrontational. I don't have much of a problem with most of what you wrote, that was the only thing that stuck out to me as different from the rest, thus the question.

[spursncowboys]

not sure that I ever passed comment on the Boortz fair tax specifically or endorsed this plan, but both are worth discussing -- our system of taxation is pretty much insane.

completely agree

[Wild Cobra]

The only thing I don't like about the "Fair tax" is the prebate. I believe you simply do not tax necessities, and have do deductions, prebates, credits, etc. A prebate would keep the "generosity" of the government in the hands of congress for elections. that's just one problem I see with it.

[coyotes_geek]

The only thing I don't like about the "Fair tax" is the prebate. I believe you simply do not tax necessities, and have do deductions, prebates, credits, etc. A prebate would keep the "generosity" of the government in the hands of congress for elections. that's just one problem I see with it.

I'd rather just use the prebate and skip the circus that would result from the government trying to define what products are necessities and what products aren't.

[Wild Cobra]

I'd rather just use the prebate and skip the circus that would result from the government trying to define what products are necessities and what products aren't.
seems to me a pretty simple process.

Food... no tax.

X-Box... tax.

Toothbrush, toothpaste, deodorant, etc... no tax.

[Drachen]

seems to me a pretty simple process.

Food... no tax.

X-Box... tax.

Toothbrush, toothpaste, deodorant, etc... no tax.

See, and that is the reason why it wouldn't be a simple process. While I use it, I do not see deodorant as a necessity.

[Wild Cobra]

See, and that is the reason why it wouldn't be a simple process. While I use it, I do not see deodorant as a necessity.

There will be gray areas where people don't agree. So what. There are enough items clearly in one camp or another that it doesn't matter. Besides, everyone will pay or not pay the tax on these gray area items. If you want to dismiss any new ideas because they aren't perfect, then go back to Utopia and leave us alone.

[coyotes_geek]

Food... no tax.

Bottled water?
Gatorade?
Halloween candy?
Ice cream?
Cheerios?
Captain Crunch?
A #1 combo supersized with a large soda?
A $50 steak at a fancy restaurant?
A $5 cup of coffee from Starbucks?
A bag of Starbucks coffee beans bought from a grocery store?
An H.E.B. fully cooked brisket?
Nachos at a ball game?
Lobster from a grocery store?
Vitamins?


Toothbrush, toothpaste, deodorant, etc... no tax.

Cosmetics?
Perfume/Cologne?
A comb?
A hairdryer?
A trip to the barber/stylist?
Baby diapers?
Adult diapers?
Condoms/Birth Control?

Instead of asking the government to give a yes/no on an endless list of items, wouldn't it be easier to just tax everything and use a prebate?

[LnGrrrR]

Hell no.

$100k is way too much. I would love paying thousands less each year, but I strongly believe it would create more people desiring a bigger government since less will be paying for the bigger government.

I will not budge from my argument that we need more tax payers. Not less.

Except people would be paying the same amount of taxes (assuming they didn't change their buying patterns) through the value-added tax proposed. So they'd still be paying.

And you'd think if you wanted more tax payers, you'd be for an easier path to citizenship for illegal immigrants, or at the least, a system that allowed more legal immigrants.

[LnGrrrR]

nvm

[LnGrrrR]

To encourage long term investing which aids companies in making good long term business decisions rather than just trying to make the next quarter.

I'd say that plan backfired spectacuarly if CEOs can get golden parachutes after severely screwing up their businesses.

[LnGrrrR]

seems to me a pretty simple process.

Food... no tax.

X-Box... tax.

Toothbrush, toothpaste, deodorant, etc... no tax.

What about a car? Gas?

[spursncowboys]

SHould I be taxed for buying a used car? what about selling your car?

[Drachen]

SHould I be taxed for buying a used car? what about selling your car?

exactly, SnC can see the unending complexity of such an approach.

[spursncowboys]

I don't appreciate the word even. BTW I say no to double taxation.

[Borat Sagyidev]

Sounds like a good plan to get rid of income tax and replace it with sales tax. We need a more nepotistic society with spoiled children like Paris Hilton.

http://money.cnn.com/popups/2006/consumer/expensive_toys/index.html

[Wild Cobra]

Except people would be paying the same amount of taxes (assuming they didn't change their buying patterns) through the value-added tax proposed. So they'd still be paying.

And you'd think if you wanted more tax payers, you'd be for an easier path to citizenship for illegal immigrants, or at the least, a system that allowed more legal immigrants.
OK, you caught me in a mistake.

I missed the part of his plan that includes the 12.5% VAT. However, I don't want a VAT as it applies tax at each process. That hurts manufacturing. One way of making our manufacturing more competitive is to remove such taxation. Tax only at the point of sales, and allow productivity to go untaxed. This will help create more manufacturing jobs that are normally family level wage jobs.

[Wild Cobra]

I don't appreciate the word even. BTW I say no to double taxation.
No shit. That made it sound like he was slamming you.

It seems to me, you tax the new car, but not the used one. you can try to cloud the issue with details all you want. No matter what change could be made, someone will not be happy.

[FuzzyLumpkins]

OK, you caught me in a mistake.

I missed the part of his plan that includes the 12.5% VAT. However, I don't want a VAT as it applies tax at each process. That hurts manufacturing. One way of making our manufacturing more competitive is to remove such taxation. Tax only at the point of sales, and allow productivity to go untaxed. This will help create more manufacturing jobs that are normally family level wage jobs.

Yeah its okay to hurt the consumer but not good ole manufacturing companies. Fucking rube. All hail your corporate overlords. I imagine if this country was occupied by a foreign power you would go the way of the Vichy.

[boutons_deux]

good ol WC, check-box predictable, just like PussyEater, VAT on Human-Americans at retail is fine, but don't ever put VAT on Corporate-Americans at wholesale.

[Wild Cobra]

good ol WC, check-box predictable, just like PussyEater, VAT on Human-Americans at retail is fine, but don't ever put VAT on Corporate-Americans at wholesale.
You don't get it, do you?

All taxing the producers do is make them less competitive in the overseas markets. The consumer ends up paying the tax in the end, with higher prices. No tax means lower retail.

Yes I know, you will claim they will keep more in profits. I say bullshit. If they didn't have to compete in the marketplace, then they could charge what ever they want anyway. Right?

[Drachen]

I don't appreciate the word even. BTW I say no to double taxation.

I kept reading your sentence incorrectly. I am not being grammar police, I just read it as saying that you don't appreciate the word "complexity" or something. (i.e. I don't appreciate the word, even. instead of: I don't appreciate the word "even".) I know the former is a strange way to talk, but I read that sentence probably 10 times and for some reason kept reading it that way. (until just now)

Anyway, I put it in there because the two of you agree on many (not all, but many things) didn't mean to offend you, consider it stricken. I guess I can understand because many board republicans continually attribute qualities, positions, or thought processes to me that I don't share with others that they lump me in with...

[TeyshaBlue]

good ol WC, check-box predictable, just like PussyEater, VAT on Human-Americans at retail is fine, but don't ever put VAT on Corporate-Americans at wholesale.

irony alert:lol

[TeyshaBlue]

Even Drachen apologizes occasionally.:lol

[Winehole23]

I guess I can understand because many board republicans continually attribute qualities, positions, or thought processes to me that I don't share with others that they lump me in with...happens across the board. the jumping to conclusions disease is endemic on this board.

in principle it's easy to ask posters can what they are, think, believe and will defend, but in practice this very seldom happens.

[Drachen]

Even Drachen apologizes occasionally.:lol

LOL, well I generally try to treat everyone with respect and go to lengths to stay away from being insulting. I have even typed out entire posts then erased them because upon rereading them I realized that it was a long drawn out way of putting someone down. I like conversation, and believe it or not, I learn about a lot of cool stuff from this place. I like getting different perspectives and have changed my mind about issues based on conversation here (granted they were usually minor ones).

There is only one poster that I allow myself a little leeway for and it is WC. I don't get anywhere near as bad as some other posters, and I tried for a long time to give him the benefit of the doubt, appeal to his senses, etc, but he is the most ridiculous poster here (at least b_d, cosmored, etc are consistent unlike WC, the libertarian who wants to assign the duty of climbing up into my balls to the government.)

Everyone else seems pretty much ok and I try to act in the same manner even if they don't. So, if I unintentionally don't act decent, and I get called on it, I will probably apologize.

[Winehole23]

GOP nominee Mitt Romney (http://www.thefiscaltimes.com/Articles/2012/08/21/GOP-Preview-Can-Romney-Win-as-The-Man-From-Bain.aspx#page1) has a plan that would reduce statutory tax rates by 20 percent. But he has said he would eliminate enough deductions and loopholes to equal current federal revenues and also ensure that the wealthy pay the same percentage of total taxes as they pay now.


But the Tax Policy Center recently (http://www.taxpolicycenter.org/publications/url.cfm?ID=1001628)concluded that Romney’s proposal is mathematically impossible even if the mortgage interest deduction and all other deductions are abolished. Romney reacted angrily (http://finance.fortune.cnn.com/2012/08/15/mitt-romney-interview/)to the study, denying he would touch the mortgage interest deduction for middle-income taxpayers. But at the same time, he has steadfastly refused to say what deductions he would in fact get rid of to pay for his plan.


This week, writers of the Republican platform (http://www.thefiscaltimes.com/Articles/2012/08/23/Tea-Party-Libertarians-Win-Big-in-GOP-Platform.aspx#page1)in Tampa dipped their toe in the tax reform water by excising a plank in previous platforms defending the mortgage interest deduction (http://blogs.wsj.com/washwire/2012/08/21/gop-panel-rejects-plank-on-mortgage-interest-deductions/tab/print/). Under pressure from groups such as the National Association of Home Builders (http://www.nahb.org/news_details.aspx?newsID=15487), language was quickly reinserted to protect the deduction (http://blogs.wsj.com/washwire/2012/08/21/gop-in-compromise-on-mortgage-interest-deduction/).


The fact is that if fundamental tax reform is on the table, then so is the mortgage interest deduction. Making an exception for it automatically becomes the best possible argument for keeping the next most popular deduction and so on – until we are right back where we started. The fact that Republicans backtracked on mortgage interest the moment there was pushback from special interests doesn’t bode well for tax reform even if Mr. Romney wins.

Read more at http://www.thefiscaltimes.com/Columns/2012/08/24/GOP-All-Talk-on-Eliminating-Tax-Breaks-No-Action.aspx#kfpDvcSTpDOROlri.99

[boutons_deux]

Prediction: any tax reform will enrich the 1%, and suck wealth out of the 99%, and cut the safety net deeper.

Mortgage interest deduction, and employer-paid health insurance as taxable benefit will be on the table.

Employer-paid health insurance is nothing but employers skimming your salary and passing it directly to health insurers. The employer counts it a a business expense, the employee get the "free lunch" financial benefit tax free, and for-profit insurer pass the employees' salaries to (foreign) investors and over-paid management.

[Winehole23]

Here’s some holiday cheer: 120 million American families no longer have to file income tax returns (http://www.bloomberg.com/quote/FFSTIND:IND); the top individual rate is lowered by 20 percent; the top corporate rate is cut by more than half; the government gets the same amount of revenue; and the tax system is slightly more progressive.


OK, it’s not a free lunch. It would be accompanied by a 12.9 percent value-added levy, which critics like to call a national sales tax.

http://www.bloomberg.com/news/2013-12-01/a-value-added-tax-plan-all-sides-can-embrace.html

[Winehole23]

The Graetz initiative (http://www.taxpolicycenter.org/UploadedPDF/412963-Updated-Tables-for-Using-a-VAT-to-Reform-the-Income-Tax.pdf) offers something for both sides. It starts, he suggests, with countering the observation once offered by former Treasury Secretary Larry Summers (http://search.bloomberg.com/search?q=Larry%20Summers&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1&partialfields=-wnnis:NOAVSYND&lr=-lang_ja) that liberals fear a value-added tax because it’s regressive and conservatives fear it because it’s a money machine. Graetz’s measure overcomes both objections.


The professor argues that his VAT would make business more competitive and create jobs; it would be levied on imports, not exports. It would bring U.S. tax policy more in line with the 160 other countries, including every developed one, that have a VAT.
Graetz addresses the regressivity of most sales taxes, not by exempting food, drugs and other necessities as most of the older European systems do, but with a system of credits and offsets that follows the more modern models of Singapore and New Zealand.


He provides a payroll tax cut and expanded child-care credits focused on low- and moderate-income workers. Families making less than $100,000 would be exempt from any income tax that is progressive, with a top rate of 31 percent on incomes more than $600,000. (The top corporate rate would be 15 percent.)


Those on fixed incomes, such as senior citizens, he argues, would be protected from higher prices induced by the tax by cost-of-living adjustments.


The Tax Policy Center (http://taxvox.taxpolicycenter.org/2013/11/26/a-value-added-tax-that-wont-raise-revenues-or-boost-taxes-on-the-poor/) found that his proposal succeeds in raising the same amount of revenue (http://www.bloomberg.com/quote/.REVGDP:IND) as current law. If revenue is to be part of any longer-term deficit reduction, Graetz observes, the value-added tax or the income taxes could be tweaked. “Actually, this would put us in a better situation to address the fiscal crunch down the road,” he says.


One of the many reasons the Baucus-Camp effort is doomed is that the differences between today and 1986 are much greater than any similarities. Almost three decades ago, lower individual rates were funded by higher taxes on capital gains and corporations. “There is no such pot of gold today,” Graetz says.

[boutons_deux]

“There is no such pot of gold today,”

VRWC/1%/corporate-purchased govt policies made that pot of gold disappear(into their own pockets), and govt policy can make it reappear.

"U.S. tax policy more in line with the 160 other countries, including every developed one, that have a VAT."

chauvinist politicians would NEVER accept the USA being like 160 other nations, because God has decided the USA is the shining superior exceptional nation.

All these tax reform proposals are purely academic because Congress is deeply polarized, totally constipated, incapable of any major legislation, or even minor legislation. The US tax code is rigged to an incredible complexity to enrich corps, wealthy, and protect their riches.

[Winehole23]

academic until it happens. all policy starts as just talk.

[boutons_deux]

academic until it happens. all policy starts as just talk.

ain't gonna happen. the current system is rigged into a complex rigidity.

these tax reforms always sell themselves as EVERYBODY WINS!, WHAT'S NOT TO LIKE and VOTE FOR?, and also often where total tax take is down, while current tax take is already too low

[RandomGuy]

academic until it happens. all policy starts as just talk.

One would hope so.

Even if the end result does not change one penny in total Federal revenue, the economy would be better off. Accountants and tax preparers would lose out, but the amount of time wasted on preparing and QC'ing, and auditing would drop to almost nothing.

Although I try not to be overly cynical, I think boutons has it right.

Far to many interests have far too many gimmies. "complex rigidity" is an understatement.

[Wild Cobra]

http://www.bloomberg.com/news/2013-12-01/a-value-added-tax-plan-all-sides-can-embrace.html
I'm OK, and prefer a consumption tax over our current income tax system, but I say "hell no" to a VAT.

[Winehole23]

why?

[Wild Cobra]

why?
You mean my "hell no" to a VAT?

Do you know the difference between a consumption tax and VAT?

I am against taxing productivity. A VAT taxes productivity. A consumption tax does not.

Now to be fair, there is some confusion and various interpretations between the two. The distinction I make is that the consumption tax is effectively a sales tax at retail level only, whereas a VAT taxes increased value at each step of the manufacturing process.

[Winehole23]

The distinction I make is that the consumption tax is effectively a sales tax at retail level only, whereas a VAT taxes increased value at each step of the manufacturing process.that's superficially plausible. can you give an example of what you mean?

[Winehole23]

and also, why that's preferable.

[Winehole23]

your objection is clear. the reason for it isn't.