[BRussell]

So now that national Democrats are in the worst shape they've been in for generations, they've got a plan!

Here are the basics including my summaries. Read more here.

Standing with our troops.
Increase numbers by 40,000. Guard and Reserve Bill of Rights. Improved income and health care.

Targeting the terrorists more effectively.
Increase Special Ops forces by 2000. Target institutions that spawn terrorists. Safeguard nukes.

Fulfilling our duty to America's veterans.
Improved health care. 21st Century GI Bill.

Expanding economic opportunity.
Restore overtime protection. Eliminate tax incentives to take jobs overseas. Create jobs with spending on infrastructure. Better trade policy.

Quality education for all.
Increase support for preschool. Fully fund and improve implementation of No Child Left Behind. Tuition scholarships for teachers going into math, science, and special ed. Make college more affordable.

Making health care more affordable.
Prescription drug reimportation. Protect Medicaid. Tax credits for small business to offer health care to employees.

Democracy begins at home.
Same day voter registration. Verification, accountability, and accuracy for voting. Modernize voting equipment.

Meeting our responsibility to Medicare Beneficiaries
Improve Medicare.

Fiscal responsibility.
Balance the budget.

Putting prevention first.
Reduce abortions by reducing unintended pregnancies.

It's not nearly as nicely done as the "Contract with America" in 1994, but hey, these are Democrats, what do you expect? I'd like to see it simpler and more radical. Mine would include these:

� Single-payer health care. Yup, the gubberment.

� Don't privatize social security, OK?

� Fight terrorism. You know, fight the actual terrorists, not the, you know, non-terrorists.

� Dump the anachronistic electoral college, improve voting equipment to ensure accuracy.

� Tax reform: Exempt people making less than $50,000 from federal income taxes, tax everyone else at a flat rate of 40%.

� New federalism. Guarantee states that want to improve the civil rights of citizens (gay marriage, drug legalization, etc.) that the federal government will not interfere. Shocking, I know.

You get the idea. But I can't think of 10 things right now.

[vmpaul]

You radical, tree-hugging leftie...

Actually , that sounds pretty good except the 40% flat tax. 40% on top of my State taxes and then on top of my FICA deductions? Sorry, no way.

Anyway, it all sounds reasonable and that's exactly why it'll never happen.

[BRussell]

Originally posted by vmpaul:
You radical, tree-hugging leftie...

Actually , that sounds pretty good except the 40% flat tax. 40% on top of my State taxes and then on top of my FICA deductions? Sorry, no way.

Anyway, it all sounds reasonable and that's exactly why it'll never happen.

I stated it badly, I should have said exempt the first $50,000 of everyone's income, and tax the rest at 40%. So if you make $60,000, only $10,000 would be taxed at 40%.

I just think our tax system ought to be much, much more progressive, and I think that's a place Democrats ought to go. I also think they should be bolder about health care, first because I think people want something done, including businesses, and second because the costs are killing us. We need to move toward more of an HMO-like system, IMO.

[vmpaul]

Ok, that sounds better. Again, too reasonable to happen.

IMO, health care will only change when we're at crisis mode (we're close but not there yet). That seems to be the only way things get done in this country. We are the poster child for crisis management. I'm not a pessimist but if there's one thing to be learned from our last election it's that people vote on perception rather than facts.

[Sherwin]

40% flat tax? Whatever would you do with all the revenue?

I'm pretty sure that any country can get by on a 20% rate if they haven't got an army, 25% (ish) if they have - and that's with free healthcare for the poor.

[BRussell]

Originally posted by Sherwin:
40% flat tax? Whatever would you do with all the revenue?

I'm pretty sure that any country can get by on a 20% rate if they haven't got an army, 25% (ish) if they have - and that's with free healthcare for the poor.

40% flat tax, but with a $50,000 standard exemption. That's a big exemption. A whole lotta money comes in right now from people making around $50,000. I agree that 20-25% average effective tax rate (i.e., just simple % of income, assuming no deductions) is about right. I think our federal rate is in the low 20%s, not including state taxes. But we're also significantly underfunded right now.

[SimeyTheLimey]

Originally posted by BRussell:
40% flat tax, but with a $50,000 standard exemption. That's a big exemption. A whole lotta money comes in right now from people making around $50,000. I agree that 20-25% average effective tax rate (i.e., just simple % of income, assuming no deductions) is about right. I think our federal rate is in the low 20%s, not including state taxes.

A fairly well established tax theory is that everyone who works should pay some tax. It doesn't have to be a lot, but it should be something. That helps prevent the "bread and circuses" problem that comes from people having the ability to vote for a government that they don't have to pay for.

A $50,000 exemption basically excludes the majority of the people from all responsibility for paying for the government they elect. That seems to me to be a very bad idea. A better idea is spreading the burden more evenly so that everyone carries at least some of the burden.

In any case, tinkering with the income taxes doesn't really do much when so much of the real burden that working people feel comes from Social Security taxes. For many people toward the bottom of the scale, Social Security and Medicare cost more of their paycheck than income taxes. Both those taxes are sharply regressive.

In addition, Social Security is paid out regardless of the income of the recipient. Thus, poor people pay in, and in many cases, relatively rich people draw out. If the Democrats were to support means testing and meaningful reform of the Social Security system (including turning it into an investment system, rather than an intergenerational ponzi scheme) I would applaud. But I won't hold my breath.

[Sherwin]

Originally posted by BRussell:
40% flat tax, but with a $50,000 standard exemption. That's a big exemption. A whole lotta money comes in right now from people making around $50,000. I agree that 20-25% average effective tax rate (i.e., just simple % of income, assuming no deductions) is about right. I think our federal rate is in the low 20%s, not including state taxes. But we're also significantly underfunded right now.

OK, so there's a �50,000 standard exemption - this means that the few who earn substantially more than $50,000 will be paying extra to make up for those under $50,000.
IMO, this is not a good thing - if you did this, you'd suddenly find yourself with all the rich people leaving for sunnier climes. Those rich people provide employment for normal folks, so there'd be a lot of normal folks out of a job. Those normal people without jobs would then suck resources out of the system, creating the need for more taxation, leading to more people jumping ship. Thus the downward spiral starts.

I agree with the flat tax and the exemption, but not at those levels. 25% and $10,000 would be more like it, I think.

[chabig]

Same day voter registration. Verification, accountability, and accuracy for voting.

While this may sound nice to some, the reality is that same day registration is the polar opposite of verification and accountability.

Chris

[spacefreak]

Originally posted by BRussell:
So now that national Democrats are in the worst shape they've been in for generations, they've got a plan!

I'll believe it when the legislation hits the floor, and the Democrats hit the pavepent to promote the legislation. Until then, it's just fluff.

We all want those things. Developing a clear, concise, and detailed plan is the hard part. It appears to be a start, however, and that's a good thing.

My main complaint about Democrats over the past 3 years has been their inactivity in terms of drafting and promoting significant legislation, instead choosing to obstruct and bash all the legislative work done by Republicans.

[BRussell]

Originally posted by SimeyTheLimey:
A fairly well established tax theory is that everyone who works should pay some tax. It doesn't have to be a lot, but it should be something. That helps prevent the "bread and circuses" problem that comes from people having the ability to vote for a government that they don't have to pay for.

Sure, broadening the tax base and all that. It makes sense on one level, although I believe the concept is usually applied to getting rid of specific deductions for very small groups, rather than standard exemptions that apply to everyone. But my problem is that I think it has been used as a cover for a philosophy of shifting the tax burden from the wealthy to the middle class, exemplified by this WSJ editorial.

Over the past decade or so, fewer and fewer Americans have been paying income taxes and still fewer have been paying a significant percentage of income in taxes. While we would opt for a perfect world in which everybody paid far less in taxes, our increasingly two-tiered tax system is undermining the political consensus for cutting taxes at all.

They're calling for tax increases on the lower class and tax cuts for the wealthy, and the reason they want tax increases is because otherwise, those people won't want tax cuts. That just doesn't make sense to me, and strikes me as more of a political ploy than a genuine philosophy of a broad tax base.

Furthermore, even if you did exempt those making under $50,000 from federal income taxes, they're still paying plenty of taxes in the form of payroll taxes, sales taxes, state taxes, property taxes, etc. That's where those WSJ editorials are deceptive. If those folks truly paid no taxes, I'd understand the argument better.

We've always had a standard deduction for income taxes, and I believe the philosophy has always been that a certain amount to live on would be completely exempt from income taxes. I'm just saying that it's time to raise that standard deduction significantly. Part of the reason I say that is that we have absolutely incredible wealth in the US - several hundred billionaires. That wealthy class has seen their wealth vastly increase over the past several decades, while the less-wealthy classes have remained relatively flat. In that context, it makes no sense to me to lower the burden of government on the wealthy and raise it on everyone else. I believe that exactly the opposite is called for.

But I guess another way to do it would be to have a drastically more progressive set of rates, say starting at 1%.

[SimeyTheLimey]

Originally posted by BRussell:
Sure, broadening the tax base and all that. It makes sense on one level, although I believe the concept is usually applied to getting rid of specific deductions for very small groups, rather than standard exemptions that apply to everyone. But my problem is that I think it has been used as a cover for a philosophy of shifting the tax burden from the wealthy to the middle class, exemplified by this WSJ editorial.

Yes, but you want to exclude upwards of (I'd guess) 90% of the working population from paying income taxes altogether. That's an extremist postion. $50,000 for a single person or $100,000 for a married couple filing jointly is well in excess of the average incomes for all Americans. It's just terrible policy because you will lose all restraint on tax policy. A bloc large enough to pass any further tax increase could pass it over the objection of the 10% or so who would actually finance the federal government. They could also vote any spending policy they want because they would know that they would never need to pay for it. It's a stupid idea. Forget it.

[NYCFarmboy]

I'm for eliminating the tax-free status of govt. tax-free & municipal bonds. That is just a billionare tax loophole.

I'm also for elimating the state-tax deduction on federal taxes...this is just a boondoggle for high tax states to spread the tax burden more on people on states that don't have high state taxes.

I'm also against any lower rate of taxes on dividends, the rates should be the same irregardless of what source of income you get.

Eliminate all tax shelters & exemptions on any income for tax purposes.

If people know how little taxes the VERY rich really paid it would infuriate you.

Why not just have a flat tax, 10% across the board for everyone for every dime made, whether someone makes 10,000 a year on welfare, or 1,0000,0000000,00000 a year. Yes that rate is probably too low but thats my preference anyhow.

I'm against progressive taxes as that is not fair either...that is just communism. If you don't like rich people just shoot them and be honest about your feelings...they tried that in the Soviet Union in the 1920's & 30's...they ended up killing about everyone..it is not a good road to go down.

[BRussell]

Originally posted by SimeyTheLimey:
Yes, but you want to exclude upwards of (I'd guess) 90% of the working population from paying income taxes altogether.

I was thinking household rather than individual income. A household income of $50,000 is in the middle quintile, so it wouldn't exclude that many people.

It's a stupid idea.

It's a brilliant idea. Just admit it.

[olePigeon]

I'd make it a $25,000 exemption. 15% up to 50,000, then 30% anything over.

Oh, and a decrease of 5% for teachers from 2-year colleges and below. NOT faculty.

[SimeyTheLimey]

Originally posted by BRussell:
I was thinking household rather than individual income. A household income of $50,000 is in the middle quintile, so it wouldn't exclude that many people. It's a brilliant idea. Just admit it.

Incomes aren't filed by household. Also, excluding 50% from all responsibility for paying for the government they elect is still a terrible idea.

[Taliesin]

Originally posted by BRussell:


Targeting the terrorists more effectively.
Increase Special Ops forces by 2000. Target institutions that spawn terrorists.

Huh, how that, should the special ops target the pentagon? Or the CIA?

If so, I'm all for it and would vote the democrats, if I were american, that is.

Taliesin

[DeathToWindows]

Originally posted by Sherwin:

I agree with the flat tax and the exemption, but not at those levels. 25% and $10,000 would be more like it, I think.

That sounds similar to the current policy for enrolled college/grad students - up to $8500, no income tax and 10% after, sliding

[BRussell]

Originally posted by SimeyTheLimey:
Also, excluding 50% from all responsibility for paying for the government they elect is still a terrible idea.

Not all responsibility, just federal income taxes. We already have so many exemptions and deductions that we're almost there anyway, the BRussell tax plan would just make it simpler and give it a flat rate. I got my W-2 today, and I believe I'm only paying around 5% of my income in (federal income) taxes, and that's over the $50,000 cutoff.

[SimeyTheLimey]

Originally posted by BRussell:
Not all responsibility, just federal income taxes. We already have so many exemptions and deductions that we're almost there anyway, the BRussell tax plan would just make it simpler and give it a flat rate. I got my W-2 today, and I believe I'm only paying around 5% of my income in (federal income) taxes, and that's over the $50,000 cutoff.

Federal income taxes are the primary way the federal government is financed. It's just not good public policy in a democracy to give the majority of people the idea that they get their government for free and that they can make some other guy pay for it all. You create an irresponsible incentive for people to use the government for oppressive and selfish means.

That's not the same thing as cutting out the bottom 10% or so from paying income taxes. I don't have a problem with that, because 10% of the population isn't enough to exempt itself from paying taxes. The only way 10% is exempted is by means of a coalition with at least another 41%, sufficient to create a majority. There is a built in check there that restrains the free rider impulse.

If this seems difficult to comprehend, suppose instead the Republicans design a tax system that said that only people who live in New England will pay federal income taxes. The rest of the country gets off scot free but retains the power to increase the taxes of New Englanders as much as they like. They retain that power because they are the majority while New Englanders are a minority of the population. Would that be a good public policy?

Wouldn't that encourage everyone else to pay themselves more and more money, and raise taxes on New Englanders higher and higher knowing that no matter how painful it is for New England, there is nothing that New Englanders can do politically to stop the rest of the country from robbing them?

No. Bad idea. Everyone should theoretically pay at least some of the burden. If you get the benefits of government, you should pay some of the cost. If you want more benefits, you pay more cost. It's OK to exclude the poor, but you can't allow the majority to exclude themselves. It's not just a stupid idea, it is actually dangerous. I called it Bread and Circuses for a reason.



Irrelevant aside -- I don't know how you get away with only 5% federal income taxes. That seems off to me.

[finboy]

Originally posted by NYCFarmboy:
I'm for eliminating the tax-free status of govt. tax-free & municipal bonds. That is just a billionare tax loophole.

I'm also for elimating the state-tax deduction on federal taxes...this is just a boondoggle for high tax states to spread the tax burden more on people on states that don't have high state taxes.

The tax-deductibility of municipal bond income (by bondholders) is a method to make sure that the Feds don't tax state/local debt into irrelevance. Imagine that the Fed govt. decided that they could tax individual revenue on state and local obligations, at 100%, for instance.

[NYCFarmboy]

Originally posted by finboy:
The tax-deductibility of municipal bond income (by bondholders) is a method to make sure that the Feds don't tax state/local debt into irrelevance. Imagine that the Fed govt. decided that they could tax individual revenue on state and local obligations, at 100%, for instance.

That is why there should be a flat tax on everyone ..10/20% whatever it is, all income should be taxed.

The tax-deductibility of bond income is an outrage that most people don't realize happens. Yes it is great if you are super rich and can get all of your income that way so you don't have to pay any taxes.

I'm not saying tax it at 100%, I'm just saying tax it like you would all other income and return fairness to the system.

[dcmacdaddy]

Originally posted by NYCFarmboy:
I'm for eliminating the tax-free status of govt. tax-free & municipal bonds. That is just a billionare tax loophole.

I'm also for elimating the state-tax deduction on federal taxes...this is just a boondoggle for high tax states to spread the tax burden more on people on states that don't have high state taxes.

I'm also against any lower rate of taxes on dividends, the rates should be the same irregardless of what source of income you get.

Eliminate all tax shelters & exemptions on any income for tax purposes.

If people know how little taxes the VERY rich really paid it would infuriate you.

Why not just have a flat tax, 10% across the board for everyone for every dime made, whether someone makes 10,000 a year on welfare, or 1,0000,0000000,00000 a year. Yes that rate is probably too low but thats my preference anyhow.

I'm against progressive taxes as that is not fair either...that is just communism. If you don't like rich people just shoot them and be honest about your feelings...they tried that in the Soviet Union in the 1920's & 30's...they ended up killing about everyone..it is not a good road to go down.

I have advocated something similar to this in other threads on this topic.

ALL income (from salaries, saving, investments, property sales, bonds, whatever) gets taxed at a flat rate, say 15%. That way I know that know matter how much money I make in a year, only 15% of it goes to the government.

If I have a good year with my investments, then so does the government in terms of how much they get from me. If I am an independent contractor and didn't do so hot this year business-wise, the government doesn't get that much from me this year.

But, we need a simple solution that everyone can embrace and keep the wealthy from using tax shelters to hide their income. Everything that increases an individual's net wealth should be treated as income and taxed at this flat rate, with NO exemptions.

[BRussell]

Originally posted by SimeyTheLimey:
Federal income taxes are the primary way the federal government is financed. It's just not good public policy in a democracy to give the majority of people the idea that they get their government for free and that they can make some other guy pay for it all. You create an irresponsible incentive for people to use the government for oppressive and selfish means.

1. Middle income people would still be paying plenty of taxes, just not federal income taxes. I think only the wealthy should pay income tax. You want everyone to pay something - they do, in the form of other taxes.

2. When it comes to paying taxes, wealth is fundamentally different from other categorizations like geography. The original income taxes in the US were not too different from my plan - only the wealthy paid.

3. You may not realize it, but we're really already there. Just about all of the income taxes are paid by the top 50%. The only difference with my proposal is the flat rate and the single exemption rather than lots of little ones.

4. I guess I have more faith in people than you.

5. I don't get the Bread and Circus reference. I thought that was a reference to opiate of the masses kinds of entertainment, like the Roman colosseum games.

Irrelevant aside -- I don't know how you get away with only 5% federal income taxes. That seems off to me.

My income on my W-2 was $64,000 and my federal income taxes withheld is $5200. Last year I think I got about $1500 refunded (those child tax credits have a huge impact), and if it works out the same this year, that's about 5%. Of course that doesn't include all the other things like FICA, but that's my point. If you look at this, under "effective individual income tax rate," middle income quintile, it says 3.8%. And that's 2001 - there have been big tax cuts since then. I'm probably above the middle quintile a bit, but 5% with two kids isn't too far off.

[pooka]

Originally posted by BRussell:
My income on my W-2 was $64,000 and my federal income taxes withheld is $5200.

Dude, I paid more than that in fuel tax alone transporting my massive reproductive organs across the country this year. How did you manage that?

[SimeyTheLimey]

Originally posted by BRussell:
1. Middle income people would still be paying plenty of taxes, just not federal income taxes. I think only the wealthy should pay income tax. You want everyone to pay something - they do, in the form of other taxes.

Plainly. But tax scholars (yes, including liberals like my tax professor) and political scientists strongly disagree.

The other taxes are irrelevant because they don't go to the federal government. We are talking about the majority deciding that they don't have to pay for the federal government. It's not a good idea. But fortunately, nobody responsible in either party is suggesting any such policy.

5. I don't get the Bread and Circus reference.

Bread and circuses does indeed come from the fall of the Roman Empire. It's when the majority decide that they can keep voting themselves bread and circuses without any regard for paying for it by sticking it to other people. It starts the downward spiral.

I don't care about your individual taxes, but I'd suggest you look at those numbers because they sound very out of whack with current rates.

[Sherwin]

Originally posted by BRussell:
I think only the wealthy should pay income tax.

This is wrong on so many levels.

[BRussell]

Originally posted by pooka:
Dude, I paid more than that in fuel tax alone transporting my massive reproductive organs across the country this year. How did you manage that?

We're talking federal income tax.

If you and Simey don't believe those tax rates, just look here and here to see the following:

household income and effective income tax rate

0 to $18,000 ---- -6%
18 to $34,000 ---- 0%
34 to $54,000 ---- 4%
54 to 87,000 ------ 7%
87,000 and up ---- 16%

Households that make less than $18000 get an average of 6% of what they make when they file taxes. Households that make 18 to $34,000 pay on average nothing in federal income taxes. Households that make 34,000 to 54,000 pay on average 4% of their income, i.e., around $1500. Even people making between 54 and 87,000, i.e., people that are pretty well off, still only pay on average 7% in federal income taxes.

I think it's important to state what people really pay, because you hear people say "I make $30,000 and I paid half of that in income taxes!" or some other nonsense. Yes there are a lot of other taxes like payroll taxes and sales taxes and all that. But most people right now pay very little in federal income taxes.

I said I think I pay about 5%, which seems exactly right to me if I'm in the low end of the 4th quintile and take into account the tax credits from two kids.

Again, just federal income tax, not including all the other things.

[SimeyTheLimey]

Nobody here but you is trying to argue percentages. It's really not relevant here. We were just startled by your 5% claim because most of us see withholdings well above that. Your personal taxes are between you and the IRS.

[pooka]

My apologies. I wasn't looking for an argument and did not intent to come across as not believing you. I was just looking for an excuse to bring up my package in a thread about taxes.

[BRussell]

Originally posted by SimeyTheLimey:
Nobody here but you is trying to argue percentages. It's really not relevant here. We were just startled by your 5% claim because most of us see withholdings well above that. Your personal taxes are between you and the IRS.

Huh? You didn't think 5% was right. 5% is a percentage. The table shows that other people pay around that same percentage, which suggests my 5% estimate is not off-base. How are percentages not relevant? It wasn't my withholding either, that was closer to 10%. I'm just estimating total taxes based on an expected refund.

My personal taxes aren't the point, and I haven't done them yet so I don't really know. I just wanted to show how people below $50,000 even today pay very little, if any, in federal income taxes. My proposal to exempt the first $50,000 and get rid of other deductions is really not as different from what's happening now as you suggest.

[BRussell]

Originally posted by pooka:
My apologies. I wasn't looking for an argument and did not intent to come across as not believing you. I was just looking for an excuse to bring up my package in a thread about taxes.

I didn't get that the first time. I thought maybe you worked in the medical field in organ transplants or something.

[SimeyTheLimey]

Originally posted by BRussell:
My personal taxes aren't the point, and I haven't done them yet so I don't really know. I just wanted to show how people below $50,000 even today pay very little, if any, in federal income taxes. My proposal to exempt the first $50,000 and get rid of other deductions is really not as different from what's happening now as you suggest.

I don't think it is correct to say that people making $50k, or even $20K pay very little in taxes. They do pay a sum that is significant to them and which they notice. That's all that is necessary to maintain the linkage between voting for a tax and paying for it.

Reduce that linkage to zero and you remove the inhibiting mechanism that prevents democratic control over tax policy from becoming simply a license for the popular majority to rob the minority.

That's the theory and the danger, and it is accepted by tax scholars from all sides -- liberal (like my tax prof who introduced me to this issue) as well as conservatives. You and the Communists are pretty much alone on not seeing this.

[BRussell]

I don't disagree with the principle of a broad tax base. But there are other principles that I'd argue are also important. I like the idea of a flat rate. Marginal rates discourage investment. But flat rates tend to be regressive. So how do you get a progressive flat tax? You put in a large standard deduction. You might say that you're violating the "broad tax base" principle when you put in a large standard deduction, but when you have a broad tax base with a flat rate, you violate the principle of progressivity. There just isn't a perfect tax system.

You focus on the danger of people sticking it to the rich. I don't disagree that it's a problem, at least in theory. But would you recognize that another danger is the rich sticking it to the poor?

This Social Security situation we're in is a perfect example. Reagan and Greenspan raised FICA taxes on the poor in the 80s, with the promise that in the future they'd raise taxes on the wealthy to pay for the projected SS shortfall. So what do we do in the future? We lower taxes on the wealthy, and then say SS can't survive. That kind of thing concerns me. I don't want to be without compassion toward the wealthy, but I see more sticking-it-to-the-poor than sticking-it-to-the-rich.

I also think you're still not recognizing the reality of the current income tax system. That's why you were surprised at the 5% figure I gave above for my effective tax rate. In that WSJ editorial I linked above, they say this:

The most recent data from the IRS, in 2000, show that the top 5% coughed up more than half of total tax revenue. Specifically, we are talking about folks with adjusted gross incomes of $128,336 and higher being responsible for 56% of the tax take. Eyebrows raised? There's more. The top 50% of taxpayers accounted for almost all income tax revenue--96% of the total take.

That's the current system, not some weird tax proposal by BRussell on MacNN message boards. What they say is a bit sneaky, because although they're talking only about federal income tax, they use the term "tax" and "total tax revenue" as if they're talking about all taxes.

I want to repeat this: The poor and middle class are paying plenty in taxes. I would explicitly use the federal income tax to correct for the regressivity in those other taxes. I'm not saying the lower-middle class should pay no taxes. They just shouldn't pay federal income taxes. But I've already stated that so I suppose it won't help to state it again. So go ahead and respond that it's stupid to not make everyone pay taxes.

[SimeyTheLimey]

Originally posted by BRussell:
I don't disagree with the principle of a broad tax base. But there are other principles that I'd argue are also important. I like the idea of a flat rate. Marginal rates discourage investment. But flat rates tend to be regressive. So how do you get a progressive flat tax? You put in a large standard deduction. You might say that you're violating the "broad tax base" principle when you put in a large standard deduction, but when you have a broad tax base with a flat rate, you violate the principle of progressivity. There just isn't a perfect tax system.

The point of a flat tax is to do away with progressivity. You can't be for both a flat tax and for progressivity, that's a contradiction. You get to pick one or the other, not both.

What you are in fact arguing for is a punitively progressive tax system where most people pay zero, and a small number pay everything (at confiscatory rates). No, no, no, for the reasons I have stated above. Nobody is going to go for a dangerous and fundamentally democracy-destroying system in order to tinker with the tax rates. The gain doesn't outweigh the enormously destructive and well understood social costs.

If you want to go for a flat tax, that's fine with me. It's still radical and you still lose a lot of things that many people feel are important in a tax code, but I think they are fairer than the current class-envy based progressive tax rates. I'd also allow a modification to it to exclude a small percentage at the bottom of the income scales. I have no problem with a compassionate tax system that excludes those struggling with the basics of economic survival. (Note: if you really have a flat tax, the exclusion would no longer be a standard deduction, because there wouldn't be non-standard deductions). But that is just a modification to a flat tax. If you go beyond that it is no longer a flat tax. It's just a badly-designed progressive tax system.

On the burdens paid, you are mixing apples and oranges. Of course wealthy people pay out the most dollars into the Treasury -- they have the biggest incomes to pay them out of, and because taxes are calculated by percentage of incomes, those with biggest incomes pay out more dollars. That isn't the same thing as saying that ordinary taxpayers don't pay out a significant amount as a percentage of their incomes. Most especially not when compared to other non-optional living expenses.

You have to decide which perspective you are looking at this from and pick one, not muddle two perspectives up. The WSJ article you cited is looking at it from the point of view of the Treasury receiving revenue. That isn't the same as the perspective of a taxpayer paying taxes. Mixing the two measures is confusing and potentially misleading. You can't say for example, that because the upper brackets pay the most into the Treasury, the individual tax burden on poorer tax payers is negligible. From the individual taxpayer's point of view, his personal tax bill isn't negligible when he has to pay it. What someone else paid or some abstract notion about quintiles in the economy doesn't alter the size of their individual bill and the pain of paying it.

With respect, I believe I have a reasonable handle on how the income tax code basically works. I did pretty well in "baby tax."

[BRussell]

Originally posted by SimeyTheLimey:
What you are in fact arguing for is a punitively progressive tax system where most people pay zero, and a small number pay everything (at confiscatory rates). No, no, no, for the reasons I have stated above. Nobody is going to go for a dangerous and fundamentally democracy-destroying system in order to tinker with the tax rates. The gain doesn't outweigh the enormously destructive and well understood social costs.

For the Nth time, I'm not talking about people paying nothing. Everyone would still play plenty of taxes but just in other forms - payroll, sales, state income taxes, property, fees, etc. etc. Those are mostly regressive taxes, so a highly progressive income tax would balance it out, not exempt people from paying any taxes.

On the burdens paid, you are mixing apples and oranges. Of course wealthy people pay out the most dollars into the Treasury -- they have the biggest incomes to pay them out of, and because taxes are calculated by percentage of incomes, those with biggest incomes pay out more dollars. That isn't the same thing as saying that ordinary taxpayers don't pay out a significant amount as a percentage of their incomes. Most especially not when compared to other non-optional living expenses.

OK, fair enough, but I did post that table above that shows how much people pay as a percentage of their income. For example, people making 18 to 34,000 pay an average of zero, and people in the lowest group get back an average of 6% of what they make when they file. Either you just don't believe those numbers, or you have to somehow reconcile them with your belief that these people are paying more than those numbers suggest.

[SimeyTheLimey]

Originally posted by BRussell:
For the Nth time, I'm not talking about people paying nothing. Everyone would still play plenty of taxes but just in other forms - payroll, sales, state income taxes, property, fees, etc. etc. Those are mostly regressive taxes, so a highly progressive income tax would balance it out, not exempt people from paying any taxes.

We are only talking here about federal income taxes. That's the tax that pays for things that Congress does. Congress is the body that has the power to impose taxes on people. You can't have a majority exempting itself from paying a tax and at the same time voting to levy that tax entirely on minorities. You have broken the link between the power to tax, and the responsibility to pay for that tax.

What people pay for state taxes and excises is a separate issue because those are separate taxes. Theoretically, they should be broad-based as well. For example, state income taxes should be broad-based just as federal income taxes should be. The reason there is to prevent the same takeover of state government. Where those other taxes aren't broad-based, they should be discretionary -- for example, sin taxes.

But again, don't try to dodge what you are advocating by muddling the issue with irrelevancies such as other taxes we aren't discussing here and which in some cases (state taxes) don't even pay for the same sovereign. Keep the issues separate.

Next issue:

OK, fair enough, but I did post that table above that shows how much people pay as a percentage of their income. For example, people making 18 to 34,000 pay an average of zero, and people in the lowest group get back an average of 6% of what they make when they file. Either you just don't believe those numbers, or you have to somehow reconcile them with your belief that these people are paying more than those numbers suggest.

The numbers you posted are misleading because they are based on assumptions that don't hold true in every situation. They include household deductions that benefit some, and not others. For example, you are benefitting from child deductions that I wouldn't get. You therefore can't extrapolate your tax burden and assume that I pay as little in taxes. In fact, I pay more than you do, which is basically to say people like me subsidize people like you. Because everyone's situation is slightly different, an average like that isn't terribly helpful. Like a lot of averages, it can be quite misleading. What you need to do is remove the variables and make a like with like comparison.

The easiest way to do that is simply to compare your tax rates before all those individualized deductions. That's pretty much what the figure for your withholdings should be (because employers don't wade into the individual complexities of deductions that you may or may not qualify for). I was shocked when you said your withholdings were only 5% because mine are more than double that with a comparable income.

Basically, the debate about what deductions are appropriate isn't really a debate we should be having here. That is what you get into once you have made the basic decision not to have a flat tax. This is how we got into this mess with the Code in the first place. We started out with a simple system and then over the decades added more and more "good ideas" in the form of deductions and special credits. That's why the Code so complex and why it needs simplifying at a minimum. On the other hand, if we make it a flat tax, then most or all of these deductions simply go away.

[BRussell]

Originally posted by SimeyTheLimey:
We are only talking here about federal income taxes. That's the tax that pays for things that Congress does. Congress is the body that has the power to impose taxes on people. You can't have a majority exempting itself from paying a tax and at the same time voting to levy that tax entirely on minorities. You have broken the link between the power to tax, and the responsibility to pay for that tax.

What people pay for state taxes and excises is a separate issue because those are separate taxes. Theoretically, they should be broad-based as well. For example, state income taxes should be broad-based just as federal income taxes should be. The reason there is to prevent the same takeover of state government. Where those other taxes aren't broad-based, they should be discretionary -- for example, sin taxes.

But again, don't try to dodge what you are advocating by muddling the issue with irrelevancies such as other taxes we aren't discussing here and which in some cases (state taxes) don't even pay for the same sovereign. Keep the issues separate.

It's not muddling the issue, it's clarifying it. When the WSJ says people aren't paying taxes, they're being misleading by focusing on only one type of tax among many. People pay lots of taxes. Most of those taxes are regressive. You say you don't want to exclude the lower/middle income people from paying taxes, but at the same time you do want to exclude those highly regressive taxes such as payroll taxes that make up the majority of taxes that those lower/middle income people pay! That's not a fair way to look at it.

And we can exclude state and local taxes if you want, but even if we just focus on federal, the federal government gets less money in individual income tax receipts than you're acknowledging. Look at this table. In 2003, individual income taxes were 44.5% of the federal government's source of tax revenue. The majority of taxes came from other sources, mostly payroll taxes. I don't think you can simply waive your hand and discount all those other taxes, especially payroll taxes, which you earlier acknowledged comprise the majority of taxes that lower-income people pay.

The numbers you posted are misleading because they are based on assumptions that don't hold true in every situation. They include household deductions that benefit some, and not others. For example, you are benefitting from child deductions that I wouldn't get. You therefore can't extrapolate your tax burden and assume that I pay as little in taxes. In fact, I pay more than you do, which is basically to say people like me subsidize people like you. Because everyone's situation is slightly different, an average like that isn't terribly helpful. Like a lot of averages, it can be quite misleading. What you need to do is remove the variables and make a like with like comparison.

The easiest way to do that is simply to compare your tax rates before all those individualized deductions. That's pretty much what the figure for your withholdings should be (because employers don't wade into the individual complexities of deductions that you may or may not qualify for). I was shocked when you said your withholdings were only 5% because mine are more than double that with a comparable income.

Again you're calling something misleading when it's really clarifying. The only way to determine how much people actually pay is to look at effective rates. They cut through all the BS. How much did you pay, divide that by how much you made. Sure, some people pay more than others depending on their specific situation. But I don't see how you get around looking at averages when you're talking about how much people pay.

My withholdings weren't 5%, they were closer to 9%. But withholdings are a misleading way of looking at taxes, because everyone can choose where to set their own withholdings. Some might set them high to get a big refund, some might not pay any and then pay a penalty for not having enough withheld. And lower-income people will have money withheld too, but they'll get huge refunds because they actually make money by filing.

Let me ask you this - I've given you my tax reform which you don't like, why don't you tell me what you would do so I can rip on it for a while. Flat tax? Sales tax?

[SimeyTheLimey]

Originally posted by BRussell:
Let me ask you this - I've given you my tax reform which you don't like, why don't you tell me what you would do so I can rip on it for a while. Flat tax? Sales tax?

I already stated a preference for a flat tax with an exclusion for the poorest workers. I wouldn't pretend to have run the numbers, but I'd guess you could exclude about 10%.

However, I really don't think this is going to happen. There are too many interests supported in many cases by rather good arguments. You defended progressive tax brackets. Well, that's about 50% of the political spectrum who would agree -- so bye bye flat tax. Then there is the deduction side of the house. For example, the mortgage interest deduction is both a major political sacred cow, and also justifiable policy. The same goes for dependent deductions. Then you can start talking about deductions for ordinary and necessary business expenses, and so on. Pretty soon once you have restored all the deductions and saved the progressive tax brackets, you have essentially concluded that the current system gets to stay.

That's pretty much what I anticipate will come out of the current impulse to reform the Code. A few loopholes will close, but that's it. I don't think also that the president's VAT plan will fly. I could be wrong, but I'd say that Congress has got used to the idea that the tax code is as much an instrument of social policy as a means to raise revenue. One strength of an income tax is it can be very finely tuned to create winners and losers. Congress isn't going to give that up that power easily, and I don't care which party is in control.

I poked holes in your suggestion mostly because you seemed oblivious to the full power of a taxation system. It's not just there to do what one small end of the political spectrum decides is "fair" as in your statement that only the rich should pay income tax. How you pay for government is absolutely central to what kind of government you have.

It's no accident, for example, that the passing and then expansion of the Income tax coincided with the Progressive Era and the New Deal (and beyond) expansion of the Federal Government. You couldn't have the kind of government we have now with the revenue system that existed before. But anything that shifts this amount of wealth through a government that could be captured by a faction has to be thought through very carefully. That's why I stress the democratic accountability and burden sharing aspects so much.

As for your other comments, I stand by my earlier statements. Social Security taxes and FICA are very much a subject for another discussion and a diversion to this one.

[mr. natural]

Posted by SimeyTheLimey:

It's just not good public policy in a democracy to give the majority of people the idea that they get their government for free and that they can make some other guy pay for it all. You create an irresponsible incentive for people to use the government for oppressive and selfish means.

As opposed the 10% minority of enormous wealth and power aligned with unbridled corporate power who already do this with government.

Welcome to the new gilded age. Alas, so it goes in the land of the deaf, dumb, and blind -- but we sure are brave, free, and blah, blah, blah...



...but never mind me.

I just wanted to say:

Howdy from The Great White Nor'east!




and remember:

Nature Doesn't Make Political Compromises With Anyone

we'll see if the democrats can do anything about this fact after it clobbers the republicans upside their ******* head.

[Curios Meerkat]

Originally posted by mr. natural:
As opposed the 10% minority of enormous wealth and power aligned with unbridled corporate power who already do this with government.

Seems like for many the difference between democracy and plutocracy is nothing but a mere nuance.

[BRussell]

Originally posted by SimeyTheLimey:
As for your other comments, I stand by my earlier statements. Social Security taxes and FICA are very much a subject for another discussion and a diversion to this one.

You can't exclude them. We have multiple taxes, which is fine. Some are flat, some progressive, etc. I don't have a problem with that. It's like the government diversifying its portfolio. But in order to see the effect of the overall tax system, you have to consider them all together. When conservatives, like in that WSJ op-ed, say how unfair it is to not tax the poor enough, but don't want to admit the existence of other taxes that already do tax the poor enough, forgive me for wondering if true fairness isn't the real principle at work.

But maybe I'll start another thread on Social Security just for you.

[SimeyTheLimey]

Originally posted by BRussell:
You can't exclude them. We have multiple taxes, which is fine. Some are flat, some progressive, etc. I don't have a problem with that. It's like the government diversifying its portfolio. But in order to see the effect of the overall tax system, you have to consider them all together. When conservatives, like in that WSJ op-ed, say how unfair it is to not tax the poor enough, but don't want to admit the existence of other taxes that already do tax the poor enough, forgive me for wondering if true fairness isn't the real principle at work.

But maybe I'll start another thread on Social Security just for you.

You seem to be arguing with the WSJ more than with me. I don't really care what they said, and I don't particularly see the relevance here.

[BRussell]

Originally posted by SimeyTheLimey:
You seem to be arguing with the WSJ more than with me. I don't really care what they said, and I don't particularly see the relevance here.

No, I'm arguing with you, and it's relevant because that WSJ op-ed said exactly what you've spent your entire time in this thread arguing: How it would be wrong to let the poor/middle class off the hook, and how we can't talk about those taxes that actually do fall heavily on the poor. Why try to weasel out of it? Just state what you believe and stick to it.