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Photo & Video Sharing by SmugMugTax policy, and the tax code has grown into an impenetrable nightmare of allowances, exemptions, credits and loopholes.

So complex is it that even in my very simple situation, without the help of a tax calculation program I would have to pay someone to accurately file our annual taxes. That in and of itself amounts to "just another tax".

There is a guiding principle behind the imposition of tax. It simply accepts that if we wish to live in a civilised society, then some things are better paid for jointly, and that we should pay according to our ability to pay and not necessarily by our desire to consume.

One good example would be Public Schools. You may not have any children using the schools, or likely to do so in future. Why should you pay? Because our society needs an educated populace. Without them we will cease to function. You might not have kids yourself, but you drive on roads, or have goods transported to you or the stores you patronise. Without engineers, scientists and planners none of this will be possible, and they need educating.

What I am saying here is that any given individual does not have to directly need a public service to benefit from the fact that the service is there, and it needs to be paid for.

We are all in this together, and we all need to pay for it. It can only be a fair system if we pay according to our ability to pay. If you like, it is the second half of the Marxist philosophy ... "from each according to their means". I put it this way simply because I am not advocating an idealistic egalitarian society, simply suggesting that if we need services, then it is only a just system if we share the burden equitably.

Taxation in the United States is in a mess. There is little doubt about this, both sides of the political spectrum agree. The code has developed over generations, each new tax, or exemption being seen at the time as solving a specific need. The result is that the code as a whole addresses very few needs, and the application bears most heavily on those least able to pay. Some might, with justification, suggest that it actually penalises those in the middle classes rather than the very poor. This would be arguable if we were only considering Federal Income Tax. I say "arguable" because it is actually one of the few parts of the tax code that is progressive, and the poor pay all the regressive taxes too, bearing a disproportionate level of burden.

I would go further than this and suggest that Income Tax is the only progressive tax, because it asks citizens to pay for society in direct proportion to the rewards they receive. I would suggest that when we rewrite the tax code, we start by abolishing every other tax, and the vast majority of fees that are demanded by basic service providors.

Let's examine a few of them to demonstrate the point:

Sales Tax:

Most countries have a form of sales tax. It makes no sense. They are complex to manage and they vary widely. These variations between localities distort markets in an entirely artificial manner from the business end, and have to be paid by the poor even though those folk are considered too poor to pay income tax. The net result is that the poor pay a backdoor tax on most of their income, and the wealthy pay substantially less, as more of their income is diverted to non-tax services, or savings.

We then have to try to develop a whole panoply of exempted items, to attempt to redress this balance. It's an exercise in futility. It also leaves local cities vulnerable to even minor economic fluctuations, or entirely dependent on the goodwill of Walmart. If Walmart leaves town, your town is pretty well stuffed, so Walmart drives down the costs to itself and gains an advantage that a citizen simply cannot hope to match. This is no way to run a country. I use Walmart simply as an example.

Property Tax:

Problematic. It is unfair to many residents as it does not take into account the ability to pay. Worse, if you cannot pay you might lose your home. It might seem attractive to make those with large homes pay large bills, but there are better, and fairer ways to do this. Property tax sucks, it is one of the worst offenders.

Gas Tax:

The theory here seems to be that those who use the roads the most, pay the most. It is an attractive idea. The more you consume, the more you pay, who could possibly have a problem with that?

Well I do. Most road use is not discretionary. We need to go to work, we need to shop, and visiting the mother-in-law is not something I get a choice about. There are few, if any, affordable or reliable forms of public transport in most areas. Car use is mandatory in much of the country. While a hike in the price of gas might be seen as an irritant to they well paid, it is a major budget item to those less well off. Gas taxes, and the vagaries of gas prices generally hit the low paid, and rural communities very hard. People don't simply choose to drive a long way, many of them have to drive a long distances .... for those people, roads, and gas are much like utilities.

Fines:

Most fines are a tax. They are levied by municipalities and they account for a significant part of the income of many. There can be no real attempt to apply justice in this scenario. The fines are not being levied as either a punishment or a deterrent, and even if they have elements of both, they can't be divorced from the strong taint of "revenue-raising". Equally, most fines are not punishing, or deterring everyone equally. My $150 fine for speeding in a School Zone may have been very well deserved, but that $150 punished me far more harshly than the guy driving the brand new Range Rover who received the same penalty. If we are going to do this, then some sort of sliding-scale is necessary or yet again we have to accept that the poor are hammered and the rich miss an expensive lunch.

Just four examples, the principles of which you can apply to virtually every other tax or fee currently imposed, with the same conclusion.

Payroll Taxes? Sure, them too. They have the benefit of being progressive, but only if you earn a salary lower than the cap. The minute you exceed that level of income you are paying proportionately less ... and you are better placed to pay so the tax suddenly regresses for the better paid.

And while we are on the subject of taxes, let us not forget medical insurance, deductibles and co-pays. They are a tax too so please add them to all of your other taxes when working out the overall burden. As health provision in this country is piecemeal, and for-profit, the amount you pay is vastly higher than in any comparable country. This might not seem so bad if the outcomes were so much better, but they are not. Mrs Twigg has a pretty good health plan yet we still struggle with the co-pays, and if you cannot afford to access the healthcare you are paying for then all of your premiums are simply someone else's profit.

One might think that during the fifties, sixties and seventies that the relatively high taxes were an impediment to growth and development in the US. One might think that, yet one would be wrong. That period was the time of highest prosperity. Corporations grew, employment was close to full, and the entire middle class was born. Equally, the current low tax rates are not, apparently, giving impetus to recovery. Productivity is at an all-time high as are corporate profits and share prices. Yet the economy is stagnant and all that means is that the lower paid are bearing all of the pain.

The rich will not suffer if we make them pay more income tax, close their loopholes and tax their profits. They will still be rich. Paying more tax does not equal having less. It means you still have much more, just a slightly smaller much more than you think you are entitled to. If that causes you to quit your job then I feel confident that the position will not remain unfilled for long.

Simplify the system. With a few minor allowances, the only indication of ability to pay, is the amount you receive ... so tax that. There would need to be some adjustments made by some folk. Those people are among the more privileged, and best placed to make those changes. The poor, the middle class? Well they would simply get to keep more of what they earn, or have to pay less for what they need.

Either way, America wins.

--

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Comment Preferences

  •  I know this is a simplistic look (19+ / 0-)

    at a complex situation.

    It is deliberately simplistic because what I think gets lost in the complexity is the ideas. The principles of fairness and justice that should never be far from the thinking when tax policy is debated.

    We need to grasp them firmly, and test every tax proposal against such an understanding.

    I hope that the quality of debate will improve,
    but I fear we will remain Democrats.

    Who is twigg?

    by twigg on Wed Mar 06, 2013 at 05:21:13 PM PST

  •  I like having different taxes. (6+ / 0-)

    Consider property tax. I'm a landlord and I own property in many cities. Those cities provide my buildings with police and fire protection. Even when the buildings are vacant, they are still protected. Shouldn't I have to pay for this?

    (Of course using property taxes to fund schools was a horrible idea that causes widespread inequality and pain. But police, fire, and local government should be funded mostly by those who have something to protect).

    Sales taxes are good because they act as a drag on consumption. Sales taxes on food are bad and regressive, but taxes on other things are a good idea. And computers make them easy to collect.

    You are right about fines. Fines should be means-tested. The rich should pay higher penalties so that they suffer equally.

    One thing to watch out for when talking about income tax: Capital gains taxes. The most unfair part of our income tax system is that capital gains income is taxed at a lower rate. This needs to be fixed, but could be the subject of a whole different Diary...

    •  Thanks for the comment (1+ / 0-)
      Recommended by:
      Involuntary Exile

      There need be no drag on sales by such a blunt instrument as Sales Tax. You will not need to tax "luxury" items at a higher rate, if the wealthy are actually paying their fair share.

      Capital Gains Tax can be treated as income when the gain is realised. There can be exemptions and deductions for inflation between the time of axquisition and the time of the sale. Then we know the gain in real terms, and can tax it at an individuals marginal rate.

      There is no good reason why unearned income should be taxed at a rate lower than that paid by people who work for a living.

      As for your property question .... It is the income from your properties that would be taxed, in your State of residence, or shared if such arrangements exist.

      Fire, Police .... we all benefit from them but there is little reason to ring fence the funding by district.

      I hope that the quality of debate will improve,
      but I fear we will remain Democrats.

      Who is twigg?

      by twigg on Wed Mar 06, 2013 at 05:48:58 PM PST

      [ Parent ]

  •  See ya later, estate tax! (3+ / 0-)
    Recommended by:
    Gooserock, VClib, misslegalbeagle
    •  Payroll taxes are a flat tax (1+ / 0-)
      Recommended by:
      VClib
      Payroll Taxes? Sure, them too. They have the benefit of being progressive,
      They're flat taxes.  SS is a flat 6.2% on wages.  A progressive tax would increase that % as the income amount increases.  The PPACA increased the medicare tax on income over.......$250K, I think, up 90bps from 1.95 to 2.85 or something, but that's still just two brackets.  Not terribly progressive.
      •  They are not a flat tax (1+ / 0-)
        Recommended by:
        ichibon

        The amount you pay depends solely on the amount you earn ... by your metric ALL taxes are flat taxes, yet that is not the case.

        Persoanlly I don't feel the need for payroll taxes other than they identify Social Security and Medicare as something that is a promise rather than an entitlement.

        On the other hand, the word "entitlement" is a misnomer ... what they really are is a need.

        Estate Tax is another matter ... however, it is entirely possible that the same principle could be applied ... Tax the recipients.

        I have my own views about estate tax, and they involve allowing people to help their kids without creating a generation who never have to work for a living.

        I hope that the quality of debate will improve,
        but I fear we will remain Democrats.

        Who is twigg?

        by twigg on Wed Mar 06, 2013 at 05:55:15 PM PST

        [ Parent ]

        •  That's not a progressive tax (2+ / 0-)
          Recommended by:
          VClib, misslegalbeagle
          The amount you pay depends solely on the amount you earn

          That does not a progressive tax make.  A progressive tax is one in which the tax rate, not necessarily the tax liability, increases as the income (or tax base) increases. (see, eg, wikipedia's explanation.)

          So Medicare is partially progressive because once you cross the $250K threshold, you pay more.  Social security is not - it's a flat tax - because a flat rate is applied to all the income in the wage base.

          •  The actual rate is irrelevant. (0+ / 0-)

            For our purposes Social Security Tax is regressive, not flat.

            The proportion of your income that you pay decreases as your income rises above the threshold.

            "Flat Tax" as promoted by the Right is a very different animal to that which we are discussing here.

            Under that plan, the actual rate of income tax is very low, or even zero, with the entire budget being made up from non-income related taxes ... like sales tax.

            It's not accurate or helpful to introduce the term "flat" to this argument.

            I hope that the quality of debate will improve,
            but I fear we will remain Democrats.

            Who is twigg?

            by twigg on Wed Mar 06, 2013 at 06:10:41 PM PST

            [ Parent ]

        •  The rate is flat, until the income cap of $113,700 (0+ / 0-)

          so a person earning 227,400 pays 3.1 % FICA. In this regard its a regressive tax.

          ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

          by Roger Fox on Wed Mar 06, 2013 at 07:38:40 PM PST

          [ Parent ]

      •  After the 113k cap? (0+ / 0-)

        some argue FICA is regressive. And that if the 113k cap was removed, it would be 6.2% across the board.

        But yeah, its mostly flat.

        ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Wed Mar 06, 2013 at 07:35:12 PM PST

        [ Parent ]

    •  But an Estate is Income. Not Legally? nt (1+ / 0-)
      Recommended by:
      Norm in Chicago

      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 Wed Mar 06, 2013 at 05:56:49 PM PST

      [ Parent ]

  •  An Acquaintance Who Worked in County Gov't (7+ / 0-)

    told me once that you want to have a variety of taxes to make the overall income stream to government more stable over economic cycles. Maybe someone who knows more about that can say more about it.

    If estate taxes are not presently considered income taxes they definitely need to be put into that category. We need to brake the creation of dynastic wealth.

    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 Wed Mar 06, 2013 at 06:00:14 PM PST

    •  Under the current model (2+ / 0-)
      Recommended by:
      Involuntary Exile, dufffbeer

      your acquaintance may have a good point.

      Unfortunately, it comes at a heavy price because when the economy is suffering, many of the fixed taxes have to be paid regardless

      High property taxes might help the city, but they can break families who have lost all or part of their income.

      If the tax burden were fair, that in itself would generate a great deal of stability in the economy, and the deficit could then be used for it's proper purpose .... that of tiding us over the bad times.

      I completely agree about Estate Tax.

      I hope that the quality of debate will improve,
      but I fear we will remain Democrats.

      Who is twigg?

      by twigg on Wed Mar 06, 2013 at 06:06:54 PM PST

      [ Parent ]

    •  Gooserock - very good point (6+ / 0-)

      Income taxes vary significantly based on the economic cycle and decline just when state and local governments need more revenue. This is particularly true for high income earners who have much more variable incomes, driven by bonus payments and stock option related stock sales. In good times income taxes are high and in tough times income taxes can take a dip. Both California and New York depend on the high income earners for a surprising amount of their revenue and both states had challenges when the financial markets and economy declined. Sales and property tax revenues are much more stable, and predictable, and that is why most states have a mix of taxes.

      "let's talk about that"

      by VClib on Wed Mar 06, 2013 at 06:08:17 PM PST

      [ Parent ]

      •  Maybe Johhny made that number up (1+ / 0-)
        Recommended by:
        twigg

        2012 Intermediate scenario assumes 2.1% growth 69 out of 78 years, with no years higher than 4% (2015).

        See real GDP
        http://www.ssa.gov/...

        http://www.dailykos.com/...

        You should know by now I make a due diligence effort at getting my facts straight, and when I dont know something, I know enough to ask.

        ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Wed Mar 06, 2013 at 06:21:23 PM PST

        [ Parent ]

        •  Roger - I am confused (0+ / 0-)

          I wasn't commenting on anything johnny wrote.

          "let's talk about that"

          by VClib on Wed Mar 06, 2013 at 06:35:29 PM PST

          [ Parent ]

          •  You tipped his 4.4% comment (1+ / 0-)
            Recommended by:
            VClib

            ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

            by Roger Fox on Wed Mar 06, 2013 at 07:30:56 PM PST

            [ Parent ]

          •  He calls my dairy a Whale of a fail (0+ / 0-)

            and makes a number up.

            2nd time this week I called him on "Stuff made up" in my dairy. I still respect him, but.....

            SO when I see tips in a comment that is bullshit, in my dairy, I'm curious who tipped that comment.

            Now I have embarrassed myself by going on at great length about such a little thing.

            ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

            by Roger Fox on Wed Mar 06, 2013 at 07:46:15 PM PST

            [ Parent ]

          •  I got Economist Dean Baker for the SS blogathon (0+ / 0-)

            Hes writing on Productivity vs Demographics.

            I can give you a time slot on Friday, 1pm or 3pm?

            ...... Social Security blogathon March 25th thru March 29th. #HandsOffmySS FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

            by Roger Fox on Wed Mar 06, 2013 at 07:50:07 PM PST

            [ Parent ]

  •  Good diary (3+ / 0-)
    Recommended by:
    twigg, ybruti, dufffbeer

    T&r'd although not sure I agree with all of it. I actually like some sales taxes, specifically the cigarette tax which has been demonstrated to reduce smoking rates. We all benefit from lower smoking rates. I am sure not everyone will agree. I work in public health and that is my lens. I would bet carbon taxes would have a similar effect. Totally agree on copays, etc. the fine thing reminds me of Romney opening up his wallet and pulling out $50 to launch his boat. The rich live under a different set of rules, or rather the rules are not felt equally.

  •  Tax capital gains as regular income (3+ / 0-)

    That coupled with ditching the taxes you mention should make for a much fairer system.

  •  In looking at taxes on people, (2+ / 0-)
    Recommended by:
    twigg, Crider

    it's also important to consider the tax burden, or lack thereof, on corporations.

    Corporate honchos are fond of lamenting how they are subject to such a ruinously high rate. What is almost never said, and not recognized by the media or the man in the street, is that there are so many exemptions and loopholes and variations in the corporate tax structure that many of the largest and most profitable corporations pay taxes either at a ridiculously low actual rate or not at all --as witness the plea overriding sign-ins here a while back, urging people to complain because Facebook won't have to pay any taxes this year.

    Close those loopholes, get the big corporations paying something remotely close to fair share, say even 15-20%, and the resulting income stream would solve most of our financial problems right away.

    You have been told that Real Life is not like college, and you have been correctly informed. Real Life is more like high school. -- Meryl Streep

    by Mnemosyne on Wed Mar 06, 2013 at 06:20:25 PM PST

    •  why is it, republicans never point at (1+ / 0-)
      Recommended by:
      twigg

      corporate freeloaders?
      There is considerable expense associated with businesses, much higher fire equipment for instance.  Larger capacity water/sewer systems.  but, they're people too, so let them pay the same rate as everyone else and listen to the screams....

    •  "Corprorations are people, my friend" (2+ / 0-)
      Recommended by:
      joedemocrat, Mnemosyne

      And their income 9profit) should be taxed in the same manner.

      They want to be people when they want rights, less so when responsibilities are mentioned :)

      I hope that the quality of debate will improve,
      but I fear we will remain Democrats.

      Who is twigg?

      by twigg on Wed Mar 06, 2013 at 06:38:13 PM PST

      [ Parent ]

    •  A tax on gross sales (0+ / 0-)

      rather on 'profits' would greatly clean up corporate malfeasance. And the actual rate could be quite low compared to the income rate.

      Also sales taxes and gasoline taxes should be high enough to discourage rampant consumerism which is helping to destroy the environment. I like the VAT-style idea where there is a sales tax on every step of production. An apple wouldn't be taxed, but a frozen pizza with fifty ingredients would be highly taxed. A high gasoline tax would get people into fuel-efficient cars. A carbon tax should be added to all fossil fuels at the wholesale first-level sale.

      Also, an annual progressive wealth tax would nicely sock it to billionaire assholes. It would eliminate the moneyed ruling class in a generation.

      Then, income taxes from work or production can be eliminated. I'm not so fond of income taxes from productive activity. Capital gains? It ain't work, so it gets taxed.

      "Societies strain harder and harder to sustain the decadent opulence of the ruling class, even as it destroys the foundations of productivity and wealth." — Chris Hedges

      by Crider on Wed Mar 06, 2013 at 07:09:32 PM PST

      [ Parent ]

      •  A high gas tax (1+ / 0-)
        Recommended by:
        twigg

        also punishes people who live in rural areas, and people who can't afford a shiny new fuel-efficient car.

        "A lie is not the other side of a story; it's just a lie."

        by happy camper on Thu Mar 07, 2013 at 06:44:04 AM PST

        [ Parent ]

        •  There's plenty of older fuel-efficient cars (1+ / 0-)
          Recommended by:
          twigg

          I live rural myself and because of our low population density we need much more money to build and maintain our roads. Cars are fucking up the air and we need to do something about it — not subsidize them.

          "Societies strain harder and harder to sustain the decadent opulence of the ruling class, even as it destroys the foundations of productivity and wealth." — Chris Hedges

          by Crider on Thu Mar 07, 2013 at 09:48:36 AM PST

          [ Parent ]

  •  They should just tax poverty. (2+ / 0-)
    Recommended by:
    Gooserock, twigg

    then there wouldn't be anyone that wants to be poor.  :/

  •  I would support a tax on financial transactions (4+ / 0-)
    Recommended by:
    journeyman, twigg, ybruti, happy camper

    or the Robin Hood tax

    I do agree our tax system is regressive, and needs to be a lot more progressive...

    I also support corporate tax reform that would penalize corporations that don't invest in America..

    As a member of Courtesy Kos, I am dedicated to civility and respect for all kossacks, regardless of their opinions, affiliations, or cliques.

    by joedemocrat on Wed Mar 06, 2013 at 06:59:55 PM PST

    •  In the current climate (1+ / 0-)
      Recommended by:
      joedemocrat

      so would I.

      However, it is only being proposed because of the need to raise revenue both here and in Europe. Revenue that would be unnecessary were the tax codes, and rates, levied more equitably.

      I hope that the quality of debate will improve,
      but I fear we will remain Democrats.

      Who is twigg?

      by twigg on Wed Mar 06, 2013 at 07:08:26 PM PST

      [ Parent ]

      •  We need to raise A LOT (1+ / 0-)
        Recommended by:
        twigg

        of revenue. I also support removing the tax cap on social security...

        As a member of Courtesy Kos, I am dedicated to civility and respect for all kossacks, regardless of their opinions, affiliations, or cliques.

        by joedemocrat on Wed Mar 06, 2013 at 07:11:47 PM PST

        [ Parent ]

        •  joe - unless you also allow benefits to rise (0+ / 0-)

          in a similar fashion it would be a fundamental change in SocSec turning it into an income redistribution program, something that was never intended by FDR. For high income earners, particularly the self employed or small business owners, it would make SocSec a second income tax.

          "let's talk about that"

          by VClib on Wed Mar 06, 2013 at 08:04:05 PM PST

          [ Parent ]

  •  One assumes in your tax paradigm (1+ / 0-)
    Recommended by:
    twigg

    there would be a cohort who will pay no taxes or fines because they don't have the ability, as defined, presumably, by one or another government. By definition, everyone else in that government's jurisdiction does have that the ability, and would be assessed in some fashion, and you assume it will be progressive in nature. Some questions occur:

    What would be the Federal authority for preventing States from instituting other forms of taxation, according to their respective Constitutions?

    What is the mechanism for reconciling public wants and needs? Why would the non-taxed cohort have any reason to discriminate between the two?

    where is the boundary where employers might determine might determine that operating extra-nationally was more efficient?

  •  In our city in the November election (2+ / 0-)

    we voted to extend a tiny sales tax to continue to support the library. Around 73% of the voters approved the tax. A member of the Green Party told me he voted against the much-needed tax because a sales tax is regressive and libraries should be supported by property taxes.
         The difficulty with property taxes in recent years is that home values have deteriorated and property taxes have been lowered accordingly, which has led to a reduction in services. The city does not collect income taxes, although the state does.
         Washington state does not have a personal or corporate income tax, and Oregon has no sales tax. Many people choose to live in Washington state to avoid state income tax, and shop across the border in Oregon to avoid sales taxes.

    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 Wed Mar 06, 2013 at 09:10:07 PM PST

    •  That was my point (1+ / 0-)
      Recommended by:
      ybruti

      about the distortion of local markets that those taxes bring about.

      The absence of personal and corporation taxes is a political decision, not an economic one ... As such it can be changed if we can move the politics.

      I hope that the quality of debate will improve,
      but I fear we will remain Democrats.

      Who is twigg?

      by twigg on Wed Mar 06, 2013 at 09:32:10 PM PST

      [ Parent ]

  •  I like your ideas (0+ / 0-)

    I also want to point out that red light cameras make a lot of money for their cities but they make traffic safety worse.

  •  Taxes don't fund fed gov spending. Once we (0+ / 0-)

    absorb this reality of our fiat monetary system -- ie, that our fed gov creates dollars out of thin air -- then I think we can see the real purpose of taxing more clearly.

    And it seems to me that, once we realize that taxes regulate inflationary pressures, we're in a better position to realize that what we want to do is tax away unfair gain.

    So, we don't want to tax labor, innovation and industry.

    I'm interested in Henry George's ideas of a single land tax, though have yet to fully understand it.

    Maybe that wouldn't be enough, but it does seem to me that taxes should tax away the money earned through not making anything, rather than through making stuff.

  •  In an economy based largely on the (0+ / 0-)

    consumer-producer cycle, the principles governing taxation ought to be aimed at minimizing the its deleterious effects on economic activity. There are inherent areas of leakage in the economy where monetary assets become sequestered and cease to be productive. Taxes are themselves a major leakage, but so are trade deficits and savings (which in economic terms is money neither spent nor invested). In its initial iteration, the federal income tax was aimed at unearned income from economic rents. Only the top 1% were subject to the tax. !00 years ago the idea of the "Free Market" was NOT a market free of regulation as is sought after today, it was a market free of predators, monopolists and rentiers.

    Taxing labor and commodity consumption is like driving down the highway with one foot on the gas and the other on the brake. It's like taking someone weak with anemia and treating them to a good bleeding. But, it's really, really good for the rich who can dispatch their wealth to multiply off the labor of the unwashed but well taxed masses.

  •  The complexity (1+ / 0-)
    Recommended by:
    twigg

    of the tax code increases as you move up the economic scale. For most people it's pretty straightforward. The real clusterfuck is business, rental property, and investments in general, where the code has become a maze of special exemptions and credits.

    The true purpose of the tax system--other than the obvious one of financing government operations--is to prevent hoarding. When the product of labor (money) is not allowed to circulate freely in the economy, you get the situation we now find ourselves in, with huge corporate profits, the rich getting much richer, and the economy stagnant.

    As you said in the diary, the rich once paid tax rates that would now be considered confiscatory, and the economy thrived. The rich were still rich, too.

    Capitalism is like a game of Monopoly. Once all of the money is in one person's hands, the game is over.

    "A lie is not the other side of a story; it's just a lie."

    by happy camper on Thu Mar 07, 2013 at 06:57:12 AM PST

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