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  1. #1
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    Tax Policy Discussion

    Joey --

    Do you support raising the EITC to help people who are making minimum wage? Because I know that's a common conservative/Republican approach to achieve the same thing. But the problem with that is that to pay for it, you have to raise taxes elsewhere. It's the more government directly involved with the economy approach that many conservatives usually are taken aback by.
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    Quote Originally Posted by dbroncos78087 View Post
    Joey --

    Do you support raising the EITC to help people who are making minimum wage? Because I know that's a common conservative/Republican approach to achieve the same thing. But the problem with that is that to pay for it, you have to raise taxes elsewhere. It's the more government directly involved with the economy approach that many conservatives usually are taken aback by.
    I would prefer a complete overhaul of the tax system. I think both parties like to promote these half measures as solutions to a much larger problem.

    Note: I'm not totally opposed to raising MW a dollar or so. I'm more against the rhetoric being spewed that minimum wage positions deseve a livable wage and somehow it's the responsibility of businesses to provide one even when the position is not worth it. I'm against that illogical thought process more than anything else.

  3. #3
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    Quote Originally Posted by joeyc77 View Post
    I would prefer a complete overhaul of the tax system. I think both parties like to promote these half measures as solutions to a much larger problem.

    Note: I'm not totally opposed to raising MW a dollar or so. I'm more against the rhetoric being spewed that minimum wage positions deseve a livable wage and somehow it's the responsibility of businesses to provide one even when the position is not worth it. I'm against that illogical thought process more than anything else.
    Ok, fair enough. I have a couple of questions, because this idea of redesigning the tax code intrigues me. I'm crazy like that.

    Let's say that you get to redesign the tax code in the way you want. How does that look?

    Do you have a progressive tax code or is it flat? Are there the lowest possible taxes all around or do we have higher taxes (presumably to finance government spending)?

    Do you have deductions for education, house financing, large capital intensive purchases, children, medical expenses, etc.?

    Do you only have individual or business taxes and eliminate the other? How do you handle states that maintain a different tax structure? For instance, let's say you go with a business income tax and states tax individuals?

    Just some broad thoughts, that probably belong in another thread. But I'm curious and feel free to propose questions to me as I have some thoughts on these issues.
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    Tax Policy Discussion

    I am going to be moving a couple of recent posts from the Minimum Wage thread into this one so we can continue that discussion here.
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    DB

    Just my two cents.

    We need a progressive tax system. It seems illogical to force those tax payers on the margins to pay as much as those who don't need every nickel to feed their kids. How much the rates vary is negotiable.

    The idea of deductions is a good one at the beginning, but it has morfed into a system that creates winners and losers. I am OK with getting rid of all deductions, tax credits, exemptions, etc.

    The US should treat and tax capital gains and inheritance the same as ordinary income. I don't care where you get the money, from your dad's estate or gains on your investments or selling lemonade on the street. Income is income.

  6. #6
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    Do you think that we should have a progressive tax rate that starts at zero and have no EITC or do you think something like the current system where everyone pays taxes and then gets a refund (some more than 100% of what they paid -- EITC) is better?

    How specialized does a deduction have to be before it is considered "morphed"? Are we talking deductions that only apply to a couple of companies in reality (for instance let's say that everyone is eligible for a deduction when you have capital expenditures of over $10B, but realistically only 50 companies achieve that).

    The problem with eliminating deductions is that so many of them serve a legitimate purpose. Such as deductions for donations to Goodwill or Red Cross. In a structured and legislative manner, it's difficult to separate those from the morphed ones. It's along the lines of the Roth test, difficult to identify legislatively, but easy to eyeball test.
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  7. #7
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    Quote Originally Posted by dbroncos78087 View Post
    Ok, fair enough. I have a couple of questions, because this idea of redesigning the tax code intrigues me. I'm crazy like that.

    Let's say that you get to redesign the tax code in the way you want. How does that look?

    Do you have a progressive tax code or is it flat? Are there the lowest possible taxes all around or do we have higher taxes (presumably to finance government spending)?

    Do you have deductions for education, house financing, large capital intensive purchases, children, medical expenses, etc.?

    Do you only have individual or business taxes and eliminate the other? How do you handle states that maintain a different tax structure? For instance, let's say you go with a business income tax and states tax individuals?

    Just some broad thoughts, that probably belong in another thread. But I'm curious and feel free to propose questions to me as I have some thoughts on these issues.
    Great questions and thanks for making this thread.

    I would prefer a flat tax. However, I realize that may be too much change all at once. And I honestly haven't seen a full plan which works in application as well as theory.

    A change a would immediately make is lowering the business tax to around 25% while closing many of the tax breaks and loopholes they are accustomed to.

    I would also be in favor of lowering the individual rates similar to what Romeny proposed.

    I think it's more important to focus on tax revenue vs tax percentage. The government needs to spend more wisely so I'm not sure if we need more tax revenue or better spending. However, I'm a big supporter of education spending. IF we needed more revenue to support my long term ideals for education, than I would support it.

    I will go into more detail later. Busy at the moment.

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    What is the "business tax?" Do you means corporate taxes or capital gains? I assume you don't mean the payroll tax, but I think eliminating that would be a fine idea.

  9. #9
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    Quote Originally Posted by joeyc77 View Post
    Great questions and thanks for making this thread.

    I would prefer a flat tax. However, I realize that may be too much change all at once. And I honestly haven't seen a full plan which works in application as well as theory.

    A change a would immediately make is lowering the business tax to around 25% while closing many of the tax breaks and loopholes they are accustomed to.

    I would also be in favor of lowering the individual rates similar to what Romeny proposed.

    I think it's more important to focus on tax revenue vs tax percentage. The government needs to spend more wisely so I'm not sure if we need more tax revenue or better spending. However, I'm a big supporter of education spending. IF we needed more revenue to support my long term ideals for education, than I would support it.

    I will go into more detail later. Busy at the moment.
    Much appreciated.

    For instituting a flat tax, would this still be an income tax or perhaps a VAT or some form of sales tax? Because I think that a flat tax sounds good but I think there are too many variables that would have to be scrubbed from our current economy to make the shift.

    I also have the same question as Flea, are you referring to the corporate income tax being lowered to 25%? Because that does have effects throughout the market. It's a common mistake to assume that lowering that tax (CIT) will increase hiring. Because wages & salaries are deducted from taxable income, it really won't have an effect in that regard.

    Flea: I think that eliminating the payroll tax would be an interesting proposal, but it will weaken the structure of the social safety net because then their funding comes from the general pool. And in all honesty, that scares the living **** out of me. I would rather that other government programs be funded the same way SS is, where they have a dedicated stream of funding. The budget problems would be reduced if we had a system where you can see every time you get paid a $1, then 6.25% goes to Medicare (I don't remember what the numbers are off the top of my head).
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  10. #10
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    Quote Originally Posted by dbroncos78087 View Post
    Do you think that we should have a progressive tax rate that starts at zero and have no EITC or do you think something like the current system where everyone pays taxes and then gets a refund (some more than 100% of what they paid -- EITC) is better?
    I am a fan of simple. So a progressive tax rate that starts at zero would work best. I think everyone will need to file and get refunds, if they paid taxes. I don't have any issues with the EITC, it is basically a good idea. So if someone wanted it, I am ok with it.

    How specialized does a deduction have to be before it is considered "morphed"? Are we talking deductions that only apply to a couple of companies in reality (for instance let's say that everyone is eligible for a deduction when you have capital expenditures of over $10B, but realistically only 50 companies achieve that).

    The problem with eliminating deductions is that so many of them serve a legitimate purpose. Such as deductions for donations to Goodwill or Red Cross. In a structured and legislative manner, it's difficult to separate those from the morphed ones. It's along the lines of the Roth test, difficult to identify legislatively, but easy to eyeball test.
    Every deduction, tax credit etc. creates a winner and a loser. Even ones like home mortgage interest deductions. Renters are penalized in the sense they don't get it. Business deductions are trickier. Actual expenses for business should be deducted. But there are things like Pacer tickets that count as deductions that shouldn't. Too often, deductions can be used as a way to support a business by the government. It is a hidden expenditure. Or companies or individuals can get their congressman to craft a deduction that in reality only is for one person or company. Or things like the oil depletion allowance.

    I'm not philosophically opposed to deductions, so if a system can be created to use them cleanly, that is ok. But the current system is too complex and unfair by far and creates winners and losers. Better to just get rid of deductions.

    Good point about the charity deduction. You are correct about its value. No problems keeping it, even if it is the only one kept.

  11. #11
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    Quote Originally Posted by dbroncos78087 View Post
    Much appreciated.

    For instituting a flat tax, would this still be an income tax or perhaps a VAT or some form of sales tax? Because I think that a flat tax sounds good but I think there are too many variables that would have to be scrubbed from our current economy to make the shift.

    I also have the same question as Flea, are you referring to the corporate income tax being lowered to 25%? Because that does have effects throughout the market. It's a common mistake to assume that lowering that tax (CIT) will increase hiring. Because wages & salaries are deducted from taxable income, it really won't have an effect in that regard.

    Flea: I think that eliminating the payroll tax would be an interesting proposal, but it will weaken the structure of the social safety net because then their funding comes from the general pool. And in all honesty, that scares the living **** out of me. I would rather that other government programs be funded the same way SS is, where they have a dedicated stream of funding. The budget problems would be reduced if we had a system where you can see every time you get paid a $1, then 6.25% goes to Medicare (I don't remember what the numbers are off the top of my head).
    I like the idea of a national sales tax. People should be taxed on what they spend instead of what they earn. However, I agree there are a lot of variables and it gets complicated really quick. Some proposals I've seen talk about monthly reimbursements from the government for essentials to people making under a certain amount, ect.

    Currently, we have high corporate tax rates in this country compared to the other big economies. I agree, lowering it would not have much impact on the current job market. However, it allows us to lure companies back to the US and helps smaller corps grow. That will have an impact on the job market. Closing the tax loopholes and breaks for large corps will offset the revenue loss.

  12. #12
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    Quote Originally Posted by flea View Post
    What is the "business tax?" Do you means corporate taxes or capital gains? I assume you don't mean the payroll tax, but I think eliminating that would be a fine idea.
    That is what pays social security... It's pretty impossible to eliminate it. I would think however that you could remove the cap on it... or put a gap in it and lower the rate overall.

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  13. #13
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    Quote Originally Posted by IndyFan View Post
    DB

    Just my two cents.

    We need a progressive tax system. It seems illogical to force those tax payers on the margins to pay as much as those who don't need every nickel to feed their kids. How much the rates vary is negotiable.

    The idea of deductions is a good one at the beginning, but it has morfed into a system that creates winners and losers. I am OK with getting rid of all deductions, tax credits, exemptions, etc.

    The US should treat and tax capital gains and inheritance the same as ordinary income. I don't care where you get the money, from your dad's estate or gains on your investments or selling lemonade on the street. Income is income.
    A million times yes. I hate the fact that money that isn't earned by working for it is taxed at a lower rate than money that is worked for. Talk about a disincentive to work. I believe that you should have simple deductions for dependents and that's it.

    I also take issue with the idea that the economy is going to keep growing ad infinitum...and we can grow ourselves into more tax dollars... Really does anything grow forever... Not an economist, but isn't there a capacity to how big the economy can get. Systems have capacities... Plus As the economy gets bigger each amount of growth becomes less and less a % of the total , (this is just basic math).

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  14. #14
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    The tax code is like a house with fifty coats of paint. Can't define the edges, the windows won't open and the finish is lumpy due to crappy prep on the prior 48 coats. The time is here to strip it all off and start over.

    I would prefer a flat tax with NO deductions and a redefinition of income. I would like to see a modest corporate tax rate based on gross receipts with no deductions. We could maybe have zero line for low income individuals.

    Anything that simplifies the current tax structure is good by me but I want that house stripped, not just another coat of paint slathered on.

    My only problem with a VAT is that low income people, those that need every dollar to survive are going to have their entire income affected whereas those that can save would have a bit more shelter for their income.

    The KISS rule should definitely apply here as the very nature of simplicity would remove all the loopholes...
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    Quote Originally Posted by corralski View Post
    The tax code is like a house with fifty coats of paint. Can't define the edges, the windows won't open and the finish is lumpy due to crappy prep on the prior 48 coats. The time is here to strip it all off and start over.

    I would prefer a flat tax with NO deductions and a redefinition of income. I would like to see a modest corporate tax rate based on gross receipts with no deductions. We could maybe have zero line for low income individuals.

    Anything that simplifies the current tax structure is good by me but I want that house stripped, not just another coat of paint slathered on.

    My only problem with a VAT is that low income people, those that need every dollar to survive are going to have their entire income affected whereas those that can save would have a bit more shelter for their income.

    The KISS rule should definitely apply here as the very nature of simplicity would remove all the loopholes...
    I agree with you about the tax code. The problem with doing a revamp all at once is that you are going to see massive disruptions to the job market because there are industries built around the tax code. The popular one for conservatives is renewable energy, but they are by no means either the biggest or most pervasive.

    One issue that I have with a flat tax and no deductions is that it will hit low income by definition. It stops being zero deductions as soon as you add (perfectly legitimate) rules to not include poor people. If you don't apply the tax to the first $15,000 in income, then that is a deduction. It's a legitimate deduction, but one nonetheless and it opens the gate to "why not my deduction?".

    I think that a VAT with the stipend every month/quarter/year is the same thing as what we've got now except replacing income tax with VAT and the EITC with a stipend. You aren't going to fundamentally change anything.
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