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Josh

Why is America unable to enact a capitalist principle that former Soviet states have implemented?

Well, it seems like those former Soviet states are much smarter then US and that's why their GDP is very high...
I do believe that if nothing stupid happen, Russia will return it's #1 status in the world and US will suck big time...

Assistant Village Idiot

Josh - I don't see it. Russia's high level of corruption and alcoholism and low birthrate will hamper its recovery regardless of what they do with the tax rate.

To the OP. As long as some people are richer than others, the Democrats will have something they can run on. They will advocate for more regulation of those who make money. Everyone agrees in the abstract with the idea that there's too much regulation, but those suspicious of capitalism are able to paint each new regulation as a good idea nonetheless. Sad.

AMERICA F#CK YA!

What are peoples thoughts on the 'fairtax'? Its a consumption tax that would replace the current taxation system in place.

Dave

Think of how many highly-educated CPA's and tax attorneys there are, and what exactly they do to further grow the economy: Nothing. They produce nothing, create nothing, invent nothing, perfect nothing. They are leeches on the productive class. They exist largely because of the byzantine tax code, shunting dollars here and there not for reasons of market efficiency but to shelter their employer's assets. Dollars often go to strange places, unproductively, just because it makes sense from a tax perspective.

Now think if all of these unproductive people, the CPA's and tax attorneys, were suddenly out of work because of a radical simplification of the tax system. These smart, capable people would find other work, most likely they would find work that enables them to truly contribute, by making businesses more efficient, creative, and productive. The economy would benefit greatly.

The reason the tax code has become so nasty is because politicians derive a lot of their power by manipulating it. Lobbyists are either looking for handouts or for favorable treatment via regulation or tax incentives, and politicans respond. If you took tax code manipulation out of the hands of politicans, they would lose a lot of power, and power is something that the political class doesn't want to let go of.

Here's a law you'll never see: Every state and federal elected politician must do their own taxes. No CPA's or attorneys. Not even H & R Block. Many politicians are wealthy and have complicated finances - forcing them to reconcile their finances with their tax code would be the fastest way to bring about badly-needed reform.

GK

Dave,

You are right, of course. But this still remains a unnecessary burden that is downright un-American. There is nothing that would cause an immediate, guaranteed improvement in the economy as much as this would.

Foreign competition forcing change is the only hope.

Tushar D

Here is my proposed tax scheme:
For first $30,000 earning, everyone pays a flat $2000 tax. For your 30,000 to 60,000 earnings, you pay 15% on the earnings that you spend. No tax on the portion you save. On earnings above $60K, you pay 20% for the portion you spend, and nothing on the portion you save. No tax benefits for ANYTHING, including mortgage interest.

Why the $2000 on the first 30K? Because everyone should pay some taxes. People who pay nothing ara cavalier about the tax burden, because it is shouldered by others.

Oh, and adjust the numbers to achieve whatever effective tax rate (or collection target) you want to achieve.
Do this, and watch the economy zoom.

Josh (a different one)

A chief reason the tax code is so complicated is because using the tax code to create incentives is viewed as more desirable than direct regulation to produce similar outcomes. Thus, for example, rather than requiring a certain level of efficiency inehicles, we get a tax deduction for purchasing a hybrid car. Abandoning the complicated tax code will mean that those policy will be enacted by other, possibly more coercive, means, or abandoned entirely.

Assistant Village Idiot

A different Josh, that is a very fair point. The problem is government officials, elected or permanent, who want to sorta kinda make people do what they want them to. The tax code is simply the vehicle by which they do this. Whether we went to Friedman's negative income tax, a flat tax, a sales tax, or any similar mechanism, they would seek other ways to twist arms to get us poor benighted citizens to do what we "should."

We might get a head start on 'em before they caught up, however.

SanFranciscoJim

Are these overall tax rates, all federal taxes or just income tax rates?

Why don't you include the graph of all tax rates (including state, local and sales tax)?

GK

SFJim,

This is all Federal income tax, including income, SS, and Medicare. No state or local taxes.

NoeValleyJim

Why didn't you include state taxes, including sales, property and use taxes?

GK

Because the topic here is federal taxation, and state/local taxes vary widely. I want to keep it to one chart.

ohwilleke

Small business income taxation is burdensome not primarily because it takes a lot of time to complete the form. These are a burden and these costs are spread over less revenue than in a large business. But, the number one factor is the great deal of record keeping activity that goes into determining revenue and expenses from myriad small transactions.

SanFranciscoJim

Well, that might be the case, but it is certainly interesting that if you include total tax burden, the results are exactly the opposite as the ones you get by focusing only on federal tax.

Don't you think?

Adam Rice

This article is could make a perfect example for the book "How to Lie with Statistics."

Let's look at not the percentages but the actual post-tax incomes of these quintiles before and after the Bush tax cut.

If you were the average person in the lowest quintile, in '03 your post-tax income was $14,500; in '04 it $14,700. $200 extra. Woohoo!

If you were the average in the top quintile in '03, your post-tax income was $143,600; in '04, $155,200. So your tax cut wound up being almost equal to the total post-tax income of someone in the bottom quintile.

If you were in the top 1%, it gets even better: the numbers soar from $722,300 in '03 to $867,800 in '04. Again, your tax cut is almost equal to the post-tax income of the average top-quintile earner.

So, yeah. I'm going to call that a "tax cut for the rich. See p. 5 of http://www.cbo.gov/ftpdocs/77xx/doc7718/EffectiveTaxRates.pdf

GK

Adam Rice,

Your argument is boilerplate socialism that died years ago.

Let's look at not the percentages but the actual post-tax incomes of these quintiles before and after the Bush tax cut.

er.. why? Percentages are what matter. Even after Bush's tax cut, the higher quintiles pay a much HIGHER percentage of their income than the poor. In dollar terms (the wrong way to look at it), the rich pay several times more than the poor, thus destroying your quantitatively-challenged argument.

Again, your tax cut is almost equal to the post-tax income of the average top-quintile earner.

And the taxes that the top 1% pay is still several times the income of the bottom earner, even after the tax cut.

Why don't you oppose Clinton's tax cuts in 1997, which were on capital gains only, and thus far more skewed to the rich than Bush's income tax cuts (I personally approve of Clinton's tax cuts).

You are an example of how illogical fanaticism has reduced your own ability to prosper in a meritocracy.

Adam Rice

Why don't you oppose Clinton's tax cuts in 1997

How do you know that I don't? I didn't mention it, but I also didn't mention my opinion on Bruce Willis as an actor.

Percentages are what matter.

Why? I can't buy dinner with 1%. I can buy dinner with $10.

But if you want to talk about percentages, let's do. If you were in the bottom quintile, your post-tax income went up about 1.5%. If you were in the top quintile, your post-tax income went up about 9%.

You make an argument, and I try to counter it with facts and figures. You respond by suggesting that for disagreeing with you I am a socialist and fanatic. I genuinely regret having set foot here.

GK

Adam Rice,

So why don't you elaborate on what you disapprove in Clinton's 1997 tax cut? I approve of it, by the way.

Why? I can't buy dinner with 1%. I can buy dinner with $10.

How about I buy 1% of your income for $10? Would you agree to that deal?

If you were in the bottom quintile, your post-tax income went up about 1.5%. If you were in the top quintile, your post-tax income went up about 9%.

er...As did their pre-tax income, so have made no point on taxes.

The rich-poor gap is widening, as the free market is becoming better at matching compensation with contribution.

Do you know that the top 1% of income earners pay 38% of all taxes? That the top 10% pay 74% of all taxes? What number would you be happy with?

I genuinely regret having set foot here.

Socialists are averse to logic and meritocracy. You are running out of places where socialism is still popular, as the stunning defeat of socialism is the biggest event of the last 15 years.

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