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What should the next US tax code look like?

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What should the next US tax code look like?

Unread postby vtsnowedin » Sat 15 Apr 2017, 12:41:33

Congress is beginning to consider a tax code overhaul with all the usual players having their thumbs on the scale making sure that they and their contributors get the majority of any tax cuts and others (you and me more then likely) make up the difference.
My question is what do we the members here at Peakoil think would be the best tax code for the USA? Start with the goals you want to obtain and move on to what should be tax exempt and what brackets there should be and the rate for each bracket.
The tax code has always been used to direct people to do things the government thought would be good for the country (and some rich powerful people at the same time). The tax deduct-ability of home mortgage interest encouraged home buying over renting which gave many Americans a positive net worth at the same time it made a lot of money for bankers and home builders and tradesmen.
Money invested in the stock market was not taxed yearly as long as it was left invested providing capital for industry and was only taxed as "capital gains when it was withdrawn from the market. etc. etc.
But that was the way it has been done in the past, the question is what should we do going forward?
I'll not try to steer the discussion beyond saying the tax code needs to generate enough money to pay the governments bills without generating a big surplus that will encourage more programs and spending. 8)
Your thoughts Ladies and Gentlemen?
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Re: What should the next US tax code look like?

Unread postby Plantagenet » Sat 15 Apr 2017, 13:00:48

vtsnowedin wrote:.
My question is what do we the members here at Peakoil think would be the best tax code for the USA? Start with the goals you want to obtain and move on to what should be tax exempt and what brackets there should be and the rate for each bracket.


The tax code is far too complicated.

Personally I'd like to see a simple flat tax---set it pretty low and no exemptions allowed.

Something like 10% on income up to 25K, 15% on income up to 100K, 20% on income up to 500K, 25% on income up to $1 million, and 30% on higher incomes.

Cheers!
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Re: What should the next US tax code look like?

Unread postby Hawkcreek » Sat 15 Apr 2017, 13:10:21

I would like to see EVERYONE paying the same percentage rate in taxes. This would be computed after considering all taxes and fees being paid on a nationwide basis. For example, if a poor person pays .005 percent of his weekly pay to enter a national park, everyone else would have to pay the same percentage. Naturally, this would get rid of all incidental fees paid to the national and state governments.
Same for property tax. That tax would come out of the profits from corporations, rather than be passed on the consumer of their products.
It would take a few years to find the true amount of hidden taxes everyone is paying, but if everyone, including those people type entities called corporations, paid the same percentage, I would call it good. This would probably come out to 30 to 40 percent of all income going to taxes.
"It don't make no sense that common sense don't make no sense no more"
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Re: What should the next US tax code look like?

Unread postby Subjectivist » Sat 15 Apr 2017, 13:35:52

Simple, 10% sales tax and no other taxes or fees, then cut the budget to fit the income. It will never happen without a full blown revolution, but that is my goal tax/spending level for the Federal Government.
II Chronicles 7:14 if my people, who are called by my name, will humble themselves and pray and seek my face and turn from their wicked ways, then I will hear from heaven, and I will forgive their sin and will heal their land.
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Re: What should the next US tax code look like?

Unread postby vtsnowedin » Sat 15 Apr 2017, 17:33:35

Plantagenet wrote:
vtsnowedin wrote:.
My question is what do we the members here at Peakoil think would be the best tax code for the USA? Start with the goals you want to obtain and move on to what should be tax exempt and what brackets there should be and the rate for each bracket.


The tax code is far too complicated.

Personally I'd like to see a simple flat tax---set it pretty low and no exemptions allowed.

Something like 10% on income up to 25K, 15% on income up to 100K, 20% on income up to 500K, 25% on income up to $1 million, and 30% on higher incomes.

Cheers!
So you want the person making just $12.50 an hour to pay $2500 a year in income taxes? 8O
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Re: What should the next US tax code look like?

Unread postby vtsnowedin » Sat 15 Apr 2017, 17:43:55

Hawkcreek wrote:I would like to see EVERYONE paying the same percentage rate in taxes. This would be computed after considering all taxes and fees being paid on a nationwide basis. For example, if a poor person pays .005 percent of his weekly pay to enter a national park, everyone else would have to pay the same percentage. Naturally, this would get rid of all incidental fees paid to the national and state governments.
Same for property tax. That tax would come out of the profits from corporations, rather than be passed on the consumer of their products.
It would take a few years to find the true amount of hidden taxes everyone is paying, but if everyone, including those people type entities called corporations, paid the same percentage, I would call it good. This would probably come out to 30 to 40 percent of all income going to taxes.

I'm sorry Hawkcreek but I don't follow your point about entering National parks. Going to a park is voluntary and has nothing to do with tax policy or rates.
Also local and state property taxes are a separate issue and only come into, play here if the Federal government mandates that government services be paid for out of property tax revenues. That is a very real thing and is worthy of a whole separate thread.
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Re: What should the next US tax code look like?

Unread postby vtsnowedin » Sat 15 Apr 2017, 19:14:36

A question for you to consider.
If itemized deductions are drastically reduced should the standard deduction remain fixed or should it be a percentage of gross income?
After all a millionaire probably has a house with much higher property taxes and interest payments on his Jumbo mortgage. If the rich were held to a fixed percentage of deductible income they might buy more wisely and pay cash for the portion above what the deducible covered.
Should the guy renting a closet sized apartment in NY city be subsidizing the wall street banker in the penthouse and his "cottage" in the Hampton's?
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Re: What should the next US tax code look like?

Unread postby Plantagenet » Sat 15 Apr 2017, 20:34:05

vtsnowedin wrote:
Plantagenet wrote:
vtsnowedin wrote:.
My question is what do we the members here at Peakoil think would be the best tax code for the USA? Start with the goals you want to obtain and move on to what should be tax exempt and what brackets there should be and the rate for each bracket.


The tax code is far too complicated.

Personally I'd like to see a simple flat tax---set it pretty low and no exemptions allowed.

Something like 10% on income up to 25K, 15% on income up to 100K, 20% on income up to 500K, 25% on income up to $1 million, and 30% on higher incomes.

Cheers!
So you want the person making just $12.50 an hour to pay $2500 a year in income taxes? 8O


I think everybody should pay something, but that rate seems a bit high, doesn't it?

OK...then re-jigger the flat tax rate through the entire scheme. For instance, Lets say 5% tax up to 50 K in income.

Then a person making 50K at a 5% rate would pay ca. $1250 per year in federal income tax, while a person making ca. 2 million per year at a 25% rate would pay ca. $500,000 in year federal income tax.

Seems fair to me. Especially when you consider that with a simple flat rate you could shut down most of the IRS bureaucracy because the flat tax would be so transparent and simple to calculate.

Image
A flat tax makes the tax system so simple you don't the huge IRS bureaucracy

CHEERS!

PS: Vtsnowedin---what is YOUR favored tax plan? You started this thread---please participate in your own thread and tell us what changes you want in the tax system.

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---President Obama, 4/25/16
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Re: What should the next US tax code look like?

Unread postby farmlad » Sat 15 Apr 2017, 20:41:35

I would like to see a Land/Location Value Tax being implemented and increased as part of simplifing taxes. See https://en.wikipedia.org/wiki/Land_value_tax.

It makes sense that since we are all born into this world not by our personal choice and with a desire to live and have stuff that we should pursue the most equitable methods to share natural and social resources. So if someone wants property closer to populations then they should have to pay more but whether they build a house or a business or leave it vacant is their choice and the tax should not vary all that much.

This way we are taxing the access to natural resources rather than labor so that people have a lot greater incentive to work as well as employ workers but access to natural resources goes to the highest bidder and it will hurt his pocket book.
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Re: What should the next US tax code look like?

Unread postby Plantagenet » Sat 15 Apr 2017, 22:06:56

farmlad wrote:I would like to see a Land/Location Value Tax being implemented and increased as part of simplifing taxes. See https://en.wikipedia.org/wiki/Land_value_tax.

It makes sense that since we are all born into this world not by our personal choice and with a desire to live and have stuff that we should pursue the most equitable methods to share natural and social resources. So if someone wants property closer to populations then they should have to pay more but whether they build a house or a business or leave it vacant is their choice and the tax should not vary all that much.

This way we are taxing the access to natural resources rather than labor so that people have a lot greater incentive to work as well as employ workers but access to natural resources goes to the highest bidder and it will hurt his pocket book.


Since you call yourself "farmland" I assume you are a farmer or perhaps the child of farmers.

I'm surprised you'd advocate what amounts to a tax on land, since farmers hold lots of land and are at risk of being highly taxed under a land/location value tax.

I know the idea is that the LLVT tax would be low in rural areas, but good luck with that. Anytime something gets taxed the tax rate goes in only one direction, i.e. higher. The LLVT tax puts poor farmers (i.e. those who are "land rich" but cash poor at risk of losing their land as the tax rate goes higher, i.e. the LLVT can result in "land abandonment" by family farmers and the growth of huge agribusiness in their place.

Cheers!

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---President Obama, 4/25/16
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Re: What should the next US tax code look like?

Unread postby EdwinSm » Sun 16 Apr 2017, 02:38:31

On same percentage charges, here in Finland we have some of that with fines. For example at speeding fine is determined as a number of day income as declared in the last tax year. That has lead to some racing drivers having fantastically high fines :-D
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Re: What should the next US tax code look like?

Unread postby vtsnowedin » Sun 16 Apr 2017, 03:12:42

Plantagenet wrote:CHEERS!

PS: Vtsnowedin---what is YOUR favored tax plan? You started this thread---please participate in your own thread and tell us what changes you want in the tax system.

Wanted to get some input before poisoning the well.
I too want a much simpler tax code. It would have only two tax brackets, 12% and 25% with 12% on adjusted gross income up to say $50K and 25% on all income after that.
I would double the standard deduction to $25k for Married filing jointly and raise the personnel exemption to $10,000 per dependent.(Who thinks you can raise a kid on $4050 a year today)?
The only deductions I'd allow other then true business expenses would be mortgage interest on one house up to a principle of $500K and every dollar you spend on health care including premiums deductibles and prescription drug costs.
I'd set the corporate tax rate at one percent less then the developed worlds average instead of being the highest in the world.
I'd exempt farmland and forest land from the estate tax and only use it to make sure capital gains taxes are paid before stock is inherited. The rule being that all income gets taxed one time, some time but not more then once.
I don't know how the CBO would rate my plan but I'd like to find out.
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Re: What should the next US tax code look like?

Unread postby MD » Sun 16 Apr 2017, 05:13:19

Sales tax only. Scaled by purchase price. The bigger the ticket, the bigger the tax. Primary residence exempt.
Stop filling dumpsters, as much as you possibly can, and everything will get better.

Just think it through.
It's not hard to do.
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Re: What should the next US tax code look like?

Unread postby vtsnowedin » Sun 16 Apr 2017, 05:28:03

MD wrote:Sales tax only. Scaled by purchase price. The bigger the ticket, the bigger the tax. Primary residence exempt.

That would leave huge amounts of income untaxed and discourage consumption to the point that the economy would decline.
Not every rich person feels the need to live lavishly like a jet setter.
A poor person has to spend almost every dollar just to get by so if you had say a 20% sales tax that would be his tax rate. The rich man can choose to spend just a fraction of his income and hoard the rest so his tax rate might be 5% or less.
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Re: What should the next US tax code look like?

Unread postby Subjectivist » Sun 16 Apr 2017, 09:20:52

vtsnowedin wrote:
MD wrote:Sales tax only. Scaled by purchase price. The bigger the ticket, the bigger the tax. Primary residence exempt.

That would leave huge amounts of income untaxed and discourage consumption to the point that the economy would decline.
Not every rich person feels the need to live lavishly like a jet setter.
A poor person has to spend almost every dollar just to get by so if you had say a 20% sales tax that would be his tax rate. The rich man can choose to spend just a fraction of his income and hoard the rest so his tax rate might be 5% or less.


And so what? The money that rich woman 'saves' is most likely invested in things like stocks and bonds that are much more efficient at sustaining the economy than government wasteful spending.

Besides, to fund the basic needs of Government as opposed to the wants of the politicians a 20 percent tax is excessive. The government should supply national defence and infrastructure backed up by a court system. Very little else is either hecessary or proper for Government to be involved in.
II Chronicles 7:14 if my people, who are called by my name, will humble themselves and pray and seek my face and turn from their wicked ways, then I will hear from heaven, and I will forgive their sin and will heal their land.
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Re: What should the next US tax code look like?

Unread postby Hawkcreek » Sun 16 Apr 2017, 10:14:38

vtsnowedin wrote:
Hawkcreek wrote:I would like to see EVERYONE paying the same percentage rate in taxes. This would be computed after considering all taxes and fees being paid on a nationwide basis. For example, if a poor person pays .005 percent of his weekly pay to enter a national park, everyone else would have to pay the same percentage. Naturally, this would get rid of all incidental fees paid to the national and state governments.
Same for property tax. That tax would come out of the profits from corporations, rather than be passed on the consumer of their products.
It would take a few years to find the true amount of hidden taxes everyone is paying, but if everyone, including those people type entities called corporations, paid the same percentage, I would call it good. This would probably come out to 30 to 40 percent of all income going to taxes.

I'm sorry Hawkcreek but I don't follow your point about entering National parks. Going to a park is voluntary and has nothing to do with tax policy or rates.
Also local and state property taxes are a separate issue and only come into, play here if the Federal government mandates that government services be paid for out of property tax revenues. That is a very real thing and is worthy of a whole separate thread.

Going to a park is voluntary, but the funds to set aside, develop, and maintain the highways to that park are not voluntary. Effectively, the poor person spends a higher portion of his income to see that park than a rich person. Now that so many national park functions have been "leased" to corporations, this is even more evident. There is corporate profit in park maintenance.
That is one reason that fees have become so pervasive. Transfer of costs to the lower income people rather than true distribution of costs.
That is one reason I want to see it looked at from a standpoint of "effective tax rate", rather than just a re-jiggering of percentages. Fees are part of an "effective tax rate", which primarily targets the poor and middle class.
Everyone should pay the same rate. If you are poor, help would be given after the fact, not by complicating the tax code.
Right now, income producing properties are able to evade property taxes by shifting the burden to the consumer of their products, and then getting partial deductions from federal taxes through depreciation. Property taxes are already tied to federal taxes in a roundabout way.
The whole thing is a convoluted mess through design, which is intended to hide the facts.
Our wage structures are based on dollars per hour. If you equate wages to profit for the sale of your time, then why not take a certain percentage of your profit to pay for community and national services. This would work for corporations too, if they hadn't scammed the system and tax code so that no one knows what their true profit is.
Equal percentage on profits for all - no deductions.
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Re: What should the next US tax code look like?

Unread postby Outcast_Searcher » Sun 16 Apr 2017, 10:46:54

Plantagenet wrote:
vtsnowedin wrote:.
My question is what do we the members here at Peakoil think would be the best tax code for the USA? Start with the goals you want to obtain and move on to what should be tax exempt and what brackets there should be and the rate for each bracket.


The tax code is far too complicated.

Personally I'd like to see a simple flat tax---set it pretty low and no exemptions allowed.

Something like 10% on income up to 25K, 15% on income up to 100K, 20% on income up to 500K, 25% on income up to $1 million, and 30% on higher incomes.

Cheers!

Wow. Very close to correct (IMO), right out of the box.

First, my goals are to make the federal income tax very simple, and as "fair" as such simplicity allows. By fair, I mean everyone making over $25,000 in income pays something, and the very wealthy pay a LOT, but not enough to greatly disincentivize hard work or productivity. Oh, and simple enough to make the IRS (for individual tax collection), a small and streamlined entity.

One big change I'd make though, taken from the FAIR tax plan, to protect the poor: there is only ONE exemption or deduction. It is simple. It is a large, flat amount. Let's say, just for argument's sake, $25,0000. This is roughly twice the federal poverty rate for a single taxpayer. It accomplishes a few things:

1). It exempts truly poor people from paying any federal income tax.
2). It greatly reduces the amount of income tax paid percentage wise for everyone below comfortable middle class incomes.
3). It's simple enough that everyone can understand it (a nice change from the current system). With that single exemption, then I think the percentages would work well. There would be lots of screeching from the rich, but 30% is still well below what most top rates are for first world countries.

....

Now, one caveat, which I'll get into in a post downstream. This doesn't address the complexity of defining income -- only getting rid of all the mess associated with exempting income. (But that's a big step, IMO). I don't think that makes this unworkable -- it just acknowledges that computing a rich person's income who has a lot of complex investments -- is still very complex.
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Re: What should the next US tax code look like?

Unread postby Outcast_Searcher » Sun 16 Apr 2017, 11:01:02

The VAST majority of the complexity in the tax code isn't computing the rate. It's computing the INCOME. The flat tax doesn't do ANYTHING to fix that.

I made the statement above. For people who file the EZ form or who don't fool with investments more complex than bank accounts and mutual funds, I'll back it up a little.

I'm a complete piker as far as complexity of investments. All I do that's somewhat unusual is actively trade a lot of stocks and options with a small percentage of my portfolio, and invest a significant percentage of my long term mutual fund money in broad international stock index funds, as a dollar and US economic growth hedge. (Call it an "idiots on Capitol Hill hedge", if you will).

So, thank goodness, I have an accountant who does the taxes. So she worries about the detailed rules, the changes, the forms and subforms, and all the nightmarish details. I used to try to do that and became extremely depressed annually over the stress of doing my taxes -- even with tax software and spreadsheets. (This was before brokers had to compute your capital gains/losses for you. Oh, and before spreadsheets and tax software, it could almost elicit thoughts of suicide for an honest non-accountant.

But my current tax returns are currently 50 to 100 pages, and there's a LOT in there I only vaguely understand, and forms I wouldn't even know to fill out, unless tax software did it for me.

But some typical issues I've dealt with over the last 10 years that illustrate the complexity of defining income:

1). Wash sale rules. Nontrivial if you trade a lot of options on stocks you hold. For example, defining "substantially indentical" investments. There are complex rules for deep in the money options (I hold some long term ones as rough proxies for the underlying stocks). And I've never been able to get the IRS to issue a written opinion to be confident on this. And this affects hundreds of thousands of investors, so you'd think it should matter.

2). The reporting of foreign income, since there is a foreign income tax credit. I've had fights with the IRS over reporting foreign income for a fund like the Vanguard Total International Stock Index Fund -- by putting "Various" where it wants to know what country the investment is for. I've had to send 20+ pages of documents, spreadsheets, etc. to the IRS explaining why I don't KNOW precisely what the country make-up of such a fund is, and why they need to go to Vanguard to get this. (The numbers change monthly, the history isn't shown consistently on the website, I'm not sure of the rules when it changes monthly, I'm not sure why the details matter, etc). I've had to wait multiple years with my return in limo while the IRS delayed, and finally agreeing with me, in some cases.

By the way, I see the accountant now uses "Other" instead of "Various". Which seems to help keep the IRS from objecting. Is that madness, or what?

3). The volume of paperwork and data can be daunting. I have three brokers (for various reasons). My 1099's from the brokers typically come to 200ish pages. Again, thank goodness the brokers now have to compute the income/losses for stocks and options. But is this all done correctly? I eyeball things and look for flagrant errors and am confident it's within a "stone's throw" of what the correct totals are, but frankly, I'm not sure if it's completely correct, and am not inclined to find out as long as they're close. (Which is why I pay someone ELSE to do my taxes).

And this is just the tip of the iceberg for one aspect of tax complexity re computing income. And I don't see any flat tax scheme changing ANY of that. Thus, unless you exempt a lot of investment income (which I think is a BAD idea) -- I don't see the IRS going anywhere if you want people to pay roughly what they owe in taxes.
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Re: What should the next US tax code look like?

Unread postby vtsnowedin » Sun 16 Apr 2017, 11:08:30

Subjectivist wrote:
Besides, to fund the basic needs of Government as opposed to the wants of the politicians a 20 percent tax is excessive. The government should supply national defence and infrastructure backed up by a court system. Very little else is either hecessary or proper for Government to be involved in.

So you would eliminate social security ,medicare and welfare and unemployment insurance? That is two thirds of the Federal budget.
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Re: What should the next US tax code look like?

Unread postby vtsnowedin » Sun 16 Apr 2017, 11:12:22

Hawkcreek wrote:Going to a park is voluntary, but the funds to set aside, develop, and maintain the highways to that park are not voluntary. Effectively, the poor person spends a higher portion of his income to see that park than a rich person.

Transportation is only four percent of the Federal budget and that is financed by the Federal share of the gas tax so those that use the roads pay for them as they go.
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