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This is my second diary for this project. From this point on, I will simply use the tag "Project Omaha". My thanks to Angie in WA State for that suggestion.

The title might make some Kossacks wince, but I'm perfectly serious. When we make it truly "Our" tax it will be a formidable weapon for fiscal sanity. Find out why I believe so beneath the fold.

In this project I will not spend much time arguing for progressivity in our income tax; that would be preaching to the choir. Kossacks might argue about how progressive it should be, but not whether. The federal income tax is a progressive tax, and that's a good thing. But it's too complex, and the rich have found ways to accommodate themselves to its intricacies.

Have you ever wondered why it is labyrinthine in its complexity? Don't you find it strange that payroll taxes, which are designed to tax the poor and middle classes, are starkly simple, while the income tax,  designed to preferentially tax the rich, is stupefyingly complex? Do you get the impression that the loopholes were designed with your welfare in mind? How many middle class folks can hire an expert to structure their financial affairs to best take advantage of the complexity? Are you so naive as to believe the tax code was designed to insure fairness for all?

Enough of the rhetorical questions: you already know the answers. If you have half a brain, you know that you're being had. If the rich were being hurt by the complexity, you can bet that the income tax would be as simple as the payroll tax. They aren't, and it isn't.

Let's consider two concrete examples. First, consider a middle class family of four filing jointly with a gross income of $65,000. They own a modest home with a mortgage of $135,000 on which the pay annual interest of $9,000. Since they always have the option of taking the standard deduction of $11,600, the mortgage interest deduction is meaningless unless their total deductions exceed $11,600. But even if they have lots of other deductions, the most that the mortgage interest deduction can save them is 15% (their marginal rate) of $9,000, or $1350, roughly 2% of their gross income.

Now consider a wealthy family of four filing jointly with a gross income of $650,000. They own a very nice home with a mortgage of $1,350,000 on which the pay annual interest of $90,000. Even if they have no other deductions whatever, The mortgage interest deduction saves them $27,440, or about 4.2% of their gross income. Be assured, gentle reader, that they have plenty of other deductions.

The comparison is this: the middle class family gets a tax benefit ranging from 0% of gross income (when their total deductions are less than $11,600) up to a maximum of 2.08% of gross income. The rich family gets a tax benefit of at least 4.22% of gross income (when they have no other itemized deductions) up to 4.85% of gross income. With a single deduction, the progressivity has been seriously eroded.

The net result is that the mortgage interest deduction causes the middle class to carry a larger part of the burden than they would without it. If we did away with this deduction, and scaled down tax rates to make the transaction revenue neutral, the middle class taxpayer would see a tax reduction, and the rich taxpayer would see a tax increase. It is ironic that the standard deduction and the mortgage interest deduction, while ostensibly there to provide us with a measure of tax relief, both actually raise our share of the burden.  

A deduction is only as valuable as your marginal tax rate. A deduction that saves the taxpayer 15% is not as valuable as a deduction that saves 35%. This means that the poor and middle classes are disadvantaged by all tax deductions. Deductions always favor the rich. Whatever advantage the poor and middle class get is always less than the benefit the rich get. And since we intend to make the tax code more progressive than it is now, this effect would be magnified. Income tax deductions are not our friend.

It would therefore be in our interest to have an income tax code with no deductions at all. If this seems radical, reflect that the principle works perfectly well for payroll taxes. Payroll taxes are models of efficiency, but not fairness. (We'll have more to say about payroll taxes in a  later diary; I don't expect it to be controversial.)

There is one topic that a sane tax policy must address: capital formation. It would be foolish to tax the rich so heavily that there is not enough capital to invest in growth. That would be equivalent to eating the seed corn. On the other hand, a tax policy that enables the rich to get richer at the expense of everybody else is equally foolish. We don't need more seed corn than we can plant.

So I would propose that some percentage of household income be permitted to be sheltered from immediate taxation, much like we do for today's IRA. How much? We could start with 50% and adjust upward or downward, depending on whether we were raising enough capital to sustain growth. If the wealthy class were still getting wealthier, we should raise the upper marginal rates. We should aim for an equilibrium in which all income groups have the same relative chance for prosperity. There are those on the right who would call this class warfare. I call it equal opportunity.

It could work like this: Net contributions a qualified investment account (QIA) would be tax exempt. Net withdrawals would be taxed as income. The only securities that a QIA could hold would be securities issued by corporations involved in producing goods and services, or bonds issued by governments, or cash. Also permitted would be mutual funds or closed end funds holding only these securities. Investments not permitted would include derivatives, options, commodities, royalty trusts, hedge funds, short sales and the like. These would be legal in a taxable investment account (TIA) but not in a QIA.  

Income would be everything that comes in, wages, tips, bonuses, stock options exercised, dividends, capital gains, country club memberships, company cars, whatever the employer provides that has monetary value.

I suggest we use income deciles, as the boundaries for ten marginal rates. The rate for each decile would be determined by revenue needs. Does anybody here have a simple way to get a ballpark estimate of total federal revenue given the rates for each decile?  

We should get rid of this monster forever. Define income, publish the tax tables, and walk away. We should somehow forbid Congress to tinker with it; Congress is not good at tinkering. No deductions of any kind. IRS would still have some regulations, for example to define the monetary value of a company car. They would still have a few forms, but very few. For most people, filing a tax return would a 15 minute task. There would be no reason to scour the tax code for obscure deductions; they wouldn't exist.

Assuming that corporations would not be taxed (a discussion for a future diary, and perhaps a contentious one), the rewards for scrapping the tax code would be impressive indeed. Experts estimate that anywhere from 2 to 5% of GDP is wasted on nonproductive tax activity. In technical terms, we are pissing away half a trillion dollars a year, give or take a couple hundred billion. A few hundred billion here, a few hundred billion there—pretty soon you're talking real money.

I realize that there are undoubtedly many more income tax topics to be considered. For example, why do we have options such as filing individually, filing separately and head of household? Do these serve a purpose, or are they just an added complication to serve the purposes of the rich? (Frankly, I am ignorant, but I have my suspicions.) Is there a compelling argument for retaining the charitable donation deduction? I don't think so, but this could be a lively discussion, and I could easily be persuaded otherwise.

What I hope to accomplish with this diary is to define our vision for the ideal income tax. I know that what I have argued above is just a start. I don't have all the right answers; neither do you. But perhaps between us--who knows?

Old business

In the comments to “An Ex-Republican Tries to Make Amends”, a Kossack and I have had an extended disagreement on the wisdom of certain excise taxes frequently referred to as sin taxes. Please take a moment to weigh in on this issue. You might want to give this short Wiki article a glance. I advocate dropping all of them because they are regressive. I will (perhaps with slight reluctance) adopt and endorse the majority view in the Omaha project. Keep in mind that all Federal excise taxes only raise 2% of federal revenue, so the question is mainly one of principle. (I have omitted exise taxes that I feel are non-controversial.)  

Originally posted to Tim DeLaney on Sun Nov 13, 2011 at 03:01 PM PST.

Also republished by Community Spotlight and The Royal Manticoran Rangers.

Poll

Which of the following excise taxes do you favor keeping?

9%9 votes
32%30 votes
15%14 votes
1%1 votes
27%26 votes
13%13 votes

| 93 votes | Vote | Results

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Comment Preferences

  •  Poll (6+ / 0-)

    I now realize (newbie error) that only one of the poll choices can be selected, and that "none of the above" should have been included. Please ignore the poll; I'll try to reframe it in the next diary.

    Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

    by Tim DeLaney on Sun Nov 13, 2011 at 03:17:44 PM PST

  •  Won't somebody think of all those poor (4+ / 0-)

    tax specialists who would become unemployed if the tax code were so simplified?

    Because I would love to quit paying my guy hundreds of dollars a year to find obscure business deductions.

    You gave me some good ideas to think about.  


    Republicans 2012

    Keeping Millions Out of Work
    to Put One Man Out of a Job

    by smileycreek on Sun Nov 13, 2011 at 03:23:56 PM PST

  •  Well, I voted for alcohol taxes... (6+ / 0-)

    ...because that way we can still have the option of buying alcoholic beverages...

    Tobacco taxes?  I'm for those too.  It kills.  The money taxed on cigs goes to good thing.

    Gasoline taxes?  Yup...for those too.  The money taxed on gas goes to good things.

    Telephone?  Well...also goes for good things.

    Tanning salons?  Not really, but it was a "response" to Boehner being such a d*ck.

    Gambling?  Gamblers have NO idea there are any taxes at all on their behavior.  The mafia and American Natives that have their gambling taxed?  They don't care...whatever taxes they have to pay determine the "looseness" of the slot machines.

    "Ignorance is bliss only for the ignorant. The rest of us must suffer the consequences."

    by paradise50 on Sun Nov 13, 2011 at 03:27:09 PM PST

    •  Re. gambling taxes (2+ / 0-)
      Recommended by:
      Tim DeLaney, Calamity Jean

      "investing" is a polite word for gambling. When you get down to it, each and every investor is making a bet that their investment will ultimately increase in value.  In that light, we should take advantage of the fact that the religious wingnuts love the notion of "sin" taxes, and so we should be pushing taxes on speculative Wall St. "investment" schemes clothed in the garb of a Gambling Tax.

      Al Qeada is a faith-based initiative.

      by drewfromct on Mon Nov 14, 2011 at 11:30:21 AM PST

      [ Parent ]

    •  I oppose gasoline tax (2+ / 0-)
      Recommended by:
      Tim DeLaney, paradise50

      Only because it is a necessity for many and any consumption tax is regressive by nature. For the same reason, I oppose sales taxes on many items.

      -7.5 -7.28, I refuse to believe corporations are people until Texas executes one.

      by Blueslide on Tue Nov 15, 2011 at 07:53:14 AM PST

      [ Parent ]

  •  I am on a learning curve with this very issue (8+ / 0-)

    but I find this easy to read, and it makes some good points. I never thought I'd consider that my mortgage deduction does so little for me. And, the current myth that you shouldn't pay off your mortgage early..."you don't want to lose that tax deduction..." - well, I don't believe that one anyway!

    And, I can certainly agree with this...

    We should aim for an equilibrium in which all income groups have the same relative chance for prosperity. There are those on the right who would call this class warfare. I call it equal opportunity.

    "When words are both true and kind they can change our world." -- Buddha

    by mimi2three on Sun Nov 13, 2011 at 03:31:36 PM PST

    •  the MID is a great enabler. (1+ / 0-)
      Recommended by:
      drewfromct

      As noted, there are lots of random deductions lying around.  High medical bills, investment losses, etc.

      Almost none of these alone would ever surpass the standard deduction.  Add them to the MID, and they are much more effective.

      -7.75 -4.67

      "Freedom's just another word for nothing left to lose."

      There are no Christians in foxholes.

      by Odysseus on Mon Nov 14, 2011 at 04:15:25 AM PST

      [ Parent ]

    •  Me too (2+ / 0-)
      Recommended by:
      Tim DeLaney, Odysseus
      And, the current myth that you shouldn't pay off your mortgage early..."you don't want to lose that tax deduction..." - well, I don't believe that one anyway!

      That myth is maybe justifiable in a rent vs. own comparison, not a mortgage vs. own free and clear.

      I always try to look at thing in terms of how much they cost me, not just my tax 'burden'. Why? I want to keep my money for me, not just keep it away from the IRS.

      At a certain point, it makes absolutely NO sense to pay , say $10k per year in interest to save $1k in taxes.

      So, we pay extra principle every month.

      "No one earns $100 million. You steal $100 million." --Fran Lebowitz

      by SNFinVA on Mon Nov 14, 2011 at 01:32:41 PM PST

      [ Parent ]

  •  The Purpose of Progressive Taxation is to Prevent (8+ / 0-)

    the rich from getting too rich too fast, severely enough that they cannot accumulate most of society's wealth, and do compress the entire upper half of compensations by increasing marginal rates which has a number of crucial effects including preventing a few high return sectors from dominating the entire economy as thousands of merely-profitable sectors wither for lack of investment and talent.

    That's where we have to start the discussion. The economy was only good for the American masses for one 50-60 year stretch of our history, and only stable and safe for both Americans and the entire world during that same period. And the reason is that the progressivity was so steep that it accomplished those goals.

    Both parties have become so rightwing economically that they now oppose these principles, and since half to 2/3 of the population are too young to have seen them in their adult years working, probably a majority of voters oppose them as well.

    They're still the only way we ever made the place safe and stable.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sun Nov 13, 2011 at 03:38:08 PM PST

    •  ...simple...easy...too easy... (5+ / 0-)

      ...a transaction tax...

      I've done the math in the past.  A "transaction tax" of less that two percent would have gotten the Govm'nt more revenue that our current tax code (that was 7 years ago),

      Any transaction (ceptin' food purchases) would have a transaction tax.  Move $1million from one account to another (not taxed at all)...transaction tax.  Buy a ginormous boat...buy some Duracell batteries...transaction tax.

      Any time money changes hands, purchases anything or is moved from account to account...transaction tax.

      So simple...won't possibly happen.

      "Ignorance is bliss only for the ignorant. The rest of us must suffer the consequences."

      by paradise50 on Sun Nov 13, 2011 at 04:08:39 PM PST

      [ Parent ]

      •  Would a transaction tax be progressive? (3+ / 0-)

        That is to say, who would bear the burden of a transaction tax?

        For the sake of argument, I'd grant that such a tax might produce the revenue Gov't requires, but would such a tax fall more heavily upon the rich rather than the poor, or the other way around? How would this differ in principle from a national sales tax such as FairTax?

        My concern is that the wealthy and the clever could structure their transactions to avoid taxation. Color me cynical.

        Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

        by Tim DeLaney on Sun Nov 13, 2011 at 04:26:25 PM PST

        [ Parent ]

        •  A transaction tax would definitely... (5+ / 0-)

          ...be progressive (the more money that gets used in transactions...the more the tax).

          A national sales tax is totally regressive.  It's a flat tax on "stuff bought."  People who spend the highest amount of the money they have buying stuff are the poor, then the almost poor and then the middle class...and on up.

          The whole friggin' point of a transaction tax is NO LOOP HOLES.  And no, I don't color you cynical.  But, a transaction tax would be a very small tax on money that flows through a transaction.

          Actually, think about it...no, ponder...It is REALLY the fairest tax of all.  The more money anyone has to be used in a transaction...the SAME the same rate they are taxed as anyone else uses money in a transaction.

          "Ignorance is bliss only for the ignorant. The rest of us must suffer the consequences."

          by paradise50 on Sun Nov 13, 2011 at 05:35:33 PM PST

          [ Parent ]

          •  I am still (2+ / 0-)
            Recommended by:
            johnny wurster, Calamity Jean

            trying to get my mind wrapped around this idea. I am just as surely in favor of progressive taxes as I am opposed to regressive ones.

            Let's say I go shopping, buy a pair of shoes, and swipe my card to pay the bill, say, $100.  Is that a transaction? (I would think so.) If so, How would the transaction tax differ from an ordinary sales tax?

            There must be something I'm not getting. Say I paid a transaction tax of $1. The guy behind me buys two pairs of shoes and pays $200. does he pay a $2 tax? Something else? I don't see how this tax can be made progressive.

            Let's say I buy a microwave oven and discover when I get it home that it won't fit in my cupboard. So I return it, and they credit my credit card account. Two transactions? None?

            Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

            by Tim DeLaney on Mon Nov 14, 2011 at 12:42:17 AM PST

            [ Parent ]

            •  You're getting it. (2+ / 0-)
              Recommended by:
              Odysseus, Tim DeLaney

              The other commenter is just confused.  The transaction tax is "progressive" in a sense, in that poor people aren't engaging in many arbitrage trading strategies that require high frequency trading, but it's not progressive in the sense that the rate increases w/ income. (which is what "progressive tax" means)

              •  Nope...you're confused... (0+ / 0-)

                ...a transaction tax is a tax on ANY money used (moves from one hand to another...or one account to another).

                The richest folks have no social security tax on after a bit over $100 grand, really.  There is NO tax on moving money from one account (say one bond fund to another).  There are TONS of ways of not paying taxes on HUGE rewards on investments.

                One reason the tax credit for renters has eliminated is 65% of it went to millionaires, since they could "legally prove" they didn't make more than $20,000 in a given year (though on paper...HUGE gains, with lots of shifting money around from account to account).

                A transaction tax isn't a tax on investments...nope.  Of course the transaction tax would be SMALL...so even the poorest folks would pay FAR LESS in taxes (sales taxes IS the biggest hit for the poor)...and the RICH would actually have to pay taxes on all their transactions...AT THE SAME RATE as everyone pays on ANY MONEY THAT MOVES.

                Nope johnny...you're confused.

                "Ignorance is bliss only for the ignorant. The rest of us must suffer the consequences."

                by paradise50 on Tue Nov 15, 2011 at 06:44:42 PM PST

                [ Parent ]

          •  Transaction tax isn't progressive. (1+ / 0-)
            Recommended by:
            Tim DeLaney

            It's a sales tax on investments.

      •  Here's the downfall in my opinion (1+ / 0-)
        Recommended by:
        Tim DeLaney

        business, small business especially become the tax man. They are then on the hook both operationally and legally to be the tax collector..  I know they do this now with payroll income tax and sales tax.  But to me that is a burden, expense, legal liability the business should not be responsible for.  After all who goes into business to be a tax collector?

        •  I'm a small business man... (0+ / 0-)

          ...the burden would be nothing other than collecting sales tax now...and there would be NO payroll taxes, or paying into EED or all the rest.

          Are you a business man?  Oh, you aren't.  Clearly.

          "Ignorance is bliss only for the ignorant. The rest of us must suffer the consequences."

          by paradise50 on Tue Nov 15, 2011 at 06:46:17 PM PST

          [ Parent ]

    •  The problem is that supply-side tax policy has (2+ / 0-)
      Recommended by:
      Tim DeLaney, paradise50

      allowed the truly rich (a.k.a. the capital class) to avoid progressive taxation.  

      What most of us refer to as the personal income tax is really the progressive marginal rates on ordinary income.   Long-term capital gains and qualified dividends are not classified as ordinary income; therefore, they are not subject to the progressive marginal rates.  The top tax rate on long-term capital gains and qualified dividends is currently 15%.  Long-term capital gains and qualified dividends are free from the FICA and Medicare taxes because FICA and Medicare are payroll taxes, not income taxes; therefore, one must work for the privilege of paying FICA and Medicare tax.

      With the above said, what is the adjusted gross income (AGI) threshold at which working couples are taxed at an effective tax rate that exceeds fifteen percent?  For tax year 2011, a working couple with a combined AGI of just seventy-five thousand dollars is taxed at an effective tax rate that exceeds fifteen percent.

      10% on the income between $0 and $16,050           =  $1,605.00
      15% on the income between $16,050 and $65,100  =  $7,357.50
      25% on the income between $65,100 and $75,000  =  $2,475.00
                                                                                      -------------
                                                                                      $11,437.50   /  $75,000.00 = 15.25%

      Now, consider that a working couple also has to pay FICA and Medicare tax on their income whereas members of the capital class do not pay one penny in FICA or Medicare tax on their capital gains or qualified dividends, and we see that the tax code is brutally unfair to workers.  The capital class is getting richer because the tax code is rigged against workers, especially high-income workers.   The GOP wants to create an America where people who are born into wealth get richer, and those who are smart and work hard get taxed into oblivion.

      The GOP has become the "Jerry Springer" party.

      by ConcernedCitizenYouBet on Tue Nov 15, 2011 at 08:39:06 AM PST

      [ Parent ]

      •  And payroll taxes add (1+ / 0-)
        Recommended by:
        paradise50

        another 14.2% of gross income to this.

        Now, consider that a working couple also has to pay FICA and Medicare tax on their income whereas members of the capital class do not pay one penny in FICA or Medicare tax on their capital gains or qualified dividends, and we see that the tax code is brutally unfair to workers.

        In my next diary, I will talk about payroll taxes.

        Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

        by Tim DeLaney on Tue Nov 15, 2011 at 09:12:55 AM PST

        [ Parent ]

        •  FICA and Medicare are 15.3% combined (1+ / 0-)
          Recommended by:
          paradise50

          The GOP has become the "Jerry Springer" party.

          by ConcernedCitizenYouBet on Tue Nov 15, 2011 at 09:21:52 AM PST

          [ Parent ]

          •  My calculation: (2+ / 0-)
            Recommended by:
            redlum jak, paradise50

            It's a minor point, but if the amount "paid" by the employer is considered part of the worker's income (as it should be), then the denominator is different.

            Let's suppose the amount taxed is $10,000. The amount that appears on his pay stub is $765, but the employer pays another $765 on his behalf. So, the amount that the worker has earned is really $10,765. The full amount of the tax is $1,530, so the rate should be quoted as 1,530 / 10,765 which is ~ 14.2%

            What is confusing about this view is that the worker's wages for income tax purposes, are still $!0,000, but his real income is $10,765.

            The bottom line: He's getting the shaft, as we all know.

            Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

            by Tim DeLaney on Tue Nov 15, 2011 at 09:43:52 AM PST

            [ Parent ]

            •  However, that calculation does not hold (2+ / 0-)
              Recommended by:
              Tim DeLaney, paradise50

              for self-employed people.  Self-employed people pay both halves of the tax; therefore, they pay $1,530 in combined FICA and Medicare tax on $10,000 in earnings.  

              With that said, can we really treat an employer's contributions to FICA and Medicare as part of an employee's taxable earnings?  If we made that leap, we have to include FUTA, SUTA, general and administrative costs, and the cost of fringe benefits to an employee's taxable earnings.

              The GOP has become the "Jerry Springer" party.

              by ConcernedCitizenYouBet on Tue Nov 15, 2011 at 11:01:14 AM PST

              [ Parent ]

              •  You are right about the self-employed (0+ / 0-)

                They get the dirty end of the stick to the tune of about 1%

                With that said, can we really treat an employer's contributions to FICA and Medicare as part of an employee's taxable earnings?  If we made that leap, we have to include FUTA, SUTA, general and administrative costs, and the cost of fringe benefits to an employee's taxable earnings.

                No, they are not part of his taxable earnings, just part of his real earnings.

                The point is this: if FICA and Medicare taxes were repealed, the employer should arguably increase the employee's wages by that amount. But "FUTA, SUTA, general and administrative costs" can't be repealed because they represent a real cost of doing business.  

                In any event, whether payroll taxes represent a 14.2% or 15.3% tax bite, they are still regressive taxes that the capital class escapes altogether.

                Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

                by Tim DeLaney on Tue Nov 15, 2011 at 11:42:26 AM PST

                [ Parent ]

  •  Congratulations on getting rescued! (5+ / 0-)

    Apparently this topic is resonating with people.

    Let me know if you'd like to start a Group around your Project Omaha concept. Clearly there is some interest for a group.


    Republicans 2012

    Keeping Millions Out of Work
    to Put One Man Out of a Job

    by smileycreek on Sun Nov 13, 2011 at 07:35:49 PM PST

  •  Interesting ideas and excellent writing. (7+ / 0-)

    Thanks, Tim. I have several Republican relatives who would never switch parties, and I hope to read some day about how you were able to do that.

    The spirit of liberty is the spirit which is not too sure that it is right. -- Judge Learned Hand, May 21, 1944

    by ybruti on Sun Nov 13, 2011 at 08:18:58 PM PST

    •  The thumbnail version: (8+ / 0-)

      GWB.

      The short version: For most of my life, I bought into the Republican meme--smaller government, lower taxes, fiscal responsibility, yadda, yadda. Democrats were the "tax and spend" bunch, right? I sure didn't want that!

      I was always a liberal on social issues--LGBT, women's rights, especially reproductive rights, first amendment rights, etc. But I thought that the fiscal issues were overriding.

      Trouble was, I didn't pay enough attention to the details. During the debate about the Bush tax cuts, I only heard the sound bites. If there were Democrats who dissected the idea line by line (and I'm sure there were) and exposed those tax cuts for what they were, I didn't read them. Why pay any serious attention to the tax-and-spenders? I was lazy.

      My feeble defense: I was still working at the time, and didn't have time to delve into the details. But that's where the devil indeed lurks.

      So I waited for the soon-to-come wave of prosperity that would sweep us triumphantly into the 21st century. Trouble was, it didn't happen. We just went further into debt. And I didn't see a whole lot trickling down.

      At the same time, GWB betrayed another part of me with his "Faith based initiatives". Since leaving high school, I have been an atheist. My scarlet A avatar is a symbol of the "Out campaign"; it identifies me publicly as an atheist. Now, along comes GWB with his "born again" Christianity dragging religion into government through the back door of charity.

      Let me digress. I am publicly, but not militantly, an atheist. I don't seek to destroy religion; I don't hate theists.  I would not vote for or against a candidate because of his or her religion. But I expect public servants to keep religion out of government. In fact, I am currently a plaintiff in a lawsuit brought by AU and ACLU against the City of South Bend which sought to give a $1.2 million dollar property to a Catholic high school.

      I retired in early 2005 and began to look at some of the details alluded to above. I discovered that "The rich get richer, and the poor get children" isn't just a catchy line from a 1950's song, it's also reality. The 1% are outstripping the rest of us economically by a wide margin. This isn't good for the country.

      I took stock. I didn't discover a vestige of the fiscal responsibility I expected under a Republican administration. I didn't see a renewal of prosperity. I saw a party dedicated to making the rich richer. I saw a party hostile to any sexual orientation except their biblical model. I saw a party that wanted to enslave women to their fertilized ova. I saw a party that would turn the USA into a theocracy given half a chance.

      And so I switched.

      Well, that's the short version. Aren't you glad I spared you the full length version?

      Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

      by Tim DeLaney on Mon Nov 14, 2011 at 02:34:32 AM PST

      [ Parent ]

  •  Other Options (4+ / 0-)

    There are lots of preferences in the tax code that support worthy purposes - or that can't now be completely undone without causing a lot of chaos.  But I agree that the tax code could be a lot simpler and fairer.

    I think that the first thing to do with mortgages is convert the deduction to a tax credit - for two reasons.  
    First psychologically, people don't understand that deductions are subsidies.  (I would propose converting almost all deductions to credits - except maybe certain kinds of losses and truly charitable donations.)  And since you would have to apply for subsidies discretely and obviously on the tax form, people who say they don't believe in government handouts and subsidies could just skip that section.
    Second, once you make it a tax credit, it becomes obvious that the rich shouldn't get a higher percentage benefit rate than the poor.  So give everybody a 20% credit for mortgage interest, and bring down the cap a little, and some more on second homes.  The real estate market and middle class folks locked into 30-year mortgages won't be too deeply disrupted.  And pretending the single family home construction boom can be brought back is not helpful.

    For capital gains and capital formation, you need to remember the effect of inflation - if you are going to tax capital gains at or near regular income (which I would support), then you need to index capital gains so that if someone buys $10K of something, and sells it a year later for $10,500 with a 5% annual inflation rate, they won't have a tax liability.  Helps encourage longer-term investment thinking.  For example, count inflation-indexed capital gains as regular income, but give a 2% tax credit as an investment subsidy if you want to encourage capital gains.

    I don't understand your proposal for a QIA's. Up to 50% of what?  If "income" is the answer, this is pretty regressive.  Same problem as deductions - a big help to the wealthy - to the rest, not so much.  We already have excess concentration of investment assets at the top.

    I tend to think about discrete concrete steps and principles that might be done incrementally, because they seem more realistic than rewriting the whole tax code at once.  If we simply converted the mortgage deduction into tax credits, the rationale for doing the same for other deductions would become more visible, and then on to other reforms - but we all bend with the shape of our own particular delusions about how progress might be possible.  

    •  Money quote (0+ / 0-)
      we all bend with the shape of our own particular delusions about how progress might be possible.
       
      Well shaped, indeed.

      Let me issue and control a nation's money and I care not who writes the laws." ~ Mayer Amschel Rothschild, 1790

      by ozsea1 on Sun Nov 13, 2011 at 11:57:09 PM PST

      [ Parent ]

    •  I find a lot to agree with here (1+ / 0-)
      Recommended by:
      Odysseus
      For capital gains and capital formation, you need to remember the effect of inflation - if you are going to tax capital gains at or near regular income (which I would support), then you need to index capital gains so that if someone buys $10K of something, and sells it a year later for $10,500 with a 5% annual inflation rate, they won't have a tax liability.

      I recognize this as a problem that should be addressed. In fact, the taxation of dividends also has exactly the same problem; dividends are just capital gains returned to the shareholders.

      I don't understand your proposal for a QIA's. Up to 50% of what?  If "income" is the answer, this is pretty regressive.

      Yes, it's "income". But First of all, reflect that the ultra rich today pay only 15% on capital gains, so taxing half their gains--even inflation adjusted--would be a huge improvement, especially if we increased the top marginal rate to, say, 45%.

      Second, 50% is just a proxy for the optimal number. We would want to set that number at whateve value would  attract sufficient capital for sustained growth. The optimal number is one I cannot calculate, so I suggested 50% as a sort of neutral starting point. I suspect that something on the order of 20-25% would be optimal.

      Third, the top marginal rate is there to act as a brake on runaway wealth increase for the 1%.

      We need to insure some level of capital formation, and that is what the QIA is designed to do. As the 99% become more prosperous, they will tend to save more, and that would decrease the need to depend on the 1% for capital.

      I tend to think about discrete concrete steps and principles that might be done incrementally, because they seem more realistic than rewriting the whole tax code at once.

      Maybe I'm getting ahead of myself, but I would agree that radical change must be made incrementally. There's no predicting what the consequences would be if we woke up tomorrow with a tax code on a postcard. Once we agree on the ultimate goal, the implementation might suggest itself.

      I have always thought that 20% change a year for five years would be doable, but I think that's a discussion for later.

      Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

      by Tim DeLaney on Mon Nov 14, 2011 at 03:45:00 AM PST

      [ Parent ]

  •  The wealthy would love this tax system. (1+ / 0-)
    Recommended by:
    Tim DeLaney

    The only people that can afford to defer income are the wealthy, and this would permit them to exclude 50% of their AGI.  

    Also, your system runs into the same "problem" that the current one: the exclusion is worth more to someone in a higher tax bracket than a poor or middle class person.

    •  Please see my reply to ozsea1 (1+ / 0-)
      Recommended by:
      johnny wurster

      I see now that my 50% figure was a tactical mistake. The QIA proposal was not meant to be about actual numbers, but rather to point out that our economy needs a source of capital.

      Also note that this is not a deduction or an exemption. At some point, when the money is withdrawn from the QIA, it will be taxed at the taxpayer's highest marginal rate.

      In effect, I'm saying: "If you'll let us use your money to grow the economy, we won't collect the taxes until later."

      Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

      by Tim DeLaney on Mon Nov 14, 2011 at 03:54:56 AM PST

      [ Parent ]

      •  It's an exclusion from income, which is the same (2+ / 0-)
        Recommended by:
        Tim DeLaney, Odysseus

        as a deduction.  It has the same structure as a 401k, and of course a rich person that can exclude 16K from income at a 35% income tax rate gets a larger benefit than a person in a lower bracket that excludes the same amount from income.

        As mentioned upthread, I work in tax and have a number of wealthy clients, and they would all salivate over this proposal.  The name of the game in tax planning is tax deferral, and your suggestion is basically an enormous deferral option.

        •  Well, a deduction means (0+ / 0-)

          that you never pay tax on the amount. But it's true that a deferral has present value, so I see your point.

          What is your view of the government's role in assuring adequate capital formation? Should we even worry about this?

          My concern was that we should not seek to tax the rich into oblivion. We should not kill the goose that lays golden eggs. But are those eggs just lead? The rich keep making the point (however indirectly) that it is mainly they who provide capital. This is there argument for the idea that they should be left alone.

          I could be talked out of the QIA idea by somebody with a more intimate knowledge of taxation. You seem to be that person. Please tell us more. I'm not here to promote a view; I'm here to try to develop a consensus among enlightened people.

          Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

          by Tim DeLaney on Mon Nov 14, 2011 at 04:25:33 AM PST

          [ Parent ]

    •  Not sure what this sentence adds: (1+ / 0-)
      Recommended by:
      Tim DeLaney
      Income would be everything that comes in, wages, tips, bonuses, stock options exercised, dividends, capital gains, country club memberships, company cars, whatever the employer provides that has monetary value.

      Those are all income under the current code.
  •  middle class has no need for experts. (1+ / 0-)
    Recommended by:
    Tim DeLaney

    The tax code as structured today gives some very large and simple ways for "middle class" taxpayers to reduce their tax liability.

    You're allowed to deduct the lesser of $16,500 or 25% of your income in 401k contributions.  You're allowed to deduct $5000 in IRA contributions.

    Add in the mortgage interest deduction and you have to be making quite a lot before you "need" any complexity in your taxes.  Anyone under six figures who is maxing out retirement contributions is an exceptional person.

    -7.75 -4.67

    "Freedom's just another word for nothing left to lose."

    There are no Christians in foxholes.

    by Odysseus on Mon Nov 14, 2011 at 04:29:48 AM PST

    •  One of the main ideas is to simplify the tax code. (1+ / 0-)
      Recommended by:
      Odysseus

      Genuine simplification could save the country hundreds of billions. This is a goal worth pursuing, IMHO.

      The twin goal is to promote a progressive system. The 1% are currently gaining wealth faster than the 99%. This is an undeniable statistical fact. It's bad for the country. We should try to do something about this.

      Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

      by Tim DeLaney on Mon Nov 14, 2011 at 04:51:37 AM PST

      [ Parent ]

      •  People aren't interested in making it work (1+ / 0-)
        Recommended by:
        Tim DeLaney

        The flip side of my comment is that easy methods are available for EVERY income level to invest.

        What percentage of people put anything at all into 401ks and IRAs?  zero.  Fucking pisses me off.

        MSN : Why your 401k hasn't fully recovered

        The median Vanguard 401k balance, $23,140, is still below the $25,953 next egg that the median retirement saver had in 2006.

        23 fucking thousand.  23.

        You want to fix America, find people and make their IRA contributions for them.

        -7.75 -4.67

        "Freedom's just another word for nothing left to lose."

        There are no Christians in foxholes.

        by Odysseus on Mon Nov 14, 2011 at 05:52:19 AM PST

        [ Parent ]

        •  $23,000 is a nest egg?? (0+ / 0-)
          The median Vanguard 401k balance, $23,140, is still below the $25,953 next egg that the median retirement saver had in 2006.

          So, it would seem we're losing ground.

          Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

          by Tim DeLaney on Mon Nov 14, 2011 at 06:14:07 AM PST

          [ Parent ]

          •  Build your own hedge fund. (2+ / 0-)
            Recommended by:
            Tim DeLaney, wmspringer

            Occupy America my happy ass.  Walk into the Massey Energy board room and say "Every last one of you is now working for Leftist IRAs Inc.  And from this day forward, not another miner is going to die in these mines."

            The tax advantaged nature of retirement savings is your single biggest return.  10, 15, 25, or 30+% GUARANTEED immediate return?  Ain't no $&(&#)(#*# way you're getting that any other way.

            You get 1 million people with $5k contributions, and you could buy Massey out of pocket.

            Hell, even Bank of America is only $60B.  Buy them out and say "Hello.  We're going to work out HAMP refinances of every single non performing loan in your portfolio".

            You don't know what you can do until you try.  Collective action has never been tried.

            -7.75 -4.67

            "Freedom's just another word for nothing left to lose."

            There are no Christians in foxholes.

            by Odysseus on Mon Nov 14, 2011 at 06:40:03 AM PST

            [ Parent ]

            •  Interesting, but ... (0+ / 0-)

              most shareholders at any given time are not offering their shares for sale. In fact, they don't even know that you want to buy them. You cannot buy shares unless you find a seller.

              Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

              by Tim DeLaney on Mon Nov 14, 2011 at 07:07:19 AM PST

              [ Parent ]

              •  Percent of float could be an issue. (1+ / 0-)
                Recommended by:
                Tim DeLaney
                most shareholders at any given time are not offering their shares for sale.

                Yeah, I haven't figured out how to get around that.  And some of the worst offenders are kept as insider holdings, with more than 50% of shares owned by insiders.  The only thing I can see there is to attack their street business - woo all of their clients away.  That's probably not possible in a commodity business like coal.

                Still, my original point stands.  People aren't even participating in the system, and vocally declaring it a failure.

                There's a lot more we can do.

                -7.75 -4.67

                "Freedom's just another word for nothing left to lose."

                There are no Christians in foxholes.

                by Odysseus on Mon Nov 14, 2011 at 09:19:03 AM PST

                [ Parent ]

  •  I applaud your undertaking this project, (4+ / 0-)

    and agree with you on many aspects:  Since complexity works to favor the plutocrats, we should work to simplify, especially on the matter of deductions.  And, I like your inclusion of capital gains, options, etc. as income.  I'll sketch a different alternative, but first a little history:

    The adoption of the 16th amendment (1913) allowing the federal income tax was at the time a great achievement of progressives.  At its inception it had a personal exemption of $3,000 ($4,000 for married couples), equivalent to $57,000 ($76,000) in 2005 dollars.  This meant that fewer than 10% of all citizens paid income tax.  And, "income" was defined to include all sources---capital gains, stock options, etc.  A second great progressive achievement was the dedicated SS tax, followed by the Medicare tax.

    The conversion of the (individual) tax code from a weapon against the accumulation of wealth to a tool for entrenching the plutocracy has 3 aspects: the gradual exclusion of financial types of income (capital gains, etc.) from equivalent taxation, the expansion of the income tax downward into greater numbers of (wage-earning) taxpayers, and the limitation of socially beneficial taxes (SS, Medicare) to lower income levels.  However, it IS possible to reverse these trends with a few strokes:
    1. Equal taxation of all income except interest on government bonds---capital gains, salary, stock options, inherited wealth, etc.
    2. Remove the cap on benefits taxes (FICA).  Bill Gates would pay the same % (15.4?) of his income as Joe Lunchbucket, and this is just the price to the wealthy of Social Security.  As a bonus, this would generate enough income to make SS and Medicare forever solvent.
    3. Set the personal exemption at an amount equal to 50 weeks of full time work at the minimum wage; that is, 50 weeks x 40 hrs. per week x $7.50 per hour = $15,000.  That's right, the first $15,000 of income from whatever source ($30,000 for a couple and 0.5 exemption or $7,500 for each dependent) pays no income tax.

    There are a few intriguing aspects to this:
    One could have a flat income tax rate (no different brackets), and the result is a very progressive structure at the bottom, with effective income tax rates starting at 0%, and approaching a 20% flat tax for incomes above $250,000.  That is, Warren Buffett who now pays roughly 19% total taxes would pay almost 35% in combined fiCA and Income taxes.
    If the income tax exemption were based on it, there would be a built-in incentive to raise the minimum wage.
    It begins to reflect the real costs of survival (food, shelter, clothing) in this culture. i think that there is a strong moral case for NOT taxing the minimum survival wages.

    •  We're on the same page. (1+ / 0-)
      Recommended by:
      Odysseus

      But I would fold the payroll tax into the income tax. This would have the effect that the minimum wage worker not be taxed at the same rate (or close to it) as Warren Buffett.

      I think yours is an excellent analysis.

      Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

      by Tim DeLaney on Mon Nov 14, 2011 at 06:27:42 AM PST

      [ Parent ]

  •  I favor taxing carbon use. (1+ / 0-)
    Recommended by:
    Tim DeLaney

    Carbon / energy use is a good proxy for all other kinds of consumption.

    Nothing happens without energy.

    This would be a great policy tool to address global warming and pollution as well.

    You might even be able to make this the only tax.  Charge it to the producers and importers, and it will automatically be included in the price of everything else, in proportion.

    The Fail will continue until actual torches and pitchforks are set in motion. - Pangolin@kunstler.com

    by No one gets out alive on Mon Nov 14, 2011 at 05:34:32 AM PST

  •  Thanks for the diary (3+ / 0-)
    Recommended by:
    Tim DeLaney, drewfromct, Odysseus

    This is a discussion we need to have as a society. Just a few points (I haven't read the comments to see if this have been raised previously)

    - Most of us pay a lot of local taxes (state income, property, sales tax, etc). Hopefully, if the federal system was overhauled, it'd serve as a model for localities.

    - Perhaps the best way to reform the tax code is to go the other way - get some states to implement something like this & serve as a model for other states & the federal system.

    - I'd be in favor of one deduction... that is the first $x of income... in other words, the lowest tax bracket should be $0.

    - If grandma has essentially $0 taxable income for many years, then sells her house one year to move to the old folks home, and makes $300K in capital gains because she's lived in her house for 50 years... Why should she be taxed for an annual income of $300K? She's not suddenly rich. Shouldn't that income be divided over 50 years?... (so an annual income of $6000) in which case the tax rate would be much lower. The code should comprehend things like this.

    - If I'm paid something of value that isn't liquid, how would taxes work on that? If someone gives me some asset, they haven't given me the ability to pay the taxes on it. For example, if I inherit the family farm, I just got something that may have a value of $2 million. but, I haven't gotten any actual money to pay tax on $2 million. The code would need to account for this kind of thing.

    - That said, kudos for trying to treat all income the same, as much as possible. I think this is key, more than just about any other aspect of tax reform.

    - Most people simply don't understand marginal rates. And people who argue about taxes often make the mistake of assuming everyone does understand marginal rates. We need some kind of nationwide eduaction blitz about how marginal rates work. It's not complicated, but if you've never given it much thought, it's not something that's "obvious". This drives me bonkers more than just about any other topic... I'll sometimes get into a lengthy discussion with someone about taxes, only to realize later they had no grasp of the concept of marginal tax rates; which is fundamental to understanding taxes.

    Freedom isn't free: tax idle money

    by walk2live on Mon Nov 14, 2011 at 09:06:01 AM PST

    •  Oh, my, I think you just struck a nerve. (1+ / 0-)
      Recommended by:
      Odysseus
      - Most of us pay a lot of local taxes (state income, property, sales tax, etc). Hopefully, if the federal system was overhauled, it'd serve as a model for localities.

      Bingo! I think you are exactly right. If we devise a good federal tax system, why should it not serve as a model for all taxing jurisdictions?

      E.G. If a national sales tax is a bad idea, why should we accept a state or local sales tax?

      Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

      by Tim DeLaney on Mon Nov 14, 2011 at 09:29:03 AM PST

      [ Parent ]

    •  She wouldn't be. (3+ / 0-)
      Recommended by:
      JeffW, Tim DeLaney, Odysseus
      - If grandma has essentially $0 taxable income for many years, then sells her house one year to move to the old folks home, and makes $300K in capital gains because she's lived in her house for 50 years... Why should she be taxed for an annual income of $300K?
      Under the diarist's proposal, Grandma's capital gain would be adjusted for the inflation that has occured between the date she bought and the date she sold.    
      If I'm paid something of value that isn't liquid, how would taxes work on that? If someone gives me some asset, they haven't given me the ability to pay the taxes on it.
      You'd have to take the tax money from other income or savings, just as you do now.  
      For example, if I inherit the family farm, I just got something that may have a value of $2 million. but, I haven't gotten any actual money to pay tax on $2 million.
      An inheritance isn't taxable as income to the heir.  It's taxed as part of the estate, and the taxes are paid from the estate before the assets are distributed.

      Renewable energy brings national global security.      -6.25, -6.05

      by Calamity Jean on Mon Nov 14, 2011 at 07:29:36 PM PST

      [ Parent ]

      •  ok... (1+ / 0-)
        Recommended by:
        Tim DeLaney

        Bad example on the inheritance, but I think we could do better on the way we tax illiquid gains... at least up to a limit.

        The inflation adjustment was added to the diary later upon suggestion (I think). I think in addition to that, it should be amoritized over the time it took to realize the gain... At least to some extent (there could probably be some simple formula for doing this). Of course, this risks making taxes complicated once again  and I realize that's not the goal.

        Freedom isn't free: tax idle money

        by walk2live on Tue Nov 15, 2011 at 10:41:24 AM PST

        [ Parent ]

        •  Inflation adjustment (0+ / 0-)

          Was indeed added after discussion. I think it makes sense, and I'd guess most Kossacks would agree.

          This illustrates my aim to produce a consensus tax system rather than one of my personal opinion..

          I think in addition to that, it should be amoritized over the time it took to realize the gain... At least to some extent (there could probably be some simple formula for doing this). Of course, this risks making taxes complicated once again  and I realize that's not the goal.

          If there is a simple unambiguous way to achieve fairness, I don't regard this as complexity.

          Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

          by Tim DeLaney on Tue Nov 15, 2011 at 11:57:09 AM PST

          [ Parent ]

  •  Taxes are not just for raising revenue (1+ / 0-)
    Recommended by:
    Tim DeLaney

    Obviously that is their primary purpose and their raison d'être. But the reason our tax code is so complex is not (just) to benefit those who have large tax bills, but to direct where money is spent in order to benefit (in the opinion of those who made the laws) society in some way. For example, the old interest deduction, now the home mortgage interest deduction, was designed to persuade people to buy big-ticket items such as a house that they wouldn't otherwise buy. Buying houses obviously creates jobs and also gives homeowners a stake in society. Thence, the home mortgage interest deduction. With some exceptions that a nothing more than boondoggles, that's how all the complexity came to be.

    Why do so many of the deductions and loopholes tend to benefit the wealthy more than the less wealthy? Well, although it sounds like a rightwing mantra, since they have much larger tax bills, providing loopholes that motivate them to spend their money in specific ways will have a much larger net effect on society.

    This is why I tend to favor wealth taxes (taxes based on net worth) more than I do income taxes. If the problem is the grossly uneven and unfair accumulation of wealth, then a wealth tax is the fairest and most direct way to attack it. That's not to say that that should be the only kind of tax, just that in my view it is superior to an income tax as a means to reduce wealth inequality.

    I also favor the use of continuous formulas over discrete tax brackets, just as I favor formula-based annual budgets and tax rates that self-adjust to revenue demands. That is, failure to pass a budget should have little effect, since it would mean that the existing formulas would stay in effect. Passing a new budget would simply mean adjusting the parameters of the formulas. Same with tax rates.

    But, back to the income tax discussion: let's not overlook the value of tax “loopholes” and deductions as an important lever to help move society in the desired direction.

    •  The purpose of taxes ... (0+ / 0-)
      Obviously that is their primary purpose [raising revenue] and their raison d'être. But the reason our tax code is so complex is not (just) to benefit those who have large tax bills, but to direct where money is spent in order to benefit (in the opinion of those who made the laws) society in some way.

      I have three concerns about using the tax code to shape taxpayer behavior.

      First, I don't necessarily trust the judgement of Congress as to what behavior is desirable.  Their job is to run the country, not my life.

      Second, even if I agree that their aims are laudable (encouraging home ownership comes to mind), using the tax code sometimes has unintended consequences. The mortgage interest deduction, for example, has the effect of encouraging a high level of debt, which is not a good thing, as we have seen in the past few years.

      Third, there comes a point when the added complexity costs us money. We have reached and passed that point with the income tax code. When entire industries spring up to cope with that complexity, we have gone too far.

      This is why I tend to favor wealth taxes (taxes based on net worth) more than I do income taxes. If the problem is the grossly uneven and unfair accumulation of wealth, then a wealth tax is the fairest and most direct way to attack it.

      I'm sure you understand that taxing accumulated wealth would be controversial, to say the least. (We already do this with the inheritance tax to some extent.) For my own part, I'd be happy with tax policy that made excessive accumulation impossible.

      Still, I understand your position. Somebody with a net worth of $1 million could easily have gotten there through a combination of talent, hard work, and thrifty living. But I don't believe that the billionaire is a thousand times smarter or industrious, or thrifty.

      I'd be interested in the opinion of other Kossacks on this issue.

      Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

      by Tim DeLaney on Mon Nov 14, 2011 at 05:28:10 PM PST

      [ Parent ]

      •  2/3 of households don't itemize. (0+ / 0-)
        Third, there comes a point when the added complexity costs us money. We have reached and passed that point with the income tax code. When entire industries spring up to cope with that complexity, we have gone too far.

        It's hard to claim the tax code is too complex when the vast majority of people don't itemize at all.

        Percent that claim itemized deductions (TY 2008) [3] 33.8%

        The cost of this complexity for most people is "bad information".  They are asked hundreds of meaningless questions, which in the end do not make a difference.

        -7.75 -4.67

        "Freedom's just another word for nothing left to lose."

        There are no Christians in foxholes.

        by Odysseus on Mon Nov 14, 2011 at 10:16:45 PM PST

        [ Parent ]

        •  Misleading statistic (1+ / 0-)
          Recommended by:
          Odysseus
          It's hard to claim the tax code is too complex when the vast majority of people don't itemize at all.

          First, 66% is indeed a majority, but few would call it "vast". Second, my claim is not based on the proportion who don't itemize, but rather on the aggregate loss to the nation.

          To get an idea of the magnitude of that loss, see page 7 of this pdf document:

          According to research by the Government Accountability Office, efficiency costs are on the order of magnitude of two to five percent of Gross Domestic Product (GDP). Based on GDP of $13.259 trillion in 2006, efficiency costs are an additional $265 billion to $663 billion.

          This quote comes from a House document: (see "Conclusions")

          ... it is probably a reasonable generalization to conclude that about 40 cents of each dollar of taxes at the margin represents a deadweight loss to society.

          Since we collected $1.175 trillion in individual income taxes in 2010, this would suggest efficiency losses of nearly half a trillion dollars--hardly a figure to be ignored.

          You can spend hours searching the web for information on this topic, and though authorities differ widely on the bottom line, estimates on the indirect costs of the income tax are invariably in the hundreds of billions.

          I concede that real simplification would not bring that number to zero, but it would surely reduce it greatly.

          Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

          by Tim DeLaney on Tue Nov 15, 2011 at 08:54:59 AM PST

          [ Parent ]

  •  Flat Tax (1+ / 0-)
    Recommended by:
    Tim DeLaney

    Get rid of all deductions and go to a progressive flat tax.
    0-25000.00 6%
    For every 10,000. raise it a 1/4 percent with a 30% percent cap. This means all income for individuals, business, capital gains

    •  A point of nomenclature (0+ / 0-)

      "Flat" generally a system where all income levels are taxed at the same rate. Your suggestion is for a progressive code, and I happen to think it's a damn good structure in principle. The starting point and increments may need tweaking, but you're on the right track, IMHO.

      One addition that I would suggest: Exempt all income up to the poverty line.

      Taxing cigarettes reduces smoking, right? So let's reduce poverty by taxing the poor.

      by Tim DeLaney on Tue Nov 15, 2011 at 09:29:06 AM PST

      [ Parent ]

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