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Today we are going to talk about tax policy.  There are a myriad number of variables to consider, which makes this area of policy fraught with landmines at every turn.  In short, there are no easy answers to this policy.

Making matters worse, the Republicans have a very successful PR offensive with the "supply-side" argument.  They have essentially promised Americans they can have their cake and eat it too.  You can cut taxes which will encourage people to work harder thereby increasing tax revenue.  This is a very simple sales pitch, easily compressed to the world of 30-second soundbites.  Those who oppose this simplistic view of policy have a daunting task of finding their own soundbites.


The main point Democrats are arguing against is Laffer Curve theory.  Charles Wheelen wrote an article titled Debunking One of the Worst Ideas in Economics, which highlights the basic theory and problems of Laffer curve theory:

Economist Arthur Laffer made a very interesting supposition: If tax rates are high enough, then cutting taxes might actually generate more revenue for the government, or at least pay for themselves. (In one of life's great coincidences, he first sketched a graph of this idea on Dick Cheney's cocktail napkin.) If the government cuts taxes, then Uncle Sam gets a smaller cut of all economic activity -- but reducing taxes also generates new economic activity. Laffer reasoned that, under some circumstances, a tax cut would stimulate so much new economic activity that the government would end up with more in its coffers -- by taking a smaller slice of a much larger pie.

In fairness to Mr. Laffer, there's nothing wrong with this theory. It's almost certainly true at very high rates of taxation. If you consider the extreme, say a 99 percent marginal tax rate, then the government will probably not be collecting a lot of revenue. To begin with, citizens are going to hide as much income as possible. (The more honest ones will turn to barter and avoid the tax system entirely.) And no one is going to rush out and take a second job or build a factory if they get to keep only $1 of every $100 that they earn.

But here's the problem when we take Laffer's theory and try to apply it in the U.S.: We don't have a 99 percent marginal tax rate. Or 70 percent. Or even 50 percent. We start with low marginal tax rates relative to the rest of the developed world. (Yes, I understand that it may not feel that way after the check you wrote last month.)

So cutting the tax rate from 36 percent to 33 percent is not going to give you the same kind of economic jolt as slashing a tax rate from 90 percent to 50 percent. There's no huge black market to be shut down, no big supply of skilled workers to be lured back into the labor market, and so on.

Wheelen makes a solid point.  While lowering rates from a very high level to a lower level will have an effect, the probability of a significant increase in tax revenue from lowering rates from already low rates are far less.  This is the case with Bush's policies.

Looking at the history of tax revenues in a non-Laffer world, we see the following.  The 1970s saw no Laffer curve cuts and two expansions, the first from November 1970 to November 1973 and the second from March 1975 to January 1980.    The first expansion saw tax revenues increased from $90 billion to $103 billion - an increase of 14% (a few percentage points shy of Bush's total increase from the lows of 2003) and the second expansion saw an increase from $122 to $217 billion or an increase of 77.86%.  And this gain in revenue is dwarfed by the 1990s expansion, which saw revenues increase from 509 trillion in 1993 to 1 trillion in 2000 - an increase of 96%.

Compare this to the revenue increase in during Bush and Reagan.  Under Reagan, tax revenues from individuals increased from $285 billion in 1981 to $445 billion in 1989, or a 56% increase.  Under Bush, revenue from individual taxpayers has been near stagnant, decreasing from 994 billion in 2001 to 927 billion in 2005.

The Median rate of GDP growth was 3.9% for Reagan and Clinton and 3.4% for Bush.  At the same time, Reagan increased total debt outstanding from $930 billion to $2.8 trillion.  Clinton increased debt from $4 trillion to o$5.6 trillion.  And Bush has increased total debt outstanding from $5.6 trillion to $8.4 trillion.  The primary reason for Bush's and Reagan's increased debt issuance is deficits caused by excessive spending and tax cuts.

The short answer to the Laffer curve policy is simple: Overall economic growth has been comparable to periods of non-Laffer curve eras.  At the same time, total debt outstanding has ballooned.  Tax revenue from individuals has demonstrated a widely vacillating pattern, increasing fairly well under Reagan, but not at all under Bush.  The central question this raises is, "is comparable growth to non-Laffer curve eras a good policy choice given the record amount of debt required?"

So what is the Democratic stance on tax policy?  I have not seen a coherent statement from the party on this very important matter.  So, it's up to you.  What would you propose and why?  What levels of marginal taxation do you think is fair?  What about the estate tax?  Keep it?  Abolish it?  How should Democrats sell the message?  This is vitally important because the Republicans have a great sales pitch and we don't.  

Tax Revenue Info Link (PDF)

Originally posted to bonddad on Fri Jul 14, 2006 at 04:56 AM PDT.

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Comment Preferences

  •  I've thought about this for a long time... (8+ / 0-)

    The questions are several:

    1.  What is the "magic" sweet spot for tax policy?
    1.  Does that "sweet spot" move around based on one's income?
    1.  Is that "sweet spot" different for different types of income?  capital gains vs. rental incomes (which are notoriously easy to hide) vs. wages?
    1.  Does the "sweet spot" vary according to earner?  Will a corporation that can afford to buy a bevy of tax shelters have a different "sweet spot" that a small businessman?
    •  sadf (14+ / 0-)

      You hit what I think is a really important point.  I think there is a sweet spot for tax rates.  For upper income levels, I think the 1990s demonstrated that level was around 40% or so.  But I would also suspect that number moves a bit.

      "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

      by bonddad on Fri Jul 14, 2006 at 05:04:58 AM PDT

      [ Parent ]

      •  the 'contrast effect' (7+ / 0-)

        I had a discussion the other night re economic theory on your supply-side diary, in which I made mention of the "contrast effect."  This is one of those things I picked up from experimental psychology, and I believe it applies here.

        If you suddenly introduce a new environmental stimulus, you get a much bigger response from an organism than if you introduce that exact same stimulus gradually.  Thus, you should get a much bigger change in economic behavior from a sudden decrease in tax rate from, e.g., 90% to 50%, than if you wound up with that 50% tax rate over a more gradual period of time.

        •  That makes perfect sense (2+ / 0-)
          Recommended by:
          Rayne, bigchin

          "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

          by bonddad on Fri Jul 14, 2006 at 05:11:38 AM PDT

          [ Parent ]

        •  Rip off the bandaid (4+ / 0-)
          Recommended by:
          Dallasdoc, sodalis, Andy30tx, bigchin

          That's the opposite of the 'rip off the bandaid' school, isn't it?  It feels more painful when it's all at once, but it's actually less total pain if you just get it over with.

          Or for the other ethnic Finns in the audience, the 'jump from the sauna into the snow' theory.  It's a real shock, but it's great for your health.  At least that's what Mom always told me.

        •  For those of us who have seen Al Gore's (0+ / 0-)

          An Inconvenient Truth, this is the analogy of the frog placed into boiling water. If the water is already boiling, the frog jumps out immediately. If the water temperature is turned up gradually, the frog continues to sit in the water because the relative temperature changes don't seem to be as great.

        •  I just read about a similar study (0+ / 0-)

          It was looking into the effectiveness of various curricula in elementary school.  What they found was that most curricula worked pretty well equally and that changing the curricula was what would generate the greatest improvement.  Thus, changing a curricula every 6-8 years would lead to 2-3 years of high improvement rates [more of a teacher's students doing much better], 2-3 years of low improvement rates and 1-2 years of level or decreasing improvement rates.

          They theorized that teacher enthusiasm was the major factor, but were going to do more studies.

          The effects of tax policy might have a similar dynamic.    I can't, however, see any political way to experiment and impose such cyclic shifts.

      •  Couple of points: (0+ / 0-)
        1. 40% is not all that much higher than what they currently pay in federal taxes, all-in.
        1. Though I don't see the word "progressive" in your diary, I assume you intend for there to be at least some progressivity in federal tax rates, again "all-in" (incl FICA, Excise, Corp Taxes, Estate, et c.)
        1. I see also your comments on the AMT, below, which would have the impact of lowering projected revenues.

        Given all this, I strongly suspect that whatever tax policy might be phrased around these points you appear to be making, in order for the federal government to balance its budget, the balancing would need to come from the spending, and not the revnue side of the ledger.

        For my part, I think there is no empirical evidence to suggest that 40% is the sweet spot; in fact, the evidence is tenuous, once you get below punitive marginal rates like 90%, that lower rates is better for growth. Fairness would suggest it be higher. As well as simpler.

        But I do recognize the power of this frame, as evidenced by three decades of irrepesponsible and regressiver tax policy in America.

        Which is why we shouldn't use it.

        Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

        by redstar on Fri Jul 14, 2006 at 06:40:30 AM PDT

        [ Parent ]

        •  asdf (2+ / 0-)
          Recommended by:
          grayslady, Andy30tx

          Balancing the budget will come from a combination of tax increases and spending reductions.

          "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

          by bonddad on Fri Jul 14, 2006 at 06:53:11 AM PDT

          [ Parent ]

          •  How does your framing of the issue (0+ / 0-)

            contribute to that goal?

            Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

            by redstar on Fri Jul 14, 2006 at 07:20:55 AM PDT

            [ Parent ]

            •  Raising taxes (0+ / 0-)

              results in decreased government spending. The law of supply and demand kicks in when citizens are taxed heavily and start demanding fewer government services. Low taxes results in the opposite effect due to the cheapness of governemnt services.

              The true Ben Franklin quote from Poor Richard's Almanack is "Sell not virtue to purchase wealth, nor Liberty to purchase power."

              by Andy30tx on Fri Jul 14, 2006 at 09:07:29 AM PDT

              [ Parent ]

              •  prove this (0+ / 0-)

                This sounds like pure economic theory, and I doubt there is any historical or empiricle evidence that supports it.  Historical evidence unearthed by Robin Einhorn and others suggests just the opposite, that, generally, low taxes produce low services and high economic inequality, while high taxes produce high services and low economic inequality.

      •  It's pretty dynamic (0+ / 0-)

        I saw a great chart a while back that hilighted how that "sweet spot" is pretty difficult to find.  It was a list of countries, their tax rates, and their rate of growth.  Time and time again you saw in the list ZERO correlation between tax rates and economic growth.  Lithuania had one of the highest tax rates in the list, but also had one of the highest growth rates.  

        What it boils down to is that taxes are less about growth than they are about paying for the government you have.  If you want government to be effective then it requires a certain amount of money to do that job.  IF you don't pay for it, then the government fails to do it's job.

        If shaving a percentage point off income taxes means that another Enron happens because the SEC didn't have the resources to enforce the law, is that beneficial to growth?  It the state and federal highway funding is too paltry to keep the roads in good working order, does the resultant traffic jams and accidents benefit growth?

        Would the tax rates go up if we implemented a universal health care system?  Almost certainly.  But the actual money would have in their pockets would be greater because of the cost savings that are part of that change.  

        Running a deficit should only happen when:

        1. There's a recession where government servies need to be maintained or expanded to help recover
        2. There's a national emergency (war, disaster, etc), that could not be budgeted for in advance

        That's it.  Those should be fleeting, and as soon as those crises are over, the deficit spending should end.  Other than that, taxation should meet government revenue needs.  If you want to cut taxes, cut government first.  Straving it of resources doesn't shrink government it just makes it ineffective.

        --- If trickle down economics worked, Marie Antoinette wouldn't have lost her head

        by sterno on Fri Jul 14, 2006 at 11:21:34 AM PDT

        [ Parent ]

    •  So have I. A couple of things I think would go (3+ / 0-)
      Recommended by:
      opinionated, redfish, DisNoir36

      a long way to helping the situation without appearing to be a blatant attempt at income redistribution. Although that personally doesn't bother me, it does bother much of middle America.

      First, tax ALL income, regardless of source, the same. It really pisses me off that I pay a higher rate working for a living than someone who inherited a stock portfolio and is only taxed at a lower investment income rate.

      Secondly, this may ALSO be an answer for the inheritance tax. As a matter of principal, I feel it should be much higher than it is, if anything. An accident of birth shouldn't entitle ANYONE to ANYTHING, but again, that idea, largely due to successful right wing spin, is also unpopular with much of America. So, what we do is abolish the inheritance tax, make them happy! BUT, tax the inheritance as income to the receiver.

      You could possibly even go further down this line, tax other income not normally taxed now like life insurance settlements and awards from lawsuits.

      Income, is income, is income! Someone would have to run the numbers, but this approach might  actually allow a reduction in marginal rates while mainting or increasing revenue. That would certainly make right wing heads implode!

      •  Not bad (0+ / 0-)

        I like it.

        -8.50, -7.59 This is your world. These are your people. You can live for yourself today, or help build tomorrow for everyone.

        by DisNoir36 on Fri Jul 14, 2006 at 06:20:59 AM PDT

        [ Parent ]

      •  Tax already paid (1+ / 0-)
        Recommended by:
        grayslady

        The argument against estate tax is that the deceased already paid taxes once on that income, before it was put into investments.  They may even have paid taxes on investment income as it accrued.

        The challenge I see in the estate tax as currently structured is that the extremely wealthy -- the top most decile -- can afford shelters to hide wealth from taxes.  Like living trusts, for example, that create something akin to a corporation, an entity with a life of its own that is immune from estate tax but benefits heirs.

        Yet folks with modest means and the (mis)fortune to inherit the family farm's real estate are the ones most likely to pay estate tax. (Would you call any farmer's beloved children "accidents of birth"?)  What would happen if this particular segment of the population didn't get taxed on this kind of inheritance?  Would they reinvest earnings into improvements on this property, acting as a local economic stimulus?

        Versus the extremely wealthy with the living trust...?

        I think further consideration here is warranted.

        •  Living trusts do nothing to avoid taxes. (0+ / 0-)

          The only benefit from them is to avoid probate.

          "When the going gets weird, the weird turn pro" - Hunter S. Thompson (RIP)

          by redfish on Fri Jul 14, 2006 at 06:28:30 AM PDT

          [ Parent ]

        •  Taxing it as income totally removes that (0+ / 0-)

          argument, (even though I don't think it's a very good one). I also don't agree with the "family farmer" argument. First, there are damn few of those left, mostly agribusiness nowadays, and second, the ones that do exist, and are subject to an estate tax, I wouldn't be calling folks of "modest means".

          Another advantage of taxing the income side, rather than the estate, is that any exemptions or deductions will be available PER INHERITEE. The way things work now, there is one big exemption for the entire estate, regardless of how many people it's distributed too.

          Another possibility may be (using the income tax approach) to help prevent loss of true family farms or family business, would be to allow any income tax due on the inherited assets to be paid over a long term, say ten years. This should negate any possibility of a family member having to sell the asset to pay the taxes, assuming the asset is at least somewhat profitable

          •  That's what's happening right now (3+ / 0-)

            If it's a family farm, ranch or business and if you as the family keep it 10 years, you can reduce the tax by 40-60%.  Payments may be spread over 14 years if the farm/business revenues are 35% of the gross value of the estate.
            No family farms are being taxed except those little 20 million dollar ones.

            Raise the exemption to 5 million for one and 10 million per couple like the Dems suggested years ago.  But do NOT get rid of it.  The founders did NOT want an oligarchy.  Follow the Europeans who know about the feudal system.  They have extremely high estate taxes.

            "It's time to rein in the rascals and rotate the crop"

            by MontanaMaven on Fri Jul 14, 2006 at 07:03:37 AM PDT

            [ Parent ]

      •  Capital gains taxes (1+ / 0-)
        Recommended by:
        redfish

        The problem I have with capital gains taxes is that I've already been taxed on that money as ordinary income.

        I work, I get a salary, which is taxed, and then I invest whatever is left over. Then I get taxed again on the income from that investment. Doesn't seem at all fair to me.

        Higher corporate tax rates that would lead to similar yields of untaxed capital gains would seem to be fairer to me. But I'm no economist and I'm sure there are some huge landmines in that strategy.

        The trust fund babies are such a small percentage of the population, but we seem to be inordinately worried about them.

        And of course, tax policy that just looks at income doesn't address the other side, which is spending. We need to do something to balance the books. Pretty soon, Dad is going to take away our credit card, and then we'll be royally screwed.

        The power of accurate observation is commonly called cynicism by those who have not got it -- GB Shaw

        by kmiddle on Fri Jul 14, 2006 at 06:39:23 AM PDT

        [ Parent ]

        •  And I fall back to income is income. (1+ / 0-)
          Recommended by:
          opinionated

          It doesn't matter WHERE the capital came from. Earned income, lottery winnings, inhertance, etc. The earnings from your investment are STILL new income to you and should be taxed like any other income.

        •  Trust fund babies are a small part of the pop., (5+ / 0-)

          but they control a very substantial amount of the nation's wealth. I think that any approach to tax policy has to address the widening income and wealth gaps that have developed since the early 1970s. It is not health for our democracy to have so much wealth contemtrated in so few hands.

        •  You are not taxed again on the principle. (1+ / 0-)
          Recommended by:
          opinionated

          On a capital gains tax you are only taxed on the new money that you have earned through an increase in capital value.

          We could consider not taxing any gain as a result of inflation.

          The trust fund babies are such a small percentage of the population, and they are the only ones we are taxing with the estate tax.

          For green reasons I think we should have a value added tax on things, but not services.

        •  It's a classic problem (1+ / 0-)
          Recommended by:
          DBunn

          Do you tax the work, or the property?

          In Kevin Phillips' American Theocracy, he talks about the 3 Western hegemonic countries that peaked before the U.S., Spain, The Netherlands, and the U.K. In every case, as the country was losing its power, a large class of "rentiers" appeared. These were people who got their income from essentially rent. They did not make anything, the just owned everything.

          This is exactly what we do not want to encourage. Regardless of any "fairness" or "double taxation" arguments, the simple fact is that money earned from direct labor is much better for the economy as a whole than money "earned" from investments, and should be encouranged by the tax system.

          Instead, we have the exact opposite, The tax system encourages you to become a day-trader, or some other speculative investor, because the tax rate on capital gains is so much lower than the rate on ordinary income (earned by actually working).

          (-6.25, -5.23)
          Hopelessly pedantic since 1963.

          by admiralh on Fri Jul 14, 2006 at 07:23:26 AM PDT

          [ Parent ]

        •  Not double taxation (0+ / 0-)

          I'm going to skew the tax rates here to make my math simple, but let's say that the tax rate was 50%.  Here's what happens:

          You earn $100,000 as plant manage of a bubble gum recycling center.  You are taxed at 50% and so after taxes you have 50,000.  That $50,000 has been taxed once, right?  Being a smart man and an acetic not in need of world posessions or food, you take all of that money you earned and invests it.  So now you take that $50,000 which was taxed once and you invest it.  

          You invest it in tissue manufacturing stocks and it turns out to be a bad flu season so you make a killing and you double your money, making a profit of $50,000 on the original $50,000.  You are taxed, $25,000 at that 50% rate.  This means the new money you earned, that $50,000, has been taxed once and the original $50,000 you earned has not been taxed again, just the one time when you first earned it.  At no point did any of those dollars ever get taxed more than once.

          You take that $25,000 and add in the original $50,000 and now have $75,000 to invest, all of it having been taxed once.  You double your money again and now have a total of $150,000.  Of that, $75,000 is subject to capital gains (because the rest was already taxed), and so after paying $32,500 to the man, you have $107,500.  All of it still taxed only once.

          --- If trickle down economics worked, Marie Antoinette wouldn't have lost her head

          by sterno on Fri Jul 14, 2006 at 11:33:59 AM PDT

          [ Parent ]

          •  Not to argue with your math or your logic (0+ / 0-)

            But I would argue that this is exactly why people spend instead of save.

            Plus, it makes doing taxes really, really, really complicated.  I'm not a dummy or a math-illiterate, but I haven't done my own taxes in years, because it's just too complex. And I'm not a rich guy by any stretch of the imagination.

            If there was a tax incentive to invest, there would be more investment. Right now, there isn't much of an incentive, just another tax. And so. we have a nation of credit card abusers.

            The power of accurate observation is commonly called cynicism by those who have not got it -- GB Shaw

            by kmiddle on Fri Jul 14, 2006 at 01:29:30 PM PDT

            [ Parent ]

            •  Huh? (0+ / 0-)

              There is a tax incentive to invest, it's called long term capital gains.  You're still taxed but at a substantially lower rate.  If you sell in the short term (less than one year), then yeah you pay regular income tax.  But if you're really investing in something, then you do get that incentive.

              Also, the taxes themselves are simple.  Look at the example I just listed and you can see how simple those taxes are.  Where it gets complicated is deductions and funky structures where your permitted some sort of favorable tax status if you do various things.  

              The basic principal underlying the tax system is simply this: income is taxed.  If you have money in your hand it's yours.  If somebody else gives you money for something, be it the sale of something, a hard days work, etc, then you are taxed.  What's complicated about that?

              The reality is that there's plenty of incentive to invest.  The primary incentive being that of making money.  Of course you'll be taxed, but then you get to keep the majority of it.  If you didn't invest it, you'd have less money to spend.  Quite simple.  

              Have you ever, for a moment, thought to yourself, "nah, I'm not going to do X because I'd have to give 30% of it back to the government"?  I rather doubt it.

              --- If trickle down economics worked, Marie Antoinette wouldn't have lost her head

              by sterno on Fri Jul 14, 2006 at 03:44:36 PM PDT

              [ Parent ]

              •  Yeah, actually, I do... (0+ / 0-)

                I make choices all the time about whether to spend money versus investing it. And, yes, the tax implications are part of that equation. Especially when I was getting near AMT territory, you bet I looked at the tax implications (not something I have to worry about these days, but there was a time).

                Do I buy something and get the immediate enjoyment out of that item, or do I invest, defer enjoyment, but then get taxed for the privilege? Sometimes, the downstream advantage doesn't seem worth it.

                The power of accurate observation is commonly called cynicism by those who have not got it -- GB Shaw

                by kmiddle on Fri Jul 14, 2006 at 09:09:38 PM PDT

                [ Parent ]

            •  Incentives... (0+ / 0-)

              Sterno has already addressed your ridiculous claim that there is no tax incentive for investment, so I won't duplicate those comments.

              Aside from that, I'll note the incentive that always exists for savings:  to build a nest egg to cover yourself for contingencies or emergencies.  If you lose your job or have a medical emergency, the alleged lack of tax incentives won't be much of an excuse for why you don't have any money put away to be able to continue covering your mortgage until you're back on your feet.

              Political Compass: -6.75, -3.08

              by TexasTom on Fri Jul 14, 2006 at 09:16:26 PM PDT

              [ Parent ]

      •  etaylor that sounds like a good idea to me. (2+ / 0-)
        Recommended by:
        opinionated, etaylor

        I would be okay with taxing inheritances as income (maybe with an exemption for the first $100k).

        To me paying an income tax on an inheritance rather than an estate tax makes it seem less like "the government is confiscating my stuff."

        Already IRAs, 401ks and annuity proceeds are taxable to the heirs, we just apply the same rule to everything else.

        "When the going gets weird, the weird turn pro" - Hunter S. Thompson (RIP)

        by redfish on Fri Jul 14, 2006 at 07:05:34 AM PDT

        [ Parent ]

      •  Why tax.... (0+ / 0-)

        paper investments the same as manual labor? Manual labor should be taxed at a more favorable rate.

        I've thought the same on your second idea. If they want to piss and moan about paying a capital gains "death tax", then have fun with that income tax.

        As I recall, my grandmother gave me a U.S. Savings Bond. Bought back in July 1976 for $18.50 and cashed in July 2006 $135.58. I am going to have to pay tax on the difference. The income (difference) taxed on an investment. What a concept! snark to the tax already paid crap!

      •  tax simplicity (1+ / 0-)
        Recommended by:
        etaylor

        Another advantage of etaylor's tax everything at the same rate scheme is simplicity.  A great deal of the complexity in the income tax derives from treating capital gains differently from other kinds of income.   The principle reason for taxing capital gains at a lower rate than ordinary income is the unfairness of taxing gain that accured over many years at a high marginal rate in the year of the assett's sale, but that arguement dissipates if the income tax rate structure is progressive but peaks at a fairly low rate at a faily low income level (like maybe 40 percent at $250,000individual)and unfortunately, unless a lot of tax revenue is found someplace I haven't thought of yet, that is probably the kind of rate schedule we  need in order to meet current and projected revenue needs.  Taxing all income alike also removes one of the key strategies enabling tax avoidance-making highly taxed income look like something else.

        Democrats ought to do for tax lawyers and accountants what the GOP has done to trial lawyers-show them to be fundamentally dishonest, selling fraudlent tax advice to unethical rich folks in order to shift their share of the burdens of government onto someone else.  Some democrats won't like this, because if you are going to be consistent, you have to eliminate tax subsibies for progressive social purposes as well as the subsidies for capital and economic purposes because all of them can be (and are) exploited to sheild income and create complexity.

  •  Aw, c'mon (7+ / 0-)

    I want you to keep calling it the Laugher Curve - it's a much more accurate title.

    D-Trip has the New Democratic Plan on their website, here.  They talk about ending giveaways to corporations, eliminating pharma subsidies, and "Restore the budget discipline of the 1990s that helped eliminate deficits and spur record economic growth."  Which implies rolling back Bush tax giveaways but doesn't actually say it.

  •  'simple, progressive, with few loopholes' (11+ / 0-)

    That would be my mantra of what a democratic-party tax system should look like.

    I would love to see no more than about a dozen deductions or exemptions.

    Since the wolves will always be back at the door with their Christmas-tree like tax bills; as I pointed out once before, one very important way to assure tax equity is to convince the courts to give ACTUAL equal protection scrutiny to tax exemptions and deductions.  Not "strict scrutiny" like racial classifications, but just "real reasonableness" for exceptions.  Right now they give no scrutiny at all which means, "Those that have, gets" when it comes to tax loopholes.

    I'm outtahere now for the weekend, so y'all have fun and play nice!

  •  Believe In Progressive System (8+ / 0-)

    Top rate should not exceed the low 40's. Should probably start from below 5% for under the poverty line and hit the max rate at 300,000. The increments should be graduated. Fewer brackets is not tax simplification.  A shorter 1040 is.

    I liked the Matt Miller way of selling the 2% solution. Persuade people that many of the countries problems could be addressed with just a small increase in federal revenues. A progressive income based system is the fairest and best way to do that.

    Progressive solutions are more complicated than conservative ones on so many issues. Their foreign policy is "kill the bastards". Their economic policy is  "it's you money. keep it." We are like a cardiologist who competes with other doctors who are advise patients  to "eat and lie down alot" I feel a major advertising campaign should be put out by progressives to confront the fact that our policy approaches are best and can't be wrapped up in little sound bites.

    Good Government. Traffic Lights Aren't All That Weird. Vote Democratic!

    by HL Mungo on Fri Jul 14, 2006 at 05:15:36 AM PDT

    •  A question? (10+ / 0-)

      But first, I am an absolute supporter of simplification and its implied 'shorter 1040'.  It does, though raise significant issues to be resolved, not the least of which would be opposition by very powerful interest groups.

      My question though is, why should the tax rate start at 5% for those below the poverty line?  By definition, poverty exists below that line; what is the benefit of taxing poverty?  Any revenues from persons with incomes below the poverty level are generally returned and supplimented in various forms, I think (though I have not considered hard aggregate figures); if that is a correct premise, would it not be wiser to not collect that portion at all, thus avoiding the inevitable loss consumed by the costs of collection and administration?

      Life is not a 'dress rehearsal'!

      by wgard on Fri Jul 14, 2006 at 05:48:00 AM PDT

      [ Parent ]

      •  Powerful interest group? (1+ / 0-)
        Recommended by:
        bigchin

        You mean like the accountants who would all be out of a job if every person with an IQ over 80 could figure out a 1040?

        -8.50, -7.59 This is your world. These are your people. You can live for yourself today, or help build tomorrow for everyone.

        by DisNoir36 on Fri Jul 14, 2006 at 05:53:37 AM PDT

        [ Parent ]

        •  Precisely. (0+ / 0-)

          And add the tax preparer industry and attorneys who specialize in tax law.  Some very powerful groups with deep pockets, and in many instances, strong political connections.

          Life is not a 'dress rehearsal'!

          by wgard on Fri Jul 14, 2006 at 06:04:31 AM PDT

          [ Parent ]

          •  As much as I like my accountant (0+ / 0-)

            I really wouldn't mind being able to do my own 1040's and not have to shell out hundreds of dollars to get it done.

            As for the attorneys, well I'm sure they could get a job doing something more useful.  Maybe they could be politicians. (BTW that was a joke).  

            -8.50, -7.59 This is your world. These are your people. You can live for yourself today, or help build tomorrow for everyone.

            by DisNoir36 on Fri Jul 14, 2006 at 06:19:30 AM PDT

            [ Parent ]

      •  I Will Accept Your Amendment To My Proposal (4+ / 0-)
        Recommended by:
        KiaRioGrl79, judy99, Tuba Les, DBunn

        Progressivity is the main concept I am interested in. Having people at the bottom end pay nothing is definitely progressive. I could even see raising it above the poverty line. Wesley Clark had an interesting proposal in 2004 that would have seen a 0% tax rate for anybody under 50K. There is an argument that having zero % tax rates would make people feel apart and not invested in the system. My feeling is that while you can't expect people to be happy paying taxes, there should be a sense that they are getting something in return by investing in the Commonwealth. I'd like to think that people could have a sense of that at all income levels.  

        Good Government. Traffic Lights Aren't All That Weird. Vote Democratic!

        by HL Mungo on Fri Jul 14, 2006 at 06:11:30 AM PDT

        [ Parent ]

        •  Works at the other end of the spectrum, too (1+ / 0-)
          Recommended by:
          DBunn

          If the wealthy who can afford to buy themselves legislation believe that the vast population earning under 50K pays no taxes, they can see them as highly disposable since they are mere siphons.

          There must be some de minimus tax that all citizens pay -- they are citizens, after all.  Even 1% at the lowest levels from those folks who stand to benefit most by proportion from public services.

          Democracy is free, but not like free beer; helping with even the smallest amount ensures that all citizens literally buy into the concept of democracy.

          •  Federal income tax (2+ / 0-)
            Recommended by:
            opinionated, KiaRioGrl79

               is not the only tax; those on the lower rungs of the economic ladder pay plenty in taxes. Sales tax, property tax, state income tax, personal property taxes, gas tax, etc. all take a larger bite proportionally from lower incomes.

               I like Clark's idea.

               

            "Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power" -Benito Mussolini

            by happy camper on Fri Jul 14, 2006 at 06:43:15 AM PDT

            [ Parent ]

        •  I could be wrong (0+ / 0-)

          But in a lot of cases I think it is very close to 0% for a lot of folks like that.

          I don't make much money.  I have a wife and son.  
          The government gives us some money back each year (child tax credit, eitc).

          But I still can't afford a modest home in a safe neighborhood.

    •  Kevin Zeese running in Maryland (2+ / 0-)
      Recommended by:
      opinionated, danz

      on not taxing the first $100,000 of income and making up for it with:

      Corporate welfare transfers hundreds of billions of dollars annually from working Americans to the wealthiest Americans. Hundreds of trillions of dollars are traded on stock, bond, and derivative markets which do not create wealth, only gamble on the future performance of the economy. Currency traders have become rich by bidding down the value of different currencies doing serious damage to their economies in the process. This speculative activity is so huge that only a tiny tax on transactions in these markets – a tax of .1% – would raise enough money to eliminate all federal income taxes on the first $100,000 in income – and still create a giant surplus in revenue.

      His site:http://kevinzeese.com/...

      "It's time to rein in the rascals and rotate the crop"

      by MontanaMaven on Fri Jul 14, 2006 at 07:13:25 AM PDT

      [ Parent ]

  •  What about consumption taxes? (5+ / 0-)

    Any tax reform needs to redress the incentive imbalance between consumption on the one hand, and savings and investment on the other.  Now economic activity is heavily skewed toward consumption for most Americans, and our economy depends on people spending more than they earn.

    I know consumption taxes are heavily regressive, and need to be balanced by progressivity elsewhere.  But a decent-sized national sales tax (excepting food and medicine and basic clothing) could replace most taxes for poorer and lower-middle-class Americans.  Expanding the earned income tax credit could shift moneys back to the lowest earners.

    Almost all industrial countries rely on a mix of consumption and income taxes, from what I've read.  With our huge current account (trade) deficit, we need to start generating capital in this country, rather than simply burning everyone else's.  Shifting some of the tax burden to the consumption side can be part of the solution here.

    -4.50, -5.85 In a time of universal deceit, telling the truth is a revolutionary act. --Orwell

    by Dallasdoc on Fri Jul 14, 2006 at 05:16:58 AM PDT

    •  I have many wealthy clients (10+ / 0-)

      who pay very little in tax.

      If they are truly leisure class - they use tax exempt investments.

      If they are small business owners - they run evertyhing from their dry cleaning to their kids' braces through their business only reporting the barest fraction of their income they think they need to to avoid an audit.

      If there is a cash component to their business at all, the cash never sees the light of day.

      Entire networking groups, often church related, are actively engaged in bartering services, especially construction services, off the books.

      Enormous amounts of the service industry is off the books and I don't mean millions of nannies, and housekeepers and yardmen (though most of those are paid off the books); I also mean millions of contractors for small jobs.

      Of course there is also illegal income - the income earned by drug traffickers for example - that is also never taxed.

      A consumption tax would pick up all of this.

      And while we're on it.  Vicious progressiveness for incomes between 0 - 300,000 and then taxing 350,000 and 5,000,000 at the same marginal rate is NOT progressive.

      I think the rate needs to continue to increase (even if it is only a fraction of a point) up to a top rate of 70% which would not apply unless you hit income of ten million or so.

      Most people I know who make 300,000 for a married couple don't consider themselves the "rich" and compared to the most of my clients, they aren't.

      If you want something other than the obvious to happen - you've got to do something other than the obvious...Douglas Adams

      by trillian on Fri Jul 14, 2006 at 06:02:45 AM PDT

      [ Parent ]

      •  How bad would it be (0+ / 0-)

        if using your approach we were to have a 1% national sales tax and then have a progressive income tax system where all income (as someone up thread mentioned) including inheritances, and so on was taxed at the same rate.  With the sales tax it could be possible to not tax any income until $50,000 or so and maybe even lower the tax rates above that.  Also as you said continue rates.  It's ironic that the rich complain so much about the highest rates when 20 years ago they were much higher.  Maybe someone should remind them of that and tell them to STFU.

        -8.50, -7.59 This is your world. These are your people. You can live for yourself today, or help build tomorrow for everyone.

        by DisNoir36 on Fri Jul 14, 2006 at 06:27:54 AM PDT

        [ Parent ]

        •  1% tax is a waste of time (0+ / 0-)

          Sales taxes cost a fair amount to administer.  Countries which have instituted them have found that it's not worth the bother without a fairly substantial bite.  Canada's GST is around 8%, depending on the province.  But -- Canadians correct me here -- I think the provincial GST is one of the major contributors to the national health plan.

          -4.50, -5.85 In a time of universal deceit, telling the truth is a revolutionary act. --Orwell

          by Dallasdoc on Fri Jul 14, 2006 at 07:37:13 AM PDT

          [ Parent ]

          •  GST (Goods & Services Tax) (1+ / 0-)
            Recommended by:
            Dallasdoc

            is 7% across the country (oops, July 1st it got reduced to 6%). It's the PST (Provincial Sales Tax) that varies by province. I think Ontario is among the highest at 8%, and Alberta (oil-rich) is the only province that has none at all.

            What we're discovering up here, is that the 1% reduction in the GST is only benefiting the rich who can afford big-ticket items like houses and expensive cars. For us little guys, 1% off a $3 bag of chips doesn't make much difference, now does it?

            And at the same time, they just rolled back an income-tax cut the previous government had put in place which will disproportionately affect lower-income earners, by raising the minimum tax exemption by about $600. It may not sound like much, but when you're counting pennies at the end of every month already, and then your paycheque suddenly has five, ten, or twenty dollars less it has a big impact.

      •  Definitely worth consideration (0+ / 0-)

        The problem with the Laffer Curve is that it assumes a constant, even increase/decrease in taxes and that everyone pays their share of taxes.

        The wealthy do not, for the reasons you describe.  A corporation is the fastest, easiest, cheapest method by which persons can shelter income.  (And we haven't even begun to discuss offshoring, either...)

        Consequently, the Laffer Curve doesn't work under the current tax system; a consumption tax might be more effective than income tax alone.  I would hope, though, that consumption would not be the only revenue source; I would also hope that shelters of any kind are reduced to those where national policy on investment has been focused.

    •  I understand your point, BUT consumption taxes, (0+ / 0-)

      whether they are VAT's, straight sales taxes, or any other variety tend to be very regressive. That's a bad thing.

    •  us already taxes sales pretty heavily (0+ / 0-)

      at the state level.  I think it averages 7 plus percentage now, but I don't have the figures before me.  I don't know how high you can go with a sales tax before the blackmarket becomes a really big problem (organized crime thrives on smugggling heavily taxed commodities) but I would think we're pretty close to it now.  Besides the states really need the money, especially now as the federal government keeps cutting back on social servies.

      If we really want to tax consumption, why don't we do it through a value added tax.  That is less obvious to consumers and taxes imported goods and services equally with domestically produced goods and services.  I wouldn't want to see a value added tax go for ordinary revenue, though.  Let's save this big money maker for funding universal national single payer health insurance.

  •  Yes, Laffer curve (1+ / 0-)
    Recommended by:
    bigchin

    Is used up for the US. A cut in taxes means a cut in revunue, no doubt.

    We hang the petty thieves and appoint the great ones to public office. Aesop (620 - 560 BC)

    by AWhitneyBrown on Fri Jul 14, 2006 at 05:29:25 AM PDT

  •  We're not talking about huge changes! (2+ / 0-)
    Recommended by:
    bonddad, bigchin

    We need to remember that massive changes in our tax structure did not put us where we are. Had the "Tax cuts for the rich" been only slightly lower, we might easily have a balanced budget right now.

    Now, with the War in Iraq going on as long as it has, it's EVERYBODY'S tax cuts that were wrong. Even then, they weren't way wrong. A little mismanagement, over time, equals one fucked up situation. In this case, 5 years.

    As I posted yesterday, it's a question of management. Revenue and expeditures must be managed to within a percent or even fractions of a percent. This is difficult to do but all the information needed to do it is readily available to our government. No government in history has done it as wrong as the Bush administration and the Republican controlled Congress over the last 4 years.

    What would it have taken to have done it right? Big differences? No. Very small ones.

    Rich people and traditionally Republican voters need to know we're not talking about making huge changes. We're not talking about income redistribution via taxation... at least I'm not. Those of you itching for a chance to stick it to the rich people... stick it to Republicans if Democrats take control of even one house of Congress -- you need to take a deep breath.

    We can make small changes in taxation and do a world of good. We can work on government efficiency and get the financial services sector out of government. We can make large changes in the rules governing lobbying. You advocate raising anyone's taxes by huge percentages and you might grab the House of Representatives and/or the Senate.

    But you won't keep it.

  •  Happy Bastille Day! (9+ / 0-)

    “In short, it’s a great economy if you’re a high-level corporate executive or someone who owns a lot of stock. For most other Americans, economic growth is a spectator sport.” - Paul Krugman.

    JP
    http://welcome-to-pottersville.blogs...

    Defending bad taste and liberalism since 2005.

    by jurassicpork on Fri Jul 14, 2006 at 05:36:35 AM PDT

  •  See, this is similar to what I write about (0+ / 0-)

    except in my case it's a literal "have your cake & eat it too" - marketers promise consumers they can eat junk and get healthy. The thing with the Republican "less taxes will help the economy" idea as well as the idea that eating Smart Balance mayo will lower your cholesterol (riiiight) is that people are just VERY willing to be fooled because it FEELS SO GOOD. Greed & sloth just take over whatever part of their brains that were supposed to be figuring out LOGIC.

  •  Actual Laffer error, which Wheelen accepts (1+ / 0-)
    Recommended by:
    nio
    1. Laffer proposed that at 0 and 100% tax rates on total income, income from income tax would be very low. In between, at intermediate tax rates, there is a peak in total return from the tax.
    1. Laffer then proposed that we are at a tax rate above the peak, and that by lowering taxes we would move into a more highly taxed zone.

    Laffer had no evidence at all as to the shape of the peak let alone where we are on it.  The Bush data suggests that we are below the peak and are moving even lower.  On the other hand, under Bush II we also had one of the largest stock market crashes in history which may have had a minor effect on income from capital gains, both reducing gains and giving people accumulated losses to charge against new profits.

    Wheelen, extended curve, repeats Laffer's error 1, claiming he knows something about the shape of the curve, about which it appears very hard to get information, and uses a totally fallacious argument to defend his claim, namely that in other countries taxes are higher.  Whether our tax rates are higher or lower than taxes elsewhere tells us nothing about the shape of the curve, let alone where we are on it or whether or not we and they have the same curve.

  •  #1... fix the AMT... it's killing us... (5+ / 0-)
    Recommended by:
    Rayne, bonddad, redfish, nio, OpherGopher

    Dudehisattva... <div style="color: #0000a0;">"Generosity, Ethics, Patience, Effort, Concentration, and Wisdom"&l

    by Dood Abides on Fri Jul 14, 2006 at 05:50:21 AM PDT

    •  Big and important issue (4+ / 0-)
      Recommended by:
      Rayne, nio, OpherGopher, bigchin

      I think all that you need to really do with the AMT is adjust for inflation and eliminate the state tax payment section.

      "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

      by bonddad on Fri Jul 14, 2006 at 06:01:04 AM PDT

      [ Parent ]

      •  Can you elaborate? (0+ / 0-)

        I'm flirting with the AMT this year in my household.  Sure doesn't feel like we're making a lot of money, already pinch pennies, drive a 9-year-old Honda, using coupons, buy only on sale, go to thrift-discount-outlet stores, you name it, but here we are, up against the AMT.

        It's a disincentive for me to earn any more money (even if I could find full-time work here).  It's a disincentive to my spouse because he's already too stressed out making what he makes now -- why get more stressed out and earn less after AMT?

        Add the likely-to-explode cost of fuel and heating and we're caught in a vise.

        ???

        •  I was hit with the AMT while I was receiving (0+ / 0-)

          need-based financial aid for my two kids in college. There is a political calculus to the AMT. It raises a lot of money (I paid an additional $5k in texes), and it disproportionately hits the BLUE States where state and local taxes are generally higher.

      •  except that doing this (0+ / 0-)

        however simple, still costs a good bit of money (somewhere around $400 billion over the next 10 years, I think) - so, it would have to be part of a revenue raising package.

        •  How to pay for fixing the AMT... (0+ / 0-)

          ...simply raise the tax rates on the wealthy to compensate.

          But, yeah, I do agree it should be part of a comprehensive tax reform package.

          Aside from that, I think (as has already been noted by a couple of other folks) that tax simplification in the context of a progressive income tax is important, and could actually be a winning issue.  How so?  Republicans have spent a lot of years perpetuating the lie that the way to simplify taxes is with the highly regressive "flat tax"...which just isn't true.  The Democratic alternative should be a progressive tax that treats all sources of income the same, eliminates most deductions, untangles and simplifies the maze of credits, and can be filled out by the typical middle class taxpayer in ten minutes.  

          As for what the top tax bracket should be, I'd say that something around 45% for millionaires is not unreasonable.  Go higher than that and it will look really, really radical to most voters.  Go much lower than that and it won't raise enough money.

          It is also important to ensure that the tax brackets are set in such a way that when Social Security/Medicare payroll taxes are added to the income taxes, the result is still a progressive system -- something which isn't true today.

          Political Compass: -6.75, -3.08

          by TexasTom on Fri Jul 14, 2006 at 09:32:26 PM PDT

          [ Parent ]

  •  How about (5+ / 0-)
    Recommended by:
    HL Mungo, opinionated, reahti, etaylor, bigchin

    taxing capital gains and dividends at the same rate as income.  I think it's BS that someone can sit on their fat well off ass and contribute nothing to society while the middle class schlub has to work their ass off to make a decent wage, then get taxed more heavily on top of it.  

    How is it productive to the overall health of the economy when a whole segment of people are not contributing to it other than getting their asses liposuctioned, having personal trainers tone it buying expensive cars to drive it in and making stupid reality TV shows to show it off on.

    (Sorry about the recurring ass theme)

    -8.50, -7.59 This is your world. These are your people. You can live for yourself today, or help build tomorrow for everyone.

    by DisNoir36 on Fri Jul 14, 2006 at 05:51:47 AM PDT

    •  Agreed (0+ / 0-)

      Always thought your argument should have been made to fight capital gains rate reductions.

      Good Government. Traffic Lights Aren't All That Weird. Vote Democratic!

      by HL Mungo on Fri Jul 14, 2006 at 06:23:13 AM PDT

      [ Parent ]

    •  asdf (3+ / 0-)
      Recommended by:
      Rayne, nio, grayslady

      short-term capital gains are still taxed at the oridnary income levels.  

      Long-term cap gains (LTCG) and dividend have always had their own level of taxation for various reasons.  Politically, I don't think it's possible to raise them to ordinary levels.  However, I think some raising is in order.  

      "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

      by bonddad on Fri Jul 14, 2006 at 06:26:07 AM PDT

      [ Parent ]

      •  LTCG (0+ / 0-)

        I should have been more specific.  I was referring to long term rates  more specifically the people who live off the dividends they earn off these long term investments that sit in an account and grow.

        It might not be easy to raise them substantially but what if it were possible to maybe simply equalize them, with a combination of a national sales tax, closing loopholes, simplification of the code and lowering the rates on income at the same time?  I'm no expert on taxes but it seems like that could work.

        -8.50, -7.59 This is your world. These are your people. You can live for yourself today, or help build tomorrow for everyone.

        by DisNoir36 on Fri Jul 14, 2006 at 06:32:58 AM PDT

        [ Parent ]

      •  Yes (0+ / 0-)

        Separate, at least in our own minds what is possible instead of what is just. We need to remember we're talking about a political agenda here, however distasteful that may be when we consider all the uninsured and poor.

        Victory by inches.

        With regard to taxation, that is.

    •  Imo we should do away with the tax break for (0+ / 0-)

      dividends received, and give corporations a smaller break for dividends paid.  This would motivate the big companies to share their earnings with the shareholders, which with some exceptions hasn't been done for a long time.

      "When the going gets weird, the weird turn pro" - Hunter S. Thompson (RIP)

      by redfish on Fri Jul 14, 2006 at 06:26:11 AM PDT

      [ Parent ]

      •  Yes (0+ / 0-)

        If a dividend tax break is going to be offered, it absolutely should be on the corporate side, not the individual side.  It would encourage corporations to increase the size of their dividend payments, since that would reduce their taxes.  In turn, this would benefit middle class Americans who mostly own stock through IRA and 401K accounts that are tax deferred anyway.  Note that the current dividend tax break is absolutely useless for those of us who only hold stock in retirement accounts.

        Political Compass: -6.75, -3.08

        by TexasTom on Fri Jul 14, 2006 at 09:36:36 PM PDT

        [ Parent ]

    •  Sorry, disagree (0+ / 0-)

      I made this comment upthread.

      You're obviously thinking about the .2% of the population, trust fund babies, who generate all their income from investments.

      I'm a regular guy, working hard, saving as much as I can. I get TAXED on my income, then I invest it and get TAXED again. I don't consider double taxation fair.

      Raise corporate taxes to the level of equivalent untaxed yields on capital gains.

      The power of accurate observation is commonly called cynicism by those who have not got it -- GB Shaw

      by kmiddle on Fri Jul 14, 2006 at 06:46:47 AM PDT

      [ Parent ]

  •  Corporate Weathfare? (0+ / 0-)

    I see this term thrown around, and I'd like to invite someone who knows a good bit about the subject to actually go into some detail.

    Sure, it seems to have some perverse impacts, like huge tax returns for very profitable companies, but I know these programs often serve valuable purposes - in that they start out as incentives to make companies do "good" things (like use green technology, or keep jobs in poorer areas of the country) but after some time, the situation changes, the company does great and the subsidies continue.

    Question:  What is the start of corporate assistance from government?  I'm thinking it was the Chrysler bailout of the 1970s.  Am I right?  Was that a good use of government funds in that it kept a big-3 automaker and huge US employer from going under at a time of economic uncertainty and slow growth?

    I just don't want Democrats to take a reflexive position on such things.  Tax incentives are the government's "carrot" to use to promote desirable behaviour.  

    This comment was screened and authorized by Kos. All hail the King of the Blogosphere.

    by Scientician on Fri Jul 14, 2006 at 06:00:37 AM PDT

  •  Lower Taxes ... From The Bottom Up! (0+ / 0-)

    In other wods, tutn trickle down upside down.

    It's simple.  Allow everyone to make a LIVING before paying federal taxes (both income and federal) on income (earned and unearned) and profits.  Then, institute a FLAT tax.  Finally, institute a WEALTH tax on the top 1/2 of 1% of income, estates and profits.

    Check this out ...

    Individual Earned and Unearned Income Tax
    $1 - $25,000 ... $0 income or payroll tax.
    $25,001 - $1,000,000 ... 25% federal tax + 5% payroll tax.
    $1,000,001 - $10,000,000+ 30% federal tax + 5% payroll tax.
    $10,000,000+ 40% federal tax + 5% payroll tax.

    Estate Tax
    $1- $2.500,000 ... $0 estate tax.
    $2,500,000 - $10,00,000 ... 25% estate tax.
    $10,000,000 - $100,000,000 ... 30% estate tax.
    $100,000,001+ 40% estate tax

    Corporate Profits
    $1- $100,000 ... $ corporate tax.
    $100,001 - $100,000,000 25% federal tax.
    $100,000,001 - $1,000,000,000 30% corporate tax.
    $1,000,000,001+ 40% corporate tax.
    Foreign Profits
    $1+ ... 50% corporate tax.

    Fair Tax.

    rok for dean    

  •  Thinking outside the box [1]: Raise Taxes Now! (10+ / 0-)

    As anyone who has been reading the economic blogs for the past year or so knows the federal government is spending more than it is taking in. In addition the country is buying more from abroad than it is exporting. Both these actions have led to record deficits and many are warning of severe consequences.

    There are two approaches to solving a deficit: spend less or save more. Pressing national issues seem to preclude much in the way of spending cuts in the near term. We are fighting three wars simultaneously (Afghanistan, Iraq, and "Terrorism"), we have serious rebuilding to do in the Gulf region as well as elsewhere, and we have health and retirement issues that are being shifted to the government.

    Conservatives are upset by this level of spending, but are unable to see how to change the spending programs. Attempts to cut back on social spending are mean spirited, insufficient and politically impractical in the run up to elections.

    So the only avenue open is to raise taxes. I think the Democrats should take the lead in this, now. It will have to be done sooner or later and if steps are deferred until after 2008 the situation will have just gotten worse by then. In addition raising taxes as one of the first steps in a new administration leaves one open to the "tax and spend" mantra used by the conservatives. The problem happened under the present administration and thus needs to be corrected now.

    Here are some initial ideas on how to raise taxes. Please feel free to add to the list.

    First, the issue of the estate tax is irrelevant. What is being debated is whether a future tax break will go into effect or not. There is little practical effect on current tax deficits. The Democrats can continue to push for an appropriate estate tax policy, but we need changes which take effect immediately.

    I suggest imposing a war surcharge on the top three income tax rates. The 28% rate would be raised to 31% (about a 10% surcharge). The 33% rate would be raised to 39% (a 20% surcharge) and the 35% rate would be raised to 45% (about a 30% surcharge). Examination of the brackets will show that this will effect those most able to pay the most. Those who have been squeezed by rising costs and stagnant pay scales will be unaffected.

    In addition I would limit the amount of interest that can be deducted for a mortgage. The amount of interest that could be deducted on the income tax would be capped at $25,000. Second mortgages and home equity loans would not be eligible for interest deductions. At present interest rates near 5% this would allow borrowing $500,000 in principal which is sufficient to finance the bulk of homes in the country. Median home prices for existing homes are currently in the range of $320,000 so a $500,000 cap on principal would only affect the most expensive houses.

    To compensate for the hidden rise in the cost of living I would suggest reactivating the deduction for interest on consumer loans. This deduction would apply to home equity, revolving credit and auto loans. There would be a cap of $10,000 in interest on this. At current common loan rates of 20% this would allow borrowing of $50,000 in consumer debt. Credit card debt balances now average about $7,000 per household which means that most families would be able to deduct their entire credit card interest.

    Common stock dividends should be treated as regular interest again rather than being taxed at a 15% rate. Those with large amounts of dividend interest can afford it and those with a small amount of stock holdings will only be affected minimally.

    Corporate taxes should be subject to a surcharge as well. Retained earnings should be taxed at a suitable rate, somewhere in the 25-35% range. Earnings paid out to shareholders would not be considered retained earnings. Business expenses for capital improvements would be counted against earnings as is done currently, but expenses incurred in mergers or acquisitions would not. Companies buying companies does not produce any real wealth or provide economic stimulus.

    Foreign earnings need to be repatriated annually and not be allowed to accumulate overseas tax free. The recent tax holiday for overseas earnings exempted billions from US taxation. This must stop.

    Stock options and other indirect payments must be treated as regular income in the year granted and taxed appropriately. Consideration should be given to imposing an excess compensation tax as well.

    These new tax programs would be considered as temporary, war and disaster finance taxes. They would be repealed or readjusted two years after US troops withdraw from Afghanistan and Iraq, and provided no new major troop deployments have taken their place. Troops left abroad, as in Kosovo, for peace keeping purposes would not be counted when figuring the date for the surcharges to end.

    The Democrats need to propose these actions as emergency measures taken in time of war and national disaster as soon as the November elections are over. They can all be set to take effect as early as Jan 1, 2007. Unwillingness by the Republicans to consider this type of legislation can be countered by appeals to common sacrifice, patriotism and fiscal responsibility. These appeals have been very successful in other times of economic distress. Look at the sale of War Bonds during WWI and WWII as examples.

    The longer range issues of the negative effect of our current tax policies can be addressed after the immediate issues are taken care of. I have a short essay on more far-reaching tax reform ideas here (also posted down thread):

    Corporate Taxes

    By raising taxes now we will reduce our need for current borrowing from abroad, this will eventually lower the amount of current government expenditures for interest on the national debt and reduce the cost of borrowing for the private sector as well. This may seem to run counter to the Federal Reserve policy of raising interest rates to curb inflation, but even the Fed has acknowledged that federal spending is out of control.

    The Democrats need to take the lead on this and continue hammering on the issues until some rationality is restored to fiscal policy. The policies I have outlined here affect only the wealthy, so we can expect to hear lots of criticism from the conservative punditry, but concrete examples showing how little the average person will be affected should help to deflect the self-serving critics.

    The alternative to raising taxes now is runaway inflation later and devaluation of the dollar. The stock market is already showing signs of weakness. A big decline in the market will ultimately cost the wealthy class much more than these modest tax increases. Perhaps this time they will think things through for themselves.

    •  I agree that we need to surtax to fund the war (2+ / 0-)
      Recommended by:
      nio, jayb

      We had one during Vietnam. the tax would certainly be unpopular, and that might help us end this miderable, pointless war. I would also recommend excise taxes on items such as jewelry. In the 1950, the excise tax rate was 10%. I would prefer an excise tax to a consumption tax, since consumption taxers are regressive.

      •  Maybe an excise tax on guns? (0+ / 0-)

        They are big ticket items.  Though I am a gun owner I would't mind paying an extra 10% if the money was going to pay for the war.

        "When the going gets weird, the weird turn pro" - Hunter S. Thompson (RIP)

        by redfish on Fri Jul 14, 2006 at 07:23:29 AM PDT

        [ Parent ]

    •  Wonderful Post (0+ / 0-)

      The idea of imposing a war surcharge on the top three income tax rates is a terrific and fresh idea.  The rationale is that the wealthy have more to protect.  

      A "War Intangible Tax" (tax on wealth stored in stocks and bonds) for the same reasons could also be considered for the same rationale.

      You could also consider a "War Sales Tax" because we all should consider protecting our nation.  

      These taxes would be set by formula to cover the total cost of defense spending during the previous fiscal year.

      This will allow the Democrates to cut other taxes.

      Remember Democrates only raise taxes to pay for the Republican wars.

  •  Outside the box [2]: Abolish Corporate Tax (2+ / 0-)
    Recommended by:
    Rayne, MontanaMaven

    Over the past fifty years the portion of the federal tax revenue
    paid by corporations has decreased dramatically. It is now almost
    irrelevant. Nevertheless corporations spend a great deal of time
    and money on finding ways to lower their tax liability even
    further.


    This has several undesirable results. The cost of doing business
    is raised. In a typical arrangement a large corporation hires a
    tax consulting firm to create a way to lower their taxes. In
    return the consultant gets a portion of the savings as a fee. The
    government loses the revenue, the corporation wastes the money on
    the fee and the clever people at the consulting company are
    misused in socially unproductive work. In addition it has a
    corrosive effect on the ethical behavior of
    congress as numerous scandals have shown.


    A similar effect happens at the state and local level.
    Corporations play one area against another when looking to setup
    or expand a business in a particular locale. Governments are
    blackmailed into offering tax concessions to "attract" new
    business. As a consequence the cost of the additional services
    supplied by the locale are shifted to individuals or other
    businesses in the region that are not as adept at playing the tax
    game.


    In addition the imbalance in tax policy puts some companies at
    a disadvantage with others. The migration of shell corporations to
    off shore tax havens puts more ethical or patriotic companies at
    a competitive disadvantage.
     


    What is needed is a way to remove the financial incentives to
    "creative accounting". The simplest is to eliminate the corporate
    tax on "profits" entirely.

    This should be replaced by an alternative source of corporate
    revenue. There are many proposals floating around. The one that
    has been adopted most frequently elsewhere in the world is a
    value added tax (VAT). This is applied at each step of the
    production stage as a percentage of the "value" added by the
    company in processing it's product. So if I buy leather for $1
    and make a pair of shoes that I wholesale for $5 the value added
    is $4 (ignoring labor and other costs, to simplify the example).
    Ranges of the tax are generally in the 10-20% range. So a 10% tax
    would collect $0.40 in the prior example.


    Another approach might be a gross receipts tax based upon how
    much revenue a company takes in. This might make calculations
    easier in the case of service industries where the "value added"
    is less clear than in manufacturing.


    Whatever approach is used it should have a simple underlying
    principal. Every company pays the tax and the rate is the same
    for all. There must be no special cases or exceptions or the tax
    avoidance industry will once again spring up as a socially
    unproductive parasite.


    Ethical corporations should approve of this approach since it
    levels the playing field and makes for more fair competition.
    Whether corporations that have become expert at gaming the system
    agree is another matter. And the extortion game used by congress
    to finance their campaigns needs to be fixed or they will refuse
    to consider jeopardizing their own revenue streams.

    •  That's an interesting idea (1+ / 0-)
      Recommended by:
      Rayne

      Don't you run into a big transfer pricing problem though?  

      "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

      by bonddad on Fri Jul 14, 2006 at 06:14:08 AM PDT

      [ Parent ]

      •  explain (1+ / 0-)
        Recommended by:
        Rayne

        Could you explain you question in more detail? Thanks...

        •  Sure (2+ / 0-)
          Recommended by:
          Rayne, bigchin

          company x buys raw material A for $1.  They do something with the product to make it more valuable and sell it to a wholesaler for $5.  In theory they added $4 in value.  However, there are many ways for the company to claim the $4 profit is actually $1 for whatever reason.  

          The RIS code has a whole section on this -- 482.  However, it gets a great deal of play in practice.  It seems this situation runs into the same problems as section 482 does currently.

          "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

          by bonddad on Fri Jul 14, 2006 at 06:31:24 AM PDT

          [ Parent ]

          •  VAT (1+ / 0-)
            Recommended by:
            Rayne

            Lots of countries have a VAT (Canada has a GST), so it would seem that the details of how to measure "value" have been worked out elsewhere. So I don't see why some of this experience couldn't be applied to the US.

            Rather than using a VAT structure we could just apply a "sales" tax based upon the price. The principle points are that the tax should be a function of revenue, not profit and that it should be unavoidable.

            This eliminates the trick of Nike of selling shoes to a subsidiary in Bermuda for $1, adding $90 for the value of the logo and then reselling to the US unit for $100. The US unit then sells to retailers for $110 and Nike avoids taxes on $90 of profit.

            Instead a, say, 10% "sales" tax in the US would produce $11 in taxes.

            The other point I'm trying to make is that, since the corporate tax raises so little revenue, and since it is so open to gaming, it is just better to drop it altogether and replace it with something more airtight.

            I'll leave it to the accountants on how to make it "airtight".

            The present system isn't working...

    •  Gross receipts taxes (2+ / 0-)
      Recommended by:
      grayslady, happy camper

      are very harsh on business with low profit margins, and very generous on those with high profit margins.

      "When the going gets weird, the weird turn pro" - Hunter S. Thompson (RIP)

      by redfish on Fri Jul 14, 2006 at 06:35:49 AM PDT

      [ Parent ]

    •  tax on financial accounting income (0+ / 0-)

      How about laying the corporate tax on the income public corporations report to their shareholders instead of having different accounting systems for book and tax?  Think of Enron.  They paid no tax at all (had no tax income) while reporting astronomical profits.  This has the advantage of playing off the different sources of a corporation's greed-too high income, they pay tax, too low income, stock prices decline.

  •  Remove the limits on the FICA soc. sec tax (8+ / 0-)

    As the system now exists, it is highly regressive.

    •  I think they should be raised at a minimum (1+ / 0-)
      Recommended by:
      nio
      to $250,000.

      "When the going gets weird, the weird turn pro" - Hunter S. Thompson (RIP)

      by redfish on Fri Jul 14, 2006 at 06:43:20 AM PDT

      [ Parent ]

    •  This is one place I'm more radical (4+ / 0-)
      Recommended by:
      nio, grayslady, blue jersey mom, bigchin

      Yes. Remove the limits completely AND RAISE payroll taxes (some) on everyone... now.

      Tell our citizens the truth: it's the ONLY way to insure the future of Social Security.

      Americans want to take care of Social Security and it's the one part of revenue they'll pretty much do whatever it takes to put it right.

      •  This one I'm more radical one too (1+ / 0-)
        Recommended by:
        opinionated

        I agree that there should be no ceiling for payroll taxes, only if that will bring down the payroll taxes for everyone, especially those with incomes belong the $90,000 who should pay very little.   I'm with Edwards.  Taxing work over wealth is wrong.  Labor creates wealth and not the other way around.  Our economic system should serve the citizens and not the other way around.
        The way to eliminate poverty and the drag on our society is to spread wealth around like manure.  Right now we have rough barren patches in our lawn.  

        Oh and check out Kevin Zeese's idea from a study in Maryland.  I'm curious about it:
        http://kevinzeese.com/...

        "It's time to rein in the rascals and rotate the crop"

        by MontanaMaven on Fri Jul 14, 2006 at 07:29:09 AM PDT

        [ Parent ]

      •  I believe that my son is already shut out (0+ / 0-)

        I'm 25. He's .5
        I see it as I'm lucky if I get a cut

  •  Unfortunately (6+ / 0-)

    Tax policy, especially raising taxes, is a much harder sell now because of stagnant wages, rising commodity prices, and higher interest rates.

    While I have some problems with the approach I am about to propose, politically, I think any raise in marginal rates has to be from a "soak the rich" point of view.

    First, rebrand the "death tax" the "Paris Hilton Tax".  Reinforce the fact that the tax only applies to very large estates and prevents inheritied wealth.  I don't know if anyone noticed in a NY Times article about Buffett's donation, but Buffett himself said the Estate Tax was good public policy and that he was against inherited wealth because it went against the idea of America as a meritocracy.

    Once the "Paris Hilton Tax" automatically reinstates itself in 2011, set it at $1 million and index to inflation.

    Second, a luxury consumption tax.  Certain items e.g. yachts, jewelry, luxury cars etc., over a certain amount are subject to this tax.

    Third, increase the capital gains tax back to Clinton era levels.

    Fourth, tax stock options.  I don't know how, if at all, these are taxed, [bonddad, a little help?] but they should be taxed as income, at the highest marginal rate.

    This is merely a starting point, and I think an easier political sell.

    We also need to investigate a carbon tax, and increased environmental taxes - especially to restore the superfund cleanup fund which is bankrupt.

  •  The Laffer Curve has two sides. (0+ / 0-)

    Inumerate, who reject science on so many issues, Rep pols pretend it just has one.  If you believe these guys, we can cut taxes to zero, have infinite revenues, and build a golden bridge to the moon (contracted to Halliburton).

    Dems balance and invest.

    Reps borrow and waste.

  •  Offshoring (6+ / 0-)

    I recently spoke with a person who has been caught by the irs using offshore entities to hide income.

    My answer to them was "hire a criminal defense lawyer immediately if not sooner."

    Offshoring has become a pretty big industry.  Dems need to pound the table on this issue and get something done about it.

    Clinton did well with his campaign to halt tax motivated expatriation.

    "When the going gets weird, the weird turn pro" - Hunter S. Thompson (RIP)

    by redfish on Fri Jul 14, 2006 at 06:24:38 AM PDT

    •  asdf (2+ / 0-)
      Recommended by:
      Rayne, bigchin

      I think that's a solid idea.  however, I have no idea how to do it.  Any suggestions?

      "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

      by bonddad on Fri Jul 14, 2006 at 06:29:01 AM PDT

      [ Parent ]

      •  More funding for Fincen and criminal (4+ / 0-)
        Recommended by:
        Rayne, MontanaMaven, opinionated, bigchin

        investigation division of IRS.

        Increase the jail term (currently 3 years).

        Treaties with countries like Nevis to share info (using carrot/stick approach).

        Imprison the people who are helping set up the abusive trusts/corporations.

        Forfeiture penalties.

        "When the going gets weird, the weird turn pro" - Hunter S. Thompson (RIP)

        by redfish on Fri Jul 14, 2006 at 06:33:49 AM PDT

        [ Parent ]

        •  The strange thing about offshoring (3+ / 0-)
          Recommended by:
          Rayne, Jesterfox, bigchin

          is it is hard to convince the people doing it that they are committing a serious crime.  Maybe we need public education on that.

          A typical conversation

          "You're almost certainly going to jail"
          "What are you talking about? I'll meet with them and we'll work something out"
          "When you meet with them there will be two fbi agents in the room"
          "Hey all I did was do the same thing everybody does, right?
          "You're going to jail"

          "When the going gets weird, the weird turn pro" - Hunter S. Thompson (RIP)

          by redfish on Fri Jul 14, 2006 at 06:40:53 AM PDT

          [ Parent ]

      •  The New Untouchables (1+ / 0-)
        Recommended by:
        redfish

        We need Eliot Ness Spitzers who revel in their cleaning up the mob.  It's UnAmerican.  Democrats will fund a new Untouchables to get our money back from off shore and out sourcing.  Have a new House UnAmerican Activities Committee.

        "It's time to rein in the rascals and rotate the crop"

        by MontanaMaven on Fri Jul 14, 2006 at 07:34:07 AM PDT

        [ Parent ]

  •  The political sell. (1+ / 0-)
    Recommended by:
    4Freedom

    Is to talk about fiscal sanity, being an adult, paying your bills, and cleaning up the Reps mess.

  •  Middle Class tax breaks (8+ / 0-)

    Look at the limits on the Child Care Credit and Student Loan interest deduction.

    In this world, who only pays $3000 a year per child for day care, and who only pays $2500 a year in student loan interest?

    While the IRA contribution limits and Estate Tax Exmeptions keep increasing, the middle class deductions stay stagnant.

    But who should be surprised by this?

    You're either for spying on American citizens or you are not.

    by CVDem on Fri Jul 14, 2006 at 06:26:45 AM PDT

  •  Equity sales tax. (3+ / 0-)

    It will never fly but...

    The accounting nightmare implied is real but...

    (and did I mention it'll never fly?...)

    That said.

    We pay sales tax on just about everything we buy, except food.  Why doesn't the investor class pay sales tax when buying stock?  It will be argued that it's "double taxation" and I'd argue back that double taxation happens all the time, MOSTLY impacting the lower and working classes.  And other forms of investment are "double" taxed - when one buys a painting, or gems, etc. a sales tax is paid at the point of purchase and a CG tax is paid at the point of sale (depending upon it's increase in value).  The sales tax is the single most regressive tax around, yes?  So why is the investor class exempt from sales tax on the purchase of their equities?

    Everyday billions of shares are bought and sold.  A miniscule tax - .001% or even .0001% - would not impact investors very much... and would raise GOBS of CASH for the public coffer.

    I know many will scoff... I say it's worth thinking about.

    "...history is a tragedy not a melodrama" - I.F. Stone

    by bigchin on Fri Jul 14, 2006 at 06:28:44 AM PDT

  •  Kill the check cashing industry (0+ / 0-)

    Although this isn't exactly "tax policy," I think that the check cashing industry is a great target.

    Here's the meme: "All Americans are entitled to 100% of their paycheck!"

    Or even better: "Eliminate the poor tax!"

    Look, I'm not poor. I have ok credit. I get my check, I deposit it in the bank. No harms, no fouls, no blood, no ambulence. Sure, I pay a few fees every once in a while, but that's peanuts.

    Now poor people have to go to a check cashing place that takes so x% of their paycheck. Why, because they are too poor to have a bank account. As far as I'm concerned, that is NOTHING but a poor tax! Jesus Christ, if I was poor, I'd rather have the company that pays me pay me in cold hard cash simply so that I can avoid the poor tax.

    I believe that this WILL resonate with Middle America--at least that part of Middle America that currently pays the poor tax (and probably doesn't vote).

    The bad news is that the check cashing industry buys off a lot of politicians.

    •  Check cashing industry (3+ / 0-)
      Recommended by:
      opinionated, KiaRioGrl79, bigchin

             Their real cash cow is the "payday loan". The APR on these things is unreal. It used to be called usury until the laws were changed to allow this form of theft from the poor.

      "Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power" -Benito Mussolini

      by happy camper on Fri Jul 14, 2006 at 07:07:38 AM PDT

      [ Parent ]

      •  Slight difference (0+ / 0-)

        I agree that the payday loan is a scam, as well as anything hucked by Gary Coleman.

        The difference is that the check cashing industry is unavoidable if you get a check and have no bank account. The payday loan is not.

        When it comes to the payday loan, I'm willing to say buyer beware. I have no problem in principle if you're legally able to make money off of the gullible and unwise--think psychic hotlines.

        •  Hmmm... (0+ / 0-)

          Having the heat turned off in winter with an infant in the house or getting a payday loan.  I think the loan can be considered 'inevitable' in that case, can't you?

          "Help us to save free conscience from the paw -- Of hireling wolves whose gospel is their maw." --John Milton

          by ohiolibrarian on Fri Jul 14, 2006 at 02:34:21 PM PDT

          [ Parent ]

  •  Buffett and Gates philathropists or tax-dodgers? (2+ / 0-)
    Recommended by:
    redfish, bigchin

    By setting up charities with their billions, Gates and Buffett have sheltered much of their wealth so they can direct its use. I wonder if this is a giant tax dodge to give them control over its distribution rather than having the government use it through taxation.

    The people must think because the people alone can act. Henry George

    by 4Freedom on Fri Jul 14, 2006 at 06:35:33 AM PDT

    •  What can be done there is to increase the (0+ / 0-)

      amount private foundations pay out each year from 5% to say 10%.

      This would give the government more "bang for the buck" and make the tax break afforded to the donor of greater social utility.

      "When the going gets weird, the weird turn pro" - Hunter S. Thompson (RIP)

      by redfish on Fri Jul 14, 2006 at 06:37:54 AM PDT

      [ Parent ]

    •  An entire diary could be written about (0+ / 0-)

      philanthropy and what it implies.  It's so easy to assume it is only a wonderful thing, but one need look no further than, say, the United Way, to see the potential that great wads of cash have for misallocation and cronyism.... not to mention your concerns of tax dodging... good point!

      "...history is a tragedy not a melodrama" - I.F. Stone

      by bigchin on Fri Jul 14, 2006 at 06:40:12 AM PDT

      [ Parent ]

  •  The problem with philanthropy (3+ / 0-)
    Recommended by:
    opinionated, redfish, grayslady

    is that individuals are deciding what is in the common good. Lots of money goes into disease research, art and music, and other attractive charities. No one donates money for infrastructure, septic repair, and other necessary, but not sexy, services.

  •  Some thoughts on taxes (3+ / 0-)
    Recommended by:
    Rayne, KiaRioGrl79, happy camper

    I think the big mistake in tax policy has been the lack of coordination between Federal and State tax policies. Forgetting corporate taxes for a moment, take a look at how housing is treated. We have a low income tax rate here in Illinois, but our property taxes are staggering. Inflation, and the rush to real estate as one of the few reliable investments, has meant that assessments are at an all-time high. I pay more in property taxes right now than I do in income taxes. Meanwhile, what do I receive in return from the State of Illinois? Good roads? Think again. Health care? That's a laugh. Two-thirds of my property taxes go for local schools, most of which are administratively bloated beyond belief. The tax deduction for my real estate taxes is paltry, so what am I really gaining? I'd rather see my income tax go up enough to pay for single-payer health care and see my property taxes go down substantially. Unfortunately, tax policies don't seem to relate to real life. Why does the cost for educating our children fall primarily on the states while health care is viewed as a national issue? Why aren't they both national issues? Whatever tax policy is arrived at, IMO it needs to take an honest look at national objectives, real wages, and real inflation and then come up with a plan that minimizes taxes for the basics of food, clothing and shelter while distributing taxes for other items proportionately.

    •  asdf (3+ / 0-)
      Recommended by:
      Rayne, grayslady, KiaRioGrl79

      I think that's a really interesting idea.  But, you run into a problem with federalism there that may be unresolvable.

      "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

      by bonddad on Fri Jul 14, 2006 at 07:01:42 AM PDT

      [ Parent ]

      •  On the other hand... (1+ / 0-)
        Recommended by:
        grayslady

        We don't exactly have equal protection under the law as citizens of different states.

        ;-)

      •  There's a way to address just about any issue (0+ / 0-)

        if we care enough about addressing it. We already have the Federal government butting its nose into education, for example, by virtue of NCLB. But as the various school districts are finding out, instead of helping out financially, it's actually costing them more to comply than it's worth. So guess who ends up paying for these bright ideas by the Feds? We, the local taxpayers. No one thinks these things through anymore. That's why the states have to be active participants in whatever Federal decisions are arrived at, IMHO.

  •  Questions (0+ / 0-)
    1. Did the recently taughted mid-session review carry the assumption that the current tax cuts expire in 2010?
    1. Did anyone else notice the 'Personal Accounts' line item on table S-7?
    1. Also from table S-7, it seems they are now lowering their estimates for off-budget surpluses after 2007 Table (from prior published estimates).  Look especially at table S-8. Why the sharp drop in estimated SS revenue for 2007-2009? They are projecting the same thing for Excise taxes. Is this monkey business to set-up 2008 to look better (by using this as the new benchmark to compare in 2008 and claim how much better things are)?
    1. 'Off-Budget' is the current Social Security surplus plus any Postal Service surplus, right?
    1. Are there any assumptions about the estate tax here?
    1. Did anyone notice there was only $50B for the war on terror in 2008 and zero dollars after that, while the CBO is estimating much larger costs through 2016?

    Thanks!

  •  One thing the republican congress did that (5+ / 0-)

    was really bad was the dog and pony show they put on a few years about IRS abuses.  That really hurt the enforcement side of the equation.  It made some really dedicated public servants look bad and hurt morale something awful.

    We need enforcement because it is human nature to avoid paying taxes.

    Dems need to emphasize the importance of making sure everybody pays their fair share under existing laws.

    "When the going gets weird, the weird turn pro" - Hunter S. Thompson (RIP)

    by redfish on Fri Jul 14, 2006 at 07:15:33 AM PDT

  •  This is more a refutation of the value of the (1+ / 0-)
    Recommended by:
    Bob Guyer

    Laffer curve as being a reliable representation of economic phenomena than it is a framing of tax policy.

    This is a Democratic blog; I'm not sure of the utility of refuting something we all think lacks credibility anymore than I think it is useful to give play to the view of Irak war supporters by examining, once again, their claims about the presence of WMDs in that country. The train should have left the station, I would have thought, for Democrats on both the Laffer curve and WMDs in Irak; why go back and revisit silly claims again?

    If it is for framing of tax policy, I would strongly suggest beginning from the frame of a fundamentally supply-side view of taxation, even if unwitting. Even if the point if to refute the Laffer curve in present US circumstance (all the while accepting its validitiy in other circumstance, including previously in the US), the framing is all wrong here. We see the regressive supply-side frame front and center, and we see not once the word progressive.

    And in so framing the issue of taxation, I would suggest that Bonddad is, unwittingly or not, advancing an essentially GOP or soft-GOP frame here. Nothing really Democratic here at all other than a fairly oblique, though sympathetic, view of  tax policy during the Clinton administration.

    What is Democratic? Universal health care, for starters. A comprehensive platform of affordable housing for another: no child should be homeless. Which will cost a bit of money. And will require tax increases. The discussion should be around who should fairly pay for government, and not whether or not the Laffer curve is a valid frame. For even if you hold that it isn't, by giving it this much credence, this much analytical play, as Bonddad has, you totally undermine the importance of fairness in taxation.

    And what are the four principles of taxation to respect? Fairness, administrative simplicity, economic neutrality and transparency.

    This discussion advances none of these principles, and does so eschewing an explicitly Democratic frame imho.

    Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

    by redstar on Fri Jul 14, 2006 at 07:20:23 AM PDT

    •  We need a transition from Republican frame (4+ / 0-)

      to a progressive frame for taxation. I think talking about taxes as if seperate from the purpose of taxation feeds into the problem we have now. Republicans have split the tax, from the purpose, and then they attack the tax side as if it stands alone, which it doesn't.

      I think we get back to the fair, simple, transparent, neutral once we reconnect taxes with the legitimate purpose's they serve. Taxes are a means to an end. I think we should reframe taxes as public investment in physical and economic security, and support for achievment of American excellence, my comments to bonddad's diary have some more details.

      The Republican frame and the way economists speak of the economy and taxes communicates an inherent belief system that favors the current system and the interests of the economic elites. It is as if their viewpoint is the economy, well I don't want to start there either. I think that is what you are picking up and opposing.

      •  Maybe that explains why people who 'hate taxes' (0+ / 0-)

        don't seem to care much what is done with the money once taxed. Their whole mind is fixed on "keeping their  money in their pocket." Once it's gone, it doesn't seem to matter whether it goes to build a needed road or a 'Road to Nowhere.'

        "Help us to save free conscience from the paw -- Of hireling wolves whose gospel is their maw." --John Milton

        by ohiolibrarian on Fri Jul 14, 2006 at 02:50:53 PM PDT

        [ Parent ]

  •  Tax The Rich, Give Back to the Working Class (1+ / 0-)
    Recommended by:
    redstar

    What is hard to understand about that formula?

    Al Gore received more votes, Ohio was stolen. This isn't a democracy.

    by Deadicated Marxist on Fri Jul 14, 2006 at 07:29:56 AM PDT

    •  Judging from the basic tone of responses here, (1+ / 0-)
      Recommended by:
      bigchin

      you gotta wonder how progressive self-described "Democrats" out there really are.

      I mean, this is the most fundamentally economic diary (and one I usually enjoy) on the most influential Democratic blog in America and yet, fairness through "a heavy progressive or graduated income tax" is nowhere to be found in a discussion of the proper tax policy for the party.

      If the Democratic party has any left-leaning soul remaining, it'd best start here.

      Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

      by redstar on Fri Jul 14, 2006 at 07:56:59 AM PDT

      [ Parent ]

      •  I think it is understood that we (0+ / 0-)

        would all like a progressive tax structure.

        "When the going gets weird, the weird turn pro" - Hunter S. Thompson (RIP)

        by redfish on Fri Jul 14, 2006 at 08:19:57 AM PDT

        [ Parent ]

        •  I think that we might safely assume that folks (0+ / 0-)

          are vaguely in favor of progressive taxation. 'Course, on a Democratic site in a discussion explicitly about taxation, I'm thinking it'd be more comforting to actually see the word used, lest we start thinking certain folks think it's a dirty word.

          This being said, Bonddad doesn't actually use the term, though he does employ a rather explicitly supply-side frame to set up the tax discussion.

          Further, bondded, above in the comments, indicates that the "sweet spot" of taxation on upper income folks is 40%.

          Given that those strata currently (2004) pay about 35% of their income in various federal taxes (compared to roughly 60% in France, which is especially progressive at the highest end of the income strata), I'd say 40% isn't saying much. It certainly won't cover all the other things Democrats say are important, like universal health care, education and housing investments.

          Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

          by redstar on Fri Jul 14, 2006 at 08:48:35 AM PDT

          [ Parent ]

          •  I think the debate is at what levels the higher (0+ / 0-)

            rates should kick in (at least among dems).

            When I used to work for a silk stalking law firm I handled the estate of a guy who earned $30m in the first six months after he died.  I don't think there's much debate that a high rate is appropriate there.

            The more difficult issue is say a guy who earns $100k a year, that's not as much money as it used to be, he's hardly filthy rich.

            "When the going gets weird, the weird turn pro" - Hunter S. Thompson (RIP)

            by redfish on Fri Jul 14, 2006 at 09:23:48 AM PDT

            [ Parent ]

            •  I don't disagree at all. (3+ / 0-)

              I would only point out that simply raising the overall tax burden on the 99.99 percentile income strata and above to French levels (that's 62% all-in burden on 14,400 tax payers earning on average slightly more than $18M/year and paying just under 35% today) would raise $70Bn/year! From just over 14K taxpayers.

              Mimicking France's progressivity from the 99th percentile on up and leaving it intact for everyone else (that 1,440,000 tax payers earning on average sligtly more than $1M/year, with no one earning less than 300K/year getting hit) would raise over $200bn/year.

              That's real money. I would say it's a starting point.

              Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

              by redstar on Fri Jul 14, 2006 at 10:15:55 AM PDT

              [ Parent ]

              •  Helpful and politically viable (0+ / 0-)

                A progressive tax on income should not be marketed as a punishment of the rich, the rich are bad, the poor are good slant. Progressivity should be marketed as an investment by the rich back into the overall system that benefits them more than anyone else.

          •  Scandanavian Tax Structures (1+ / 0-)
            Recommended by:
            redstar

            Norway and Finnish taxes can hit 60% and higher.  And having spent some time in Finland, I can't say that's a bad thing from either a societial or economical (ie, business) view.  

            Most European cities seem to have many more "mom and pop" run businesses that cover their biggest cities.  I don't see a problem with that.  In fact, it looks a lot more democratic than what we have here.  

            The biggest X factor is universal healthcare.  It's high time we tax the rich, implement that system, dismantle our over-priced private health companies, and watch the market grow (as well as our chances for independent business success and successful swooning of foreign auto manufactures).  

            But then again, I guess the rich would have to truly care about us before they would be forced do pay such taxes.  That is, unless we just cared about ourselves and stopped being fooled into voting for Republicans.  They we could force them to eat the shit they serve us.  

            Al Gore received more votes, Ohio was stolen. This isn't a democracy.

            by Deadicated Marxist on Fri Jul 14, 2006 at 01:33:22 PM PDT

            [ Parent ]

            •  Cost of universal health care not that high (0+ / 0-)

              Administrative costs and profit are around 14% using our way of financing health care. the rest of the world averages about 1% admin costs in countries (all except the U.S.) that have some form of single payer financing. That brings down the cost a lot.

              Additionally, compared to 21 other industrialized nations, we have the highest cost by double the second highest cost for health care, and our system delivers outcomes that are in the middle of the pack.

              The private market model of health care financing produces high cost, poor quality health care. When Adam Smith wrote Wealth of Nations, health care as we know it did not exist, and his model doesn't address it well.

      •  The art of the possible... (0+ / 0-)

        We're also proposing things that we think are at least vaguely achievable in the near term.  And a progressive tax structure that tops out at around 40 to 45% is probably about the maximum that is achievable without generating a massive public backlash.  Remember, for the past thirty years, the American public has only been exposed to the Republican meme that taxes are too high, taxes are evil, etc.  You don't change that overnight.

        Political Compass: -6.75, -3.08

        by TexasTom on Fri Jul 14, 2006 at 09:51:33 PM PDT

        [ Parent ]

  •  Invest in America's future (3+ / 0-)
    Recommended by:
    MontanaMaven, ohiolibrarian, redstar

    Divorcing taxation from the purpose of taxation has been a successful Republican PR ploy. They split taxation from purpose, public investment in systems that the private sector isn't capable of creating through busniness activity of individual initiative.

    First the Democratic party needs to re-connect taxation and purpose. Invest in America is a good frame to start with. We need to shift our investment portfolio from investing in non productive investments (like debt) to productive investmentments that most effectively benefit our country.

    Our first  survival related goals of investing in America should be to establish adequate physical and economic security for our population. The next investment should be in supporting American achievment of excelence.

    Keeping it simple on physical and economic security there are a few points to make.

    Investment in eliminating debt is the starting point for becoming able to invest positively in both security and excellence.

    Here we need to raise taxes and cut spending that does not contribute to physical and economic security and encouraging excellence. Once we are on the right track toward a ballanced budget then we can invest to shore up weak spots in physical and economic security.

    Capping the higher income tax rate at the sweet spot 40% or a little higher seems reasonable. Reinstating the inheritance tax on intergenerational wealth transfer over a certian threshold also seems reasonable. Returning income tax rates to the pre Bush tax cuts for the income brackets over 200,000 also seems reasonable.

    On the investment in excellence side we should invest in an excellent environment. The whole economy runs on our ability to sustainably produce more food per unit of labor than a unit of labor needs to produce for survial. The health of our environment is the underlying factor that makes that possible. To keep our environment strong we need to make a transition from an oil based industrial economy to a non polluting energy based economy.

    One taxation and one spending transfer initiative should be proposed. We need to put our non productive over investment in offensive military capacity to better use by transfering that spending to developing an energy infrastructure for non oil based economy of the future. 5% every 2 years until we hit a 30% reduction in overall military spending that is transferred to developing energy excellence would do the trick. The taxation initiative would be to start a tax on energy related pollution and invest that money in developing energy excellence. This would help the market reflect the true cost of highly polluting energy systems by incorporating the negative externalities in the market price of energy. It would also provide more revenue for investment in developing a clean energy infrastructure that supports the development of American energy excellence.

    In his book, plan B 2.0, Lester Brown, advocates moving toward increasing taxation of pollution and decreasing income tax in equal proportion until the market reflects the true cost of polluting energy. I don't think this idea is a viable political platform now. But it could be used as a new idea that creates conceptual space for looking at different ways of investing in environmental security and energy excellence.

    We should support these tax policy changes with 3 points. We must invest in American security and excellence, ballancing our budget is step one, Republicans have badly mismanaged our investment in America and harmed our security and ability to achieve excellence.

    •  Spot on! (0+ / 0-)

      William Greider in "The Soul of Capitalism", Gar Alporovitz in "America Beyond Capitalism" and Francis Moore Lappe in "Democracy's Edge" are all tallking about eventually getting rid of the old 'redistribution of wealth" after the fact set up i.e. taxation and finding new ways of collecting money.  But also giving each child something like a baby bond when they are born which increases every year until they are 18.  Then they can use that capital to invest in a business or go to college.  Rather than using our tax money just at the end of our lives in the form of Social Security, we start everybody off even at the starting line.

      "It's time to rein in the rascals and rotate the crop"

      by MontanaMaven on Fri Jul 14, 2006 at 08:07:38 AM PDT

      [ Parent ]

    •  Recommend with a caveat: (0+ / 0-)

      Debt is not in and of itself "unproductive" or necessarily bad. Depends on what you use the proceeds for in terms of investment.

      By the same token, paying down debt, depending on your cash flows, is not necessarly the wisest investment choice, if by paying down the debt over-quickly you impinge on the ability to invest in projects which pay back at higher rates of return than the marginal cost of debt you are retiring.

      You are spot on in terms of the posture Democrats should be taking with respect to taxes.

      Freedom is merely privilege extended unless enjoyed by one and all -9.50, -5.74

      by redstar on Fri Jul 14, 2006 at 08:51:53 AM PDT

      [ Parent ]

      •  I agree, debt not bad if invested well (1+ / 0-)
        Recommended by:
        redstar

        but our current investments that are exaserbating the federal budget deficit, particularly military overspending (including the Iraq war), and unnecessary income tax cuts for the top 5% are poor investments.

        If we were borrowing and spending on building a non polluting energy infrastructure that could facilitate a transition away from oil the economic return would be tremendous. The private sector would do what they do best, develop product to fit into the new infrastructure, the same way cars are built to fit on highways. The multiplier effect of this on our economy would be similar to creating the interstate highway system. Additionally it would mitigate the effects of global warming. This alone would save a tremendous amount of money and human suffering we are causing by not changing course in our energy system.

        I agree that we can't choke out the other productive spending that we must maintain just to get rid of debt. But we have to increase revenue (taxation in some form) along with some spending reductions due to more efficient spending to help maintain these valuable investments and make a dent in the debt.

  •  Okay, I'm NOT an economist but here goes (0+ / 0-)

    I agree with many in the thread about the need to address marginal income tax rates - probably restoring them back to pre-2001 levels. I'm also interested in ideas like limiting exemptions beyond certain amounts. Of course, something has to be done about overall exemptions themselves because however much we like certain tax credits, etc - they do add to the complexity - some kind of integrated/simplified tax credit system that would not increase the burden on lower-to-middle income families and would reduce the loopholes/exemptions at the higher end should be exlpored, I think.

    I would also implement estate tax reform probably along the lines of the proposal from United for a Fair Economy that I think would limit the exemptions to what they are currently ($3.5 million for individuals, $7.0 million for couples) and make the top rate 45%, I think. Though I read an interesting proposal recently that would tax ALL transfers of wealth at the marginal income tax rate of the recipient (the income level of the recipient including the income from the wealth transfer) - perhaps this is along the lines of establishing marginal tax rates that apply to all forms of income regardless of how the income was generated.

    I'm also in favor of lifting the cap on FICA taxes because Social Security is a common good program that all people should pay into regardless of income to insure a safety net for ALL.

    Now, for corporate taxes - this is an area where I know very little, but I'm in favor of creating incentive related taxes to encourage more responsible corporate behavior - i.e. decreasing tax rates for companies that provide living wages for their employees, embrace responsible environmental practices, reduce offshoring etc. I don't know what the threshold at either in should be and perhaps such an approach would create too complicated a system, but it seems that in addition to regulations we should establish rewards and penalties in the tax code for companies that do the right thing. I dunno - this isn't fleshed out too well in my head yet.

    I do NOT like sales taxes and consumption taxes, except perhaps in the case of "luxury" items or large purchases because they distort the amount of income is taxed such that a much lower percentage of income for higher income earners is taxed than for lower-income earners. (If you only make $25,000 per year, almost all of that income is going to be spent, not saved therefore nearly 100% of your income would be taxed. Whereas at $1 million per year, a lot more can be saved and exempt from taxation, thus compounding wealth (increasing income inequality) until the savings are spent.

    (whew) I can't really give much more in detail, but those are my starting points.

    •  Some kind of penalty for companies (0+ / 0-)

      whose wage gap is really huge?  Tie the rate to the percentage difference between rank and file wages and CEO/management wages. The bigger the gap, the higher the tax rate. A rising CEO lifts all boats, you know.

      Well, I can dream can't I?

      "Help us to save free conscience from the paw -- Of hireling wolves whose gospel is their maw." --John Milton

      by ohiolibrarian on Fri Jul 14, 2006 at 03:09:59 PM PDT

      [ Parent ]

  •  If you want to have a tax policy that... (1+ / 0-)
    Recommended by:
    blue jersey mom

    ...doesn't favor the rich, and does give everyone a cut, the best sense is to do more with the allowances.

    How 'bout a larger exemption allowance?  More people on the bottom don't have to pay an income tax, and the rich get a cut, too.  Keep the rates the same.  Or better yet roll back recent cuts for the rich.  They seemed to be doing all right during the Clinton years with the previous rates.

    Lower income people pay more in payroll tax than income tax.  Always focusing on income tax is a mistake.  How about exempting the first $5 or $20k from FICA tax, and adjusting the top end accordingly to compensate?

    Just a coupla thoughts.

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