What changes would you make to the tax laws?
Posted at 5:00 AM on April 14, 2011
by Eric Ringham
(55 Comments)
Filed under: Economy, Politics/Government
President Obama's plan to cut the deficit relies in part on changes in the tax code. He also says he will refuse any further extensions of tax cuts for the wealthy. Today's Question: What changes would you make to the tax laws?
Comments (55)
You're right about that, Jason. I think the relevant concept is marginal utility. 1% of one's income has more marginal utility for a lower-income person than for a higher-income person, because after you're making enough to be comfortable, more money doesn't make you any happier. A tax that affected everyone at the same level of marginal utility would be progressive.
I disagree with some of the flat tax advocates, at least how they state their case. What's being missed is that taxation as a straight percentage of income available would not be a truly fair one.
Wealth is not on a sliding scale from least to most. The poor do not have the least amount of wealth, they have no wealth. Its not that the poor should pay less, I think they should pay almost nothing because, well, they're poor! They do not have anything to spare.
Tax the top 1% until they leave. Our country will then be ours once again.
I see I left my thought on the tax cone on the wrong thread.
What I would do to the tax code is abolish it completely and replace it with a national consumption tax (The Fair Tax). No more loop holes, no more IRS, and nothing could stimulate the American economy quicker.
A national sales tax would actually be more progressive than an income tax, and would place the burden of taxation on the wealthy. Conversely, it is payroll taxes that are regressive and hurt the working poor. The ultra-rich, who can afford to live on dividends and capital gains, do not pay income taxes - nor do they pay into Social Security and Medicare/Medicaid, but they'd pay in under the Fair Tax. Additionally - consumption rates are more stable as an economic indicator than wages.
And consider this - consumers already pay all the taxes anyways - as our price system has a hidden embedded tax cost of 22%.
So indeed - I would throw this tax baby out with the bath water, and replace it with a completely different system - one which is simple to understand and difficult to cheat.
We need a flat tax - period. No exemptions, no deductions, no loopholes. Just pay your share.
We Americans need to find the courage to get out of our dysfunctional relationship with money. For too many of us, money is like an abusive spouse. It makes us do things we aren't happy doing. It leads us to believe we're weak and vulnerable without it. It urges us to prioritize it above our friends and family and personal integrity. It threatens to abandon us if we don't take care of it. It promises to treat us better in the future than it has in the past. It keeps lying to us, and we keep wanting to believe the lies. The way out of this trap is to learn to be content with enough.
I'd skip worrying about the Bush tax cuts and repeal the Reagan boondoggle. The wealthy have soaked the nation for their resource-stealing corporate inspired wars for 50 years. It's time for them to pay for their "nation building" with a 90% tax rate on over-$250k incomes. Corporations should lose their expense deduction for over-$100k salaries and perks, too.
"Lawyers lie, politicians lie but math is the ultimate truth."
Now that's a proverb I've never heard before. Here's one I have heard, and found to be true: Figures don't lie, but liars figure.
Eliminate the income tax and replace it with a consumsion tax. It would have to be done gradually because it would get rid of most of the IRS, unemploy thousands of lawyers and accountants. But they don't contribute to the GNP anyway.
Clark,
No "wagon riders and pullers" metaphor today?
You're alost coherent today, problem is you have inaccurate facts and narrow scope. You also think that all people with high incomes are working people, ever heard of a trust fund?
You seek facts wether accurate or not to solidify your bias.
Bring back your wagons, I miss them.
I would make the income tax rate much more progressive with the wealthy paying a higher rate and everyone else a lessor rate depending on income, maybe fire brackets or so. I would eliminate all subsidies for the petroleum and coal industries. I would place a consumption tax on carton emitting industries starting with the energy industry. I would place a higher tax on gasoline to both raise revenue and to encourage conservation. I would eliminate mortgage deductions starting with second homes and moving to primary residences in three years. I would tighten up write offs so that corporations would be sure to pay their fair share of taxes.
First get rid of Mortgage interest deduction. Second - get rid of all corporate tax-credits , tax-deductions or government credits of any kind. Third flatten the tpersonal ax code to about 10 (8.5 X11 single spaced, Arial font size 10) pages. Business tax code can't exceed 50 pages. Fourth - the only approved accounting procedures are those submitted and approved by the IRS prior to their use. Let's quit making the government chase them after the fact - make them define what they intend to do and they can have a 5 year patent on the method.
Firstly, Social Security and Medicare are not financed through federal income tax. They are financed through federal payroll tax, so they are a completely different beast. If we cut everyone's taxes by 15%, the upper income earners would pay 95% of taxes and shoot that 3rd number rating progressiveness through the roof, while paying substantially less taxes. While some discussion of that metric might be warranted, absent information about how much tax wealthy Americans pay as a percentage of their income, it is a tool for disinformation. Let's not act like this reflects some burden larger than the wealthy bear elsewhere. It most absolutely does not.
Clark: the moment I came across your single word all in caps I stopped reading your post. when you start calling people names your points lose value altogether.
Someone made a comment about wage earners paying unemployment insurance taxes (also known as payroll taxes.) As far as I know (at least in Minnesota,) employees of a business do NOT pay payroll taxes, the employer they work for pays a percentage based on their experience rating (employment history.) If a company lays off people (a construction company as an example where the work might be seasonal), they will pay a higher rate than a company that employs workers year around with few if any layoffs.
Apologize, I meant to say income in excess of $100,000 annually.
I would change the tax law to allow people who do not believe in the use of violence to settle disputes to redirect the portion of taxes that support war and weaponry to the establishment of a Department of Peace and to fund Department of Peace programs once the department has been established.
Here is a fact for the far left,. According to the IRS, if you taxed all income earners who earned in excess of 4100,000 annually, at 100%, in other words took every last penny they earned, it would amount to $1.582 trillion dollars in 2007 and a bit less in 2008 due to recession.
Therefore, even if you took all of the income of hard working high income earners, it still would not cover even one year of MORON obama's spending for 2009 or 2010 or 2011 or 2012.
So now you have taxed 100% of my income and, of course, I have no interest in working to support the freeloaders, so now you go after my wealth. Soon that is exhaused and here we are, Greece of the west.
I can tell you obama and the far left democrats are snake oil salesman at their very worst.
It is not about greed, it's all about math and obama's number do not add up.
Lawyers lie, politicians lie but math is the ultimate truth.
It’s true that the top 1 percent of wage earners paid 38 percent of the federal income taxes in 2008 (the most recent year for which data is available). But people forget that the income tax is less than half of federal taxes and only one-fifth of taxes at all levels of government.
Social Security, Medicare and unemployment insurance taxes (known as payroll taxes) are paid mostly by the bottom 90 percent of wage earners. That’s because, once you reach $106,800 of income, you pay no more for Social Security, though the much smaller Medicare tax applies to all wages.
Simplify the tax code and make income taxes more progressive. Those who have gained the most from the nation's social structure and infrastructure should pay the most. The increased income and wealth gap serves no one well including the most affluent. Social disorder will not spare them; a fairer society will improve their quality of life as well as others.
Shane - Thank you for the clarification. However, although I am happy to read what you have to say, I will not take seriously the opinions of someone who prefaces his comments with insults.
The answer is easy: tax the rich. People are wealthy because they benefit from and leverage modern technology and infrastructure, not because they are smarter or work harder than most people. How wealthy would Bill Gates or Warren Buffett be if they were born in the 19th century? I have nothing against getting rich, just remember you always get that way on the backs of working people.
How would God balance the budget?
taxes have to be fair and a overhaul completely-restribute the wealth and have more itemization of poorer people. make it simpler by not accting for every little expense but have a generic expense report!
Donna,
Apparently you need to take a remedial reading course. I did not say or suggest the "rich" do not use any government. I said they use the LEAST amount of government. Of course they use things like police, military, fire, etc. But we all know they pay way more than their fair share for these things. There is no way someone on two or three government programs pays in anything close to what they are getting out of the system. Add up everything they pay in sales taxes, fees, etc and no doubt it would add up to some palty sum. And by the way I'm not sure if you know this or not but slavery was outlawed a long time ago. You cannot be forced to work for less than a "living wage". If you don't like the job and want to make more money than you are free to quit and do something different. When it comes to taxes almost anything is better than what we have now.
I'm with most of the suggestions here-- a simpler tax system (fewer loopholes, deductions, etc.), and adjusted rates to go along with it.
I might have a slightly higher rate for top income earners than the rest. Because of the influence of money on politics, the wealthy own the consequences of politics in a way that others do not, and that includes deficits.
And Clark, if the people who use government services could pay the full price of those services, they wouldn't need them in the first place.
I agree with Obama on taxes for the rich. Capital gains should also be taxed higher.
Make the self-employment tax progessive and eliminate for the lowest earners. That tax discourages entrepreneurship and in an economy where more and more people work independtly it needs to rethought. FICA/payroll taxes also need to become progressive. We can't do either of those things though unless there is a restructuring of Social Security which I have yet to hear added to the debate in Washington.
Find a way to simplify the income tax code without it becoming more regressive. We also need to close the loopholes that allow GE & others to not pay any tax.
The President's plan to increase taxes on the top-tier wealthy is a good one: It's past time for the rich to pay their fair share. Tax loopholes should be closed, too. But I fear this will not come to pass. The Democrats had their chance before the 2010 elections but they couldn't block the extension of the Bush tax cuts or get the rich to pay more taxes.. As the minority in the House now, there's little chance they'll get that passed.
Get rid if the IRS and income tax. Institute a national sales tax. It's fair to everyone and saves the government billions.
Straight tax.
∑
DTOM
How about doing something to limit the corruption inherent in campaign financing. Congress is sold out and corrupted by the industries they receive money from. This creates subsidies for those industries and higher prices for the very tax payers whose dollars go to this corporatism. You are not going to get honest tax reform until you have an honest representation and government, period.
I think there is something wrong with the Corporate income tax. Companies that make $100,000 pay 39% and those that make $500,000 pay 35%
Further more, by cutting the corporate taxes on the federal level completely and making up for it in property taxes on bigger businesses, income tax for the rich and sales tax on disposable and higher priced items would move taxes away from a punishment for profitability. It would move towards setting a price for doing business within our borders and benefits there gained.
@ Shane The working poor do pay taxes. They pay FICA taxes, property taxes, sales taxes and gas taxes along with all the fees for service and licensing fees that governments charge. And, by working for less than a living wage, they make it possible for those on the upper end of the income scale to reap huge profits.
And to suggest that the wealthy aren't "using" government.......well - I don't even know where to begin. The wealthy certainly benefit the most from society's continued support of our current economic and political systems. They are masters of making government work for them.
Also, I'm typically not one to name-call... but I will agree with Steve the Cynic's argument that Clark is a scrooge. I'm sorry, but you're automatically a free-loader if you make less than $50K a year? Why don't you take a look at the annual salaries for researchers making less than $50k at the University of Minnesota... there are plenty of them. My bet is they are way more educated (master's degrees are a minimum) than the average person making >$50K a year, and they are contributing their hearts and souls to move our country forward. And that is only one group of people. There are many dedicated, hard-working people who don't make much money (ahem, teachers, many small-business owners), but have a critical impact on our society and our future economy.
Then I'd like you to go ahead and think about the bankers, CEOs, and insurance folks, who literally stole money out of our pockets due to personal greed, but continue to make millions of dollars a year. I'd like to ask you, honestly, who is better for our country? If money is the only thing that matters, then you are living in a different world than I.
An ignorant statement from an ignorant person. Disgraceful.
It seems we have forgotten that our governor was elected by campaigning on an increase in taxes on the wealthiest Minnesotans. Clearly this was not a problem for the majority of voters... So why can't we start there?
A good place to start would be to start making everybody pay something. Right now you have the people using the most government (essentially the poor) not paying anything. In fact they end up getting way more from government then they put in. And the people using the least government (essentially the rich) paying for the vast majority of it. Everybody should contribute, even if it's a small amount.
Yes to the flat tax/no deductions, credits, exemptions plan as long as at the same time it becomes illegal to profit from a person's labor without paying them a true living wage that covers food, clothing, shelter, healthcare, education, transportation, old-age savings, child-raising expenses, and of course - taxes. Now that would be a novel way of decreasing government spending. When working people have to go without basic necessities or have to access government services to meet those needs - that's not social welfare that is corporate welfare.
Repeal the Bush tax cuts, cap the mortgage tax credit, raise the cap on FICA, and audit more returns and have harsh penalties for tax cheaters.
The flat tax seems equitable, the problem with it is the the system for earning income and deciding who pays the nation's bills isn't equitable. However, one injustice isn't fixed with another injustice either. We need a system that works for as many people as possible without the unfair influence of the rich and powerful to take an unfair share. The way to start fixing the tax system is to start with the overweighted unfair influence that big corporations have on the politics. The Supreme Court decision that allows corporations to act as indivuduals without political spending limits is a huge inequity that perpetuates the tax code problems and allows companies like GE and Exon to pay no taxes while the middle class keeps loosing purchasing power and income per capita but is left paying an unfair share of the bills.
If the republicans veto the tax on high incomes, I will NOT vote for any republican in the next election.
Folks let's look at the situation, CONGRESS is the LARGEST private club of millionaires in the world...who writes the tax code hmmm? There should be a demand from ALL voters for TOTAL disclosure from candidates on what boards of directors/advisers they OR their families sit on! Otherwise this current system we have REEKS of "CONFLICT OF INTEREST"! BOTH parties are guilty of mass corruption on EVERY level...
Its pretty simple. Personal and corporate income tax for EVERYONE should be a flat percentage. That'll end the bickering about who pays more and who doesn't. Just keep it simple and no one will get lost in the shuffle.
Ebenezer Clark: It's not that the poor are riding on some kind of mythical wagon. Far from it. It's hard work treading water, much less making progress in a system as stacked against the economically disadvantaged as our economy currently is. The freeloaders you keep railing against, if they exist at all, are a tiny minority.
Simplify, simplify, simplify
This question requires a phased in approach and impacts an industry which has vested interests in maintaining a complex set of rules and procedures. Establish a set of principles and criteria that govern the tax code and let those principles and criteria be the deciding factor for the details to be implemented.
Personally, I would like to see a move toward a) flat tax for individual and corporate entitites b) codification initiative between US and non-US tax laws as well as between the states c) re-purposing and re-defining the IRS mandate and d) elimination of the impact of lobby groups. (Perhaps there should be an access charge levied to lobby groups to have audience with those who weld influence.)
I don't have a lot of hope because we have seen the results of other simplification initiatives such as the codification of US GAAP (accounting criteria), the final result will end up being more combersome and less inclusive.
Raise, double the cap on FICA (Social Security) contributions.
Get rid of the Bush tax cuts on the wealthiest Americans.
Tax short term capital gains at a higher rate, a lower rate for long term gains like dividends and interest. Rewarding long term investing and saving and not rewarding strictly speculative trading which is now distorting the marketplace.
Raise the national gas tax 3 cents.
Close loop holes for the wealthiest, capping the mortgage tax credit to the median house payment.
Raise state taxes on the wealthiest 2% and use the money to help cities keep down property tax rates.
I could probably think of more, but got to go.
Flat tax. No deductions, credits or exemptions. Then I don't have to listen to anyone complain that it isn't fair. Every penny earned, including capital gains, is taxed the same.
A properly constructed subtraction-method VAT (by a new name, of course) that replaces the byzantine income tax for most Americans would be the ultimate in tax reform. It could gain support on both the right and left as a pro-jobs bill that forced corporations to "pay their fair share." Above all else, the VAT gives us the opportunity to remove the structural in-balances inherent in 60 years of special interest meddling with the tax code.
Increase taxes on those making below $50k since they likely are the freeloaders using all the services anyway.
Perhaps if they actually had to pay for some of these services, they would use fewer government services which would save the country money.
Then use the excess revenue to build a bridge to Cuba for all the freeloader whining lefties. Interesting to interview them 10 years later after living in their socialist utopia.
Flat tax, perhaps 2 tiers. No exemptions, no deductions.
the removal of ALL deductions.
The US has the highest corp tax rate, but we also allow for the most deductions so people that can hire tax attorneys and accts can get away with paying nothing.
Again, I said remove ALL deductions.
On top of that I would also say to not tax people under a certain income, but that would effectively raise taxes on everyone above that level if we wanted to keep the same amount of money flowing into the government, unless we removed all deductions, then we could actually reduce tax rates. If the first thing were done then we could most likely implement a flat tax.
Eliminate loopholes, plain & simple. No more tax dodging companies, safe havens, or tax shelters. Everyone pays their fair share, no excuses.
Of course, to do this, we'll have to outlaw professional lobbyists.
There also needs to be a cultural sea change. We live in a culture that values the idea that you can somehow scam your way out of paying taxes. We put that act up on a pedestal. If the Constitution advocates that we the people, and the government should protect the "general welfare" of the people, shouldn't it be more culturally attractive to pay more taxes? To show that you are a contributor to the greatest experiment in democracy in history? To associate yourself with the ideals of the "greatest country on earth?" Instead, we brag, advertise and openly boast of our ability to bilk the government out of our taxes. Makes no sense.
Bring back the 90% tax bracket. Also, prosecute those attorneys and accountants who assist people in cheating on taxes, and no white collar prisons. They should be placed in general federal prisons with drug dealers and murders. Given our current economical situation, what they have been doing is more destructive than a rampaging ax murder.
- Eliminate the cap on FICA contributions entirely
- Raise the upper brackets or add another upper level entirely (say 40% at net income over $250k)
- Tax capital gains as income
- Update Alternative Minimum Tax (seriously out-of-date, so that many people get caught in it who should not be)
- Create tarifs on foreign-made manufacturing and foreign-based services
- Drop tax-exempt status for churches
I'd like to see it greatly simplified, to the point that puts the likes of H&R Block out of business. Let them find honest work.
Fair tax!.!.!.!. Plain and simple. No more tax returns for the poor being 1000% more than they paid in. No more complicated tax season paperwork. No more AMT. Just a nice straight forward tax on all goods and services purchased.
My personal pet peeve is that internet sales transactions are not taxed if the company isn't doing business in the state, apart from selling stuff to it's residents. That discriminates against people who have a commitment to the community in favor of those who don't.
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